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Minimum Wage Hikes vs. Skilled American Workers September 4, 2015

Posted by geoff in News.

We all know the silliness of arbitrarily increasing the minimum wage: forcing small businesses to raise prices or fold, uneven pay scales, and inflation. We saw one of the effects recently when Gravity Payments raised their minimum salary to $70K/year:

According to the New York Times article, “Two of Mr. Price’s most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises.”

One effect that we don’t talk about much is how it will magnify our skilled labor shortage unless we increase immigration levels. Take a machinist in a machine shop, where the average hourly wage is $19.02. Is a kid coming out of high school going to be motivated to learn the skills of a machinist vs. waiting tables for $15/hr?

At a minimum wage of $7.25/hr, it’s a no-brainer. She’ll be making more than 2.5X what a minimum wage worker will make. But at $15/hr minimum wage, she’ll only be making a little over 25% more than a minimum wage worker, and she’ll have to spend a couple of years learning the trade before she starts earning money. And even then, $19.02 is an average salary, not a starting salary, so it’ll take her years to get to that level.

Even college kids, where the average starting hourly wage is $21.86/hr, face a similar choice. So your choice is working for $15/hr right out of high school, or making $22/hr after 4 years (at least) of college where you spend $120K – $200K.

In the old days you would have said “Demand for skilled workers will drive their wages up,” but these days employers just import more cheap skilled labor from other countries to meet their needs.

So if you wanted to drive American kids out of skilled labor professions, raising the minimum wage to $15/hr is a great way to do it.


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