As you’ve probably heard, activists around the country have been fighting to raise the minimum wage to $15 an hour. While the they focus on legal minimum wages, activists also welcome private employers’ decisions to voluntarily raise hourly pay to $15. When you read about desperate American poverty, however, the activists really seem like they’re barking up the wrong tree. Most notably, Kathryn Edin and H. Luke Shaefer’s $2.00 a Day: Living on Almost Nothing in America shows that the truly poor have great trouble finding and keeping even the lowest-skilled jobs in the formal sector. Question: If employers hesitate to hire the ultra-poor for $7.25 an hour, why on Earth would they hire them for $15?
“No one can live on $7.25 an hour,” you say? Well, it sure beats living on $2.00 a day. And when Edin and Shaefer’s subjects fail to find a job, that’s precisely what they have to do:
[W]orkers at the very bottom continued to experience double-digit unemployment through 2012, well after the recession was officially over. For low-level positions, there are often many more applicants than there are jobs. Companies such as Walmart might have hundreds of applications to choose from, and it is not uncommon for many of these applicants to have some post-high school education, making it that much harder for a young woman of color with a GED and little previous work experience to make the cut.
How do these companies wade through so many applications? How would you do it?
What should an evidence-based poverty activist do? Well, the main problem is lack of jobs rather than low-paid jobs. So why not actually focus on the main problem?
Edin and Shaefer strongly endorse job subsidies and extra public sector employment. While such programs have notorious flaws, at least they create job opportunities rather than destroying them. (Sadly, despite the preceding quote, Edin and Shaefer also enthusiastically endorse an even higher minimum wage, even though it’s hard to deny that the ultra-poor would greatly benefit from the opportunity to work for half or even a quarter of the current floor).
But there’s an even simpler remedy available – a remedy that requires no change in government policy whatever. Namely: Instead of pressuring companies to raise wages, activists should instead pressure them to hire more low-skilled workers. Why not abandon the “Fight for $15” in favor of the “Fight for 15% More Low-Skilled Jobs”? If activists can pressure Amazon into raising wages, why can’t they pressure Amazon into expanding the bottom rung of the ladder of opportunity?
READER COMMENTS
John Hall
Dec 5 2018 at 1:45pm
Job subsidies or wage subsidies?
zeke5123
Dec 5 2018 at 6:13pm
Even more to the point, perhaps instead of doing activism for other people to hire, why not build a business and hire people themselves!
Mark Z
Dec 5 2018 at 6:32pm
In keeping with your position on migration, perhaps the best way people who purport to be concerned for the poor could improve their standard of living would be to try to make it easier and cheaper for them to move? Moving from San Francisco to Houston could double a poor person’s consumption level. Another great policy approach would be increasing people’s real wages by reducing standard of living via deregulating housing, occupational licensing, etc. Of course, even minimum wage regulation drives up cost of living, effectively reducing real wages for everyone who either makes more than the new minimum wage or less than it working in ‘undocumented’ work.
michael pettengill
Dec 7 2018 at 4:16pm
Why not get them to move to rural Africa where the cost of living is really low?
Clearly the low cost of living in Africa resukts in a much higher GDP per person in Africa than in California, or even Texas. Right?
john hare
Dec 8 2018 at 6:02am
That suggestion does have some merit. If you are going to support them in the first place, do it somewhere cheap. The article Robert linked suggested that each homeless person cost the city of San Francisco $80,000.00 a year. I think that number sounds really shaky though it does illustrate.
Though I think a real answer would involve addressing why they are unable to function in the first place. Seriously chap housing can be built and perhaps jobs suitable for people with problems. I once had an addict work for me, before mandatory drug testing in order to keep insurance, and I bought his breakfast in the mornings if he showed up at the restaurant. He was fairly reliable for a time, and relatively healthy. I heard that he overdosed a few years later.
Robert EV
Dec 7 2018 at 11:19pm
You can’t get cheaper or easier than free for the asking: https://www.theguardian.com/us-news/ng-interactive/2017/dec/20/bussed-out-america-moves-homeless-people-country-study
CZ
Dec 5 2018 at 9:19pm
Perhaps one issue with this is that some workers have zero or negative marginal product. One could imagine that a company actually choosing to hire a lot of workers at low wages might end up losing money due to expenses of supervising and training the new workers, and the potential damage to its reputation.
Matthias Goergens
Dec 7 2018 at 1:55am
That’s a common problem, and just a normal challenge for business organisation.
Eg for a high end restaurant all but a few highly skilled chefs might have negative marginal productivity. McDonald’s manages to get productive work out of a much wider range of people.
Or look at Amazon Mechanical Turk.
john hare
Dec 6 2018 at 5:07am
Wow, three comments in a row making points that I strongly agree with.
