$15 Minimum Wage Undermines Low-Skilled Workers

business_ethics_highlights_2If you think a minimum wage increase is mainly a raise for those who work currently at the minimum wage, you don’t begin to grasp the problem it presents to low-skilled labor market entrants, says Reihan Salam. >>>

The Fight Against 15

But even if we completely ignore the possibility that firms will learn to economize on less-skilled labor, $15 an hour is a bridge too far. My deeper concern is that people who in decades past might have had a fighting chance at making their way into the middle class are now finding it hard to get on the bottom rungs of the job ladder. This matters because low-wage employers aren’t just employers. They’re also institutions that invest in the human capital of their workforces. Some people learn the basics of what it takes to get and to keep a job (the ability to exercise self-control, to be persistent, to show up on time, to get along with others, to speak the language of your workplace reasonably well) from their parents. Formal education also helps, but not everyone flourishes in formal education. Even the most heroic and dedicated public school teachers can only do so much to close the gap between kids from stable, supportive families and kids from fragile ones.

Low-wage employers take on the challenge of succeeding where families and schools have failed. They don’t do this because they’re saints. They take on this challenge when they have no choice—they’d much prefer to hire workers who are already fully qualified to take on demanding jobs than to nurture talent in-house. What happens when they do have a choice? Firms are losing interest in financing the training of their employees. Peter Cappelli, director of Wharton’s Center for Human Resources, notes that although “employers in the postwar era typically selected employees for general abilities at entry-level positions, then trained them over a lifetime to meet the employers’ needs,” things have changed. Though employers don’t generally say this outright, the new expectation is that “job candidates’ skills, which are either adequate or not, are supposed to arrive with the applicants.” There are many theories as to why this has happened. One obvious possibility is that firms have grown less willing to train workers in-house as skilled employees have grown more footloose, and they are reluctant to spend time and resources training workers who will eventually wind up at other firms.

Where does this leave job candidates who don’t arrive readymade, with all the skills they need to climb the corporate ladder thanks to Mom, Dad, and good old Selective U.? It leaves them in a really tough place. Employers will give these employees a shot only if it’s not too expensive for them to do so. As the wage floor rises, why wouldn’t employers hire more experienced workers or workers with fewer personal challenges, who need less hand-holding in their first months on the job? A higher minimum wage could be good news for people who are willing to work at today’s minimum wage. Yet it might also draw in, say, candidates from more affluent backgrounds who will now compete for the same jobs. Then, of course, there is the possibility that employers will hire fewer, better-skilled employees and augment their pricier labor with machines.

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One comment

  1. Andrew Willis

    I am not an expert about this topic but it seems as though this author is disregarding some of the negative consequences of lower minimum wages. As Mr. Salam is basing his comments on the social impacts of $15/hr minimum wage (rather than economic ones), it is fair to point out that his optimism about low-wage employers’ concern for the well being of their employees may be misplaced. My experience, including as a manager and business owner, is that there is a correlation between level of pay and the training invested in staff. This suggests that raising the minimum wage would force employers to place more value in low-wage staff, be more concerned about training and retaining them, and reduce inefficiencies in labour usage.

    Arguing that employers would simply choose more qualified candidates, preventing opportunities for those without experience to learn makes little sense, too. This could apply if the wage was raised by an individual firm, outbidding their competition to hire stronger staff, but if it is raised across an entire region then it would have no competitive bearing in recruitment; all firms would have the same base wage and the same field of candidates.

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