Minimum Wage: The gift that keeps on hurting

January 05, 2011

Glenn Hamer

I started off the first business day of the New Year on Monday by turning to the opinion page ofThe Arizona Republic, where writer Alicia Russell rang in 2011 by cheering the recent $.10 hike in the hourly minimum wage.  Russell was the treasurer for the 2006 ballot campaign that allowed for an annual raise based on an increase in the Consumer Price Index. 

In her column, Russell touts the wondrous effects the wage hike will have on Arizona workers and employers.  Workers will have more money in their pockets, while employers will see less absenteeism, better employee morale and improved productivity.

But before we're overcome with happiness, the reader is warned that "industry-backed opponents, on cue, will blame the unemployment crisis in our state on the minimum wage and say that this raise will cost more workers their jobs. But that's not fair or true."

Ok, I'll bite.  As an "industry-backed" opponent, I'll agree that it's not fair or true to say that the minimum wage is to blame for the state's unemployment crisis.  But it's not helping.

The minimum wage hurts more people at the bottom of the wage scale than it helps, creating another barrier of entry into the job market for folks without experience or skills.   

The state's minimum wage is now higher than the federal minimum wage, and the Obama White House is making noises that it wants to push the federal rate even higher to $9.50 per hour. 

According to November 2010 employment data, the unemployment rate for teenagers - a group made up mostly of the inexperienced and unskilled - is 24.6 percent.

Jobs that pay the minimum wage are ones that often give Americans their first entry into the job market.  According to researchers at the Economic Policies Institute, minimum wage workers are "often young, inexperienced, and working part-time. They're often employed in low-margin industries like food preparation and service." 

But when the minimum wage spikes, employers are not able to absorb the increase and have to cut positions.  Thus the minimum wage ends up hurting the very people - those on the first rung of the career ladder - that it was supposed to help.

The automatic cost-of-living increase is especially pernicious.  When the CPI goes up, so does the entry-level worker's salary.  The state's minimum wage law does not take into consideration whether an employee is deserving of a raise, whether there's been a commensurate rise in output or whether the employer can afford it. 

So, faced with an increased payroll that it can't afford, a company has to scale back, and it's the unskilled and inexperienced worker that pays the price.

Think back to your first job.  At the time you may have been just been doing it for the money; maybe you wanted to buy your first car or a new stereo or save money for college.  But the lessons you learned and the experience you gained in that first job likely outweighed whatever money you made.  Entry level jobs are a critical stepping stone in a career path.  You learn a little about what you like to do, what you don't like to do and you learn a lot about responsibility.  It's too bad that those that claim to be advocates for workers at the lower end of the pay scale are actually cutting off access to these important jobs.