Zeke, the vast majority of those advocates have no idea of how much work, risk, and hassle there is to running a business. Having no clue does not prevent them trying to tell others how they should do it.
Mark, most of the ones I have listened to on those subjects seem to feel that people should be able to live where they want, at the level of lifestyle they want, in the job they want, and if for some reason that doesn’t happen, it’s the fault of the greedy companies.
CZ, my company has gone through dozens of negative product workers over the last few years, it’s a losing proposition in quality control, risk, and productivity. I have to grit my teeth when I hear someone claim that everyone deserves a job, with no clue as to where the money comes from to pay literally worthless employees.
Many of these issues could be addressed by the expedient of not lying to people about their actual value in such a way as to motivate them to do better. This would involve taking on a good percentage of people with agendas.
Matthias Goergens
Dec 7 2018 at 2:03am
Different people have different levels of productivity in different environments.
For example, in my current job I produce a lot of value because of a mathematical bend, but eg I’d be terrible as a footballer or in retail. No matter whether there was a minimum wage for footballers or not.
The goal of policy should be to make it possible to create businesses with a wide range of different environments, so that as many people as possible can find a place where they can contribute positively.
There’s no moral obligation for any specific business to hire the low skilled. There should be a business opportunity to figure out how to make that work.
Minimum wage laws block that process. But they are not the only thing. Eg Germany managed to have rather high unemployment in the 1990s without minimum wage laws.
john hare
Dec 7 2018 at 5:22am
I’ll not dispute any of your points except to note that there are some that seem to feel that actually doing a job at all is to be exploited. Some of them make a business owner aware of why the old British Navy used flogging. There are some that have to be closely supervised at all times in order to get anything out of them at all. That’s negative productivity as the supervision can often do the actual job in less time than they need to force the employee to work. I would rather pay enough to get responsible people and let the irresponsible go their own way.
I agree that any person can be an asset somewhere in the right niche. I tend to believe that the responsibility for finding that niche is primarily with the seeker, and only secondarily with the companies. I also believe that far more people could be assets to themselves and society if a little dose of reality were offered to them instead of this everybody deserves nonsense.
mark
Dec 7 2018 at 2:08pm
Germany had no minim. wage, but social security (Sozialhilfe) offered an alternative to work (far above 2$/day) and even more important: If one lost an average job after a few years, one got generous unemployment benefits – no time-limits! (some months Arbeitslosengeld and then forever Arbeitslosenhilfe, much higher than Sozialhilfe. I considered that option in the eighties 😉 Chancellor Gerhard Schröder put an end to this (no more “Arbeitslosen-Hilfe”, instead all way down to Sozialhilfe plus the state bothers you with constant demands.) Result: Unemployment halved. 😀
As did the share of votes for Schröder´s party after 2003. :/
Some people can not earn much more than social-security in our modern society. My guess: 1-5% of the population. (A few due to Down-Syndrom. For employing the latter, big German companies get a small subsidy by not being fined for not “employing” a too small percentage of handicapped people. I saw one; rather sweet, but not really productive.)
I doubt there is a cheaper way to handle this issue than to just pay our unemployable (at almost any wage unemployable) for being alive. I hope there is a better way.
John Hare
Dec 7 2018 at 3:19pm
i was referring to the unemployable by choice. There are some that should be helped, but very few if they choose to make no effort.
michael pettengill
Dec 7 2018 at 4:12pm
If it costs $10,000 per year more than a low wage job pays, to get to and do the low aage job, how is the poor person better off?
Tanstaafl.
Many low wage jobs require a car that is in good condition and reliable 100% of the time, a stable place to live with utilities so you can be clean and presentable, and for many, access to health care services to treat medical problems from birth or from decades of hard labor.
Tanstaafl.
The places with low wages, say rural Alabama or Ohio or Kansas do not have good reliable cars manufactured by equally low wage workers for sale in those communities, only cars made by higher wage workers run by managers earning millions for the benefit of coastal elites, like Donald Trump.
Tanstaafl.
If low wage jobs are the solution, let’s start by replacing all the managers of global corporations with low wage workers. Think about how much higher profits will be by eliminating the extremely high labor cost managers. The managers and shareholders will spend twice as much when the profits soar from cutting the crushing costs of corporate managers. And don’t claim high cost managers are needed to prevent corporate bankruptcy: the biggest corporate bankruptcies in the past half century have had excessively high labor cost managers.
JK Brown
Dec 8 2018 at 3:21pm
To expand bottom rung jobs, the activist would be wasting their time to pressure Amazon. As Warren Meyer related in his paper at Cato, to increase unskilled jobs, you need to reduce government regulations at all levels.
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