When Gov. Andrew Cuomo signed a bill raising New York’s minimum wage to $15 by 2021 on Monday, it was a strong political gesture. Unfortunately, it was merely a Band-Aid on our hemorrhaging skills deficit.
Even Alan Krueger, the former chief economist for the U.S. Department of Labor under Bill Clinton, cautioned against raising the federal minimum wage that high by 2020.
“Research suggests that a minimum wage set as high as $12 an hour will do more good than harm for low-wage workers,” he wrote in a New York Times opinions piece. “But a $15-an-hour national minimum wage would put us in uncharted waters, and risk undesirable and unintended consequences.”
Frankly, I like Krueger’s point – a reasonable minimum wage is needed, but not something excessive. Poverty wages are a problem, but a $15-an-hour minimum wage would be a problem too. It almost guarantees layoffs, for one, and sets the bar impossibly high for young people to meet. The hiring process will be slower and people will not be able to gain skills to advance in a career. Thus, Republicans are technically correct when they say artificially raising wages will eliminate jobs in the short term. Everything, including labor, has a set value based on productivity. Having labor trying to exceed said value often sends unpleasant ripples through the economy.
Franklin Delano Roosevelt once declared that the minimum wage should be a living wage that can support a family, but that is no longer the case today. A raise in wages would disproportionately affect young people. About half of those making the minimum wage fall between 16 and 24 years old, according to the Bureau of Labor Statistics. Consequently, a raise to $15 an hour would be problematic.
Take a cashier, for example, who made New York’s previous minimum wage of $9.00 per hour. Increase their wage by 70 per cent with virtually no increase in productivity. It’s only a matter of time before industries automate low-skills work if the costs go up. After all, if you could replace someone – likely a young person, as we just explained — with a machine that complains less, is paid nothing, and works better, you probably would. This is a trend going on through the food service industry, where productivity has barely risen while costs are rising.
“That’s the dirty secret of the minimum wage,” one of my political science professors told me. “Young people can’t be hired.”
This is why we need to raise productivity through education and training. We face a skills problem. It is not a deficit of logic or empathy. The only way you can have higher wages without losing out to other countries is to get more skilled workers that can increase productivity. Protecting certain jobs just has no kick back. Countries are competing with each other. As Malcolm H. Dunn, a professor at the University of Potsdam explained in 1994, countries have an incentive to improve their own internal conditions, but increased economic power can lead to “gaining bargaining power and influence on other countries, strengthening the country’s position in international negotiations and institutions, increasing its prestige and military power, and so on.”
Job losses, with or without a higher minimum wage, may be an unavoidable growing pain. Certain jobs are offered as a sacrifice for the greater good. The economy used to be home-based in colonial America, but nobody can argue against industrialization. It created significantly more goods and jobs for a lot more people. Remember the time data had to be entered by hand? Or when setting the presses was a nightmare? Thousands permanently lost those jobs only for more jobs to come into place later.
Plus, better-trained workers are important to companies. A report by Robert Half, a staffing agency, has found that more than half of surveyed Chief Financial Officers are willing to pay more or negotiate on benefits for skilled employees. It also found that starting salaries are expected to rise 4.1 percent this year for all professional positions.
Yet, there is an incredible demand for these workers that is not being met. The same report shows most corporate leaders say have trouble finding skilled professionals. The Bureau of Labor Statistics show this too: there were over 5.4 million job openings in November 2015.
According to CareerBuilder, software developers, computer systems administrators, web developers, various engineers and the healthcare professions are in incredibly high demand. None of the median hourly earnings fall below $30 an hour. Unfortunately, this means some jobs will be less in demand. There are plenty of English teachers (and don’t get me wrong, we do need them), but apparently not enough people in STEM fields.
What we need to do improve access to education and opportunities. Two thirds of all new jobs will someday require some college education, according to the Center on Education and Workforce. The Federal Reserve Bank of San Francisco says that bachelor’s degree holders currently earn around $830,000 more in a lifetime than non-degree holders. We should also note that bachelor degree holders between 25 and 32 years old had an unemployment rate of only four percent in 2014. For master’s degrees: 3.4 percent. Those in the social sciences, arts, and architecture actually made these numbers higher too.
All this being said, college is clearly one of the great equalizers, although financially out of range for many people. There should be less focus on adding unnecessary amenities and bureaucracy, both of which have driven tuition up to obscene levels. States should also make college affordability a priority.
I’m not saying to make four-year colleges free like Bernie Sanders has. This is almost politically impossible. But “free” community college, so long as people keep up a certain GPA and public service commitment is definitely a good start. Many of these institutions offer degree and certificate programs that are a stepping-stone to good employment.
I will even give former presidential candidate Marco Rubio some credit for him saying, “We need less philosophers and more welders.” European economic powerhouse Germany, for example, emphasizes apprenticeships that involve practical training and classroom education. Most of their young people have partaken in an apprenticeship, which in turn helped forge a strong and skilled base in a many fields. While this would likely be expensive in the United States, it’s a worthwhile investment that companies here should consider if they truly want the workforce they need. Luckily, some already offer to at least pay for education.
Ultimately, fighting against having a more educated and well-trained populace is shooting the country’s welfare in the foot. What we truly need, for the sake of better productivity and ourselves, is a setting that fosters skill building.