MINIMUM WAGE

I don't get paid for this. I'm actually paying my school for the opportunity to write this to receive some grade.

A similar situation occurs with unpaid internships. Students want experience in the field and they voluntarily agree to work without pay for the opportunity and experience gain through an unpaid internship.

Internships

I always viewed unpaid internships as smarmy, but they do have some merits, especially for some hard-to-enter industries. If the minimum wage applied to internships, how many internships would be available? Well, according to supply and demand, far fewer.

In this post, I will talk about wages in general, how they are calculated in an economy, and what effects a minimum wage would have on certain groups.

The market supplies a certain level of a type of labor. Since the minimum wage currently in effect only affects those with the fewest number of marketable skills, we'll mostly be talking about low skilled labor. The type of labor usually found in the kitchen in eating establishments or bagging groceries and dry goods in grocery stores and retail establishments. There are a certain number of people who are willing/able to work such positions and a certain number of employers willing to hire this form of labor. According to basic microeconomics, the market clearing-price will be what the starting wage is for the average entry-level worker.

A minimum wage set above this price, as indicated in the picture, would create an artificially high floor on wages. Not everyone who was in the labor market could be hired at this rate. Naturally, this will allow the employers to be a bit more choosey in who they hire. This makes it harder for people with no background or skills to get their first job.

The minimum wage started as a means for unions to prevent strike breaking. Because unions would typically demand higher-than-market wage rates, they would often either threaten or enact strikes if their requests were not met. Strike breakers were people who would go to work during strikes to take advantage of the (usually) slightly hire wages than what the worker was used to. Typically, minorities and the very poor would be strike breakers. This registered minimum wage laws as one of the most racist laws on the books because the lowest skilled labor during the time of minimum wage enactment was found among black populations. Starting the workforce late or not at all has very detrimental effects on income growth in one's lifetime. Across an entire population, this has had inter-generational effects that have been noted by several prominent economists.

Another effect of minimum wage is to completely phase out/eliminate jobs that would only be productive at lower wage rates. There no longer exist elevator operators or movie ushers, for instance. There are legal exceptions for people like Wal-Mart greeters who may not find work anywhere else. But even so, people who are not mentally capable of work that would merit anything above 5 or 6 dollars and hour are barred from working anywhere but a few places by law.

I mentioned unpaid internships before. College students who need credits and a foot in the door need an internship. If the minimum wage was applied to internships, the unpaid ones would no longer be available. That would clearly adversely affect lots of students nationwide.

Conclusion:

The minimum wage is great if you are one of the slightly-higher skilled people who would not be fired from their current minimum wage job, but for everyone else (minorities, mentally disabled or developmentally disabled, and college students) the minimum wage is a raw deal. Economically it makes no sense to shrink supply and leave our labor supply undeveloped and un-utilized.

What does the dog have to do with it?

The dog is working at a sewing machine. The minimum wage in conjunction with other laws in the US has relegated this type of work to the their work to the third world. It isn't glamorous, but that dog sure makes it seem so.