Issue 2 supporters would hang out a "No New Business Wanted" sign at the Ohio border, and hurt the very category of workers they purport to help. But hey, they'll feel good about themselves. For a state that already has a poor business climate and high income tax rates, I think a 33% hike in the minimum wage, with additional escalators, will function to hurt the jobs situation more than it helps. Jonathan H. Adler of CWRU, writing at NRO today, says the minimum wage hikes and future built-in increases would be a job-killer for the state.
The economic case against a minimum wage increase is well known. Raising the minimum wage slows job growth by increasing the cost of labor. It is a basic economic truth that when the price of something goes up, the amount demanded declines. So, when the government mandates higher wages, unemployment rises as a direct result. Those workers who keep their jobs may earn more, but this comes at the expense of those who are left without jobs.Issue Two proponents argue that the majority of minimum-wage workers are adults (over 20) — and thus deserve a raise. The fact is that most minimum-wage earners are between the ages of 16-24 — and two-thirds only work part-time. People in their early twenties are certainly adults, but they are also more likely to be students or living with their families, and are rarely a household’s primary wage earner. A high-school student delivering pizzas, a 23-year-old graduate student who works in a coffee shop, or and a parent who works part-time to supplement his or her spouse’s income while leaving time for family obligations is more likely to earn the minimum wage than a family’s primary wage earner. Indeed, the average family income of minimum-wage earners is over $60,000.
Those who think minimum-wage increases are a matter of social justice ignore the fact that increasing the minimum wage cuts off the lowest rungs on the ladder of economic opportunity. Forty percent of workers earning the minimum wage were unemployed a year earlier, and the typical minimum wage earner does not earn the minimum for long. Most minimum-wage earners receive a raise within a year of employment. As young workers learn new skills, their productivity rises, increasing their value to their current and other potential employers.
For about half of my 29 year career in the employment and job placement industry, part of my job was managing a multi-office temporary services company in the Akron-Cleveland-Canton marketplace. We had a varied practice, with clerical and skilled hourly workers, but in terms of sheer numbers of employees, the biggest segment was what is called "light industrial", what you might call the bottom rung of the employment ladder.
I know conditions vary around the country with farm workers and large immigrant populations, but our market would never support paying minimum wage. And even at starting wages well over minimum, the problem was one of supply, never demand. We're talking about the labor pool after the jobs at the pizza and fast-food joints, mall stores and landscaping companies are taken. The work is often more physically taxing than taking tickets at a theater, or ringing a cash register at Orange Julius, but unlike much of the mall work, the need for labor with these companies is not temporary or seasonal.
Here in the Midwest "Rust Belt", from the mid-eighties into the 00's, we were not paying minimum wage to our unskilled workers, because they were hard enough to find and retain even at significantly higher pay rates. The marketplace was working, and it continues to work. In a job like assembling parts, or packing items in boxes, or taking plastic parts out of a machine, our clients wanted one thing from us as a service provider. Reliable workers. Some of them defined that as loosely as people who show up for work on consecutive days. And you wouldn't believe how often it was difficult to deliver even that. Anyone who owns a business large or small, or who is chartered with hiring entry level, unskilled workers of any sort, will tell you the same thing. It's hard to find people who want to work.
We typically offered a raise if a worker completed one full week, and nearly all of our clients hired every good worker they could find, transferring the keepers, the reliable ones who show up and work, from the temporary service payroll over to their own, as full-time W-2 employees, at the first opportunity (typically 30-90 days.) That brings at least nominal benefits in most cases. The interviewing and referral service performs a screening function the client doesn't have time for, and the low-risk probationary period with the temporary service affords the client a useful "try it before you buy it" method of selecting good entry-level employees. It worked, and minimum wage was never at issue, because the cold realities of a shallow labor pool wouldn't permit it.
I would venture to say that at least in northeast Ohio, and barring unusual circumstances, the idea that a significant number of people are "stuck" in a minimum wage job is hard to fathom. Because anyone who is willing to work 40 hours a week could walk across the street any day and get more from another employer. I know many people stay in minimum wage jobs for a variety of reasons (the nature of the work, flexibility of hours, location, family businesses, etc.) but the lack of other, higher paying available work isn't what's keeping them there. Others keep repeating the process of starting at the bottom of the job market, usually as a result of choices they made the first time or two, (while often complicated by any of a number of social or family problems.)
But most companies have a certain budget for labor and its associated costs and burdens. If the cost of labor goes up, they will use less of it. It's that, or inflationary increases in the prices of their products or services. And it is the tough employment cases, the least-skilled, and the ones most in need of reaching even the bottom rung on the employment ladder, who are the ones hurt by minimum wage increases.
Add to that the message you are sending to any company looking for an area to call home.
Dear potential Ohio employer:
"The wages you pay to your entry-level workers will be legislated for you by the state government....We know that the higher wages will be inflationary, and the higher the inflation we cause, the higher will be the mandatory increase in the new minimum wage next year. We don't know yet what your labor costs will be next year, though. We'll let you know. Of course the supply of available labor won't be significantly affected by this measure. Your labor pool will look much like it did before the increases. How does that sound so far?
Adler cites a recent study concluding that Ohio already has the second worst business tax climate of any state, with one of the highest state and local income tax burdens in the nation.
Like Avis, we're Number Two, but trying harder.
One of the pro-Issue 2 arguments cited in the PD article below is that...
When workers earn more, they're less likely to quit. Lower turnover leads to higher productivity, and lowers recruiting and training costs for business.
Most employers I know would pass on any "productivity" gains from their unskilled labor force if they came along with a 35% increase in the cost of labor, and even more costs associated with new record-keeping and compliance. And forget about attracting new business here. Companies will continue to leave in droves, moving to states that have a clue.
I don't find the other "pro" arguments very persuasive either.
The Secretary of State opposes Issue 2 and explains why:
* It's a massive intrusion into your personal privacy . Backers say the amendment is about the minimum wage, but read the fine print. It gives employees or any person acting on behalf of an employee the right to demand private salary records for all employees (not just hourly workers). This will give access to your private information, which could then become public. Disclosure of home addresses and other personal data will put you at risk of identity theft.* Records requirements are costly and open employers to harassment . The amendment was drafted by anti-business activists who propose that all public and private employers – including state and local governments and homeowners – maintain decades worth of records while employees are working and three years afterward. This will cost millions of dollars, yet employers will have to provide these records without charge to any employee or employee representative who asks. Unhappy workers or activist organizations will have authority to make repeated, costly requests.
* The amendment means a huge increase in the cost of government. State and local governments will be saddled both with enforcing the amendment and meeting their own costly obligations as major employers. You'll foot the bill.
* The amendment doesn't really help low-income Ohioans. A higher minimum wage will trigger thousands of layoffs in lower-paying jobs – hurting, rather than helping, Ohioans who need higher wages the most. Better approaches are to increase the federal Earned Income Tax Credit and to improve job-development and training.
* As part of the Constitution, the amendment cannot easily be changed to correct unintended consequences. This amendment, which is hostile to both employers and employees, will damage Ohio's job climate. The legislature will be powerless to fix it.
VOTE NO ON ISSUE 2.
Related:
Here's a Beacon Journal piece on the proposed legislation.
The PD's editorial, with arguments on both sides of the issue.
Posted by dan at October 30, 2006 7:25 PM