Minimum wage = Minimum opportunity

Recently, some friends and I were having a bit of a debate over the minimum wage. It actually came up during a discussion of a $900,000 federal grant that was given to a local organization to train 720 youngsters in “soft job skills” aka basic customer service. The idea is to provide them with at least the bare essentials of workplace behavior so they might stand a better chance of gaining employment. A worthy goal, but it got me to thinking why such a program was necessary. The answer was obvious.

Colorado’s minimum wage is currently $7.36/hour. When you factor in unemployment insurance, workers comp and payroll taxes, it’s closer to $9/hour. Now consider a 15, 16 or 17 year-old starting their very first job. They aren’t familiar with any workplace, never mind yours, or the equipment, the procedures, basic workplace etiquette; they are essentially clueless. It’s likely going to take a month on the job before they are productive enough to justify even $9/hour and you’re only going to have them for 3 months total.

The investment in training a brand spanking new entrant into the job market might make sense at say $5.50/hour. At $7.36, it’s a much bigger risk. This is why unemployment among teenagers is around 25%. The math just doesn’t make sense.

The opposition comes from the notion that nobody can live on $5.50/hour or even $7.36/hour. But that’s a straw man. The entry-level wage isn’t intended to be a living wage. Most teenagers are looking for some spending money. A low-paying summer job gives them valuable experience so they can get a better, higher paying job next year and it keeps them in iPhones, concerts and their favorite jeans over the summer.

In the longer term, the ability to fill very low skill positions with very low paid workers enables businesses to expand and provide better jobs. The workers gain experience which they can use to get better jobs. The alternative is what we have now. Those jobs simply don’t exist and junior sits on the couch playing video games at Mom and Dad’s expense, gaining zero work experience. The business can only hire employees who are ready and able to produce on day one, i.e. experienced employees. There is no room for entry-level.

I know the intentions of those who favor mandated wages are noble, but the results are in. It’s not a matter of opinion. It’s a matter of fact. When you remove the bottom rungs on the ladder of opportunity, there are people who just can’t get on it. There aren’t enough federal programs in the world to fill the void.