Misconceptions: “Minimum Wage Jobs Aren’t Supposed to be Careers”
by Benjamin Studebaker
The other day, I saw one of my Facebook friends post this image:
The claim that minimum wage jobs aren’t supposed to be careers, and that consequently any adult who still has one deserves a wage that cannot be lived on, is dangerously misleading. Here’s why.
There are several levels on which this argument misleads. Let’s start with the history–it’s just not true that minimum wage laws were passed with the intention that they would not provide workers with living wages. The federal minimum wage was made law by President Franklin Delano Roosevelt in 1933. It was declared unconstitutional in 1935, reenacted in 1938, and subsequently ruled constitutional by the Supreme Court in 1941 under the commerce clause. During this period, Roosevelt said many things in support of the minimum wage law and is very clear about what he intended. In 1933, FDR says:
No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.
He’s remarkably specific:
By living wages, I mean more than a bare subsistence level—I mean the wages of a decent living.
As a historical claim, the notion that the minimum wage was not intended to be a living wage is without basis in fact. When people make this argument, what they are really doing is dressing up a normative claim as if it were a descriptive one. They don’t have any reason to believe that the minimum wage was not intended to be a living wage. What they really believe is that it shouldn’t be, that only high school and college students should work for minimum wage and that adult workers should try harder to have substantive careers.
This argument relies on the assumption that if adult workers work hard enough, they will necessarily be able to get jobs that pay more than minimum wage. The claim implies that whenever we see an adult working minimum wage, it’s indicative of lack of effort rather than any larger economic phenomena. If this assumption is true, it means we have a lot of adults who just don’t try hard enough–45% of minimum wage workers in the US are older than 24:
There are 3.3 million people working at or below the minimum (workers can earn less than the minimum if they fall under an exemption–most commonly working for tips). This means that there’s just under 1.5 million people older than 24 working at or below the minimum. What would happen if 1.5 million people started trying harder?
Let’s say that our 1.5 million adult minimum wage workers all quit their jobs, took out student loans, and pursued 4 year degrees. Wouldn’t they all get better jobs once they got degrees? Not necessarily. The trouble is that our society does not create jobs to fit the extant skills of its workers–it educates its workers so that they will be able to do the jobs our society needs to thrive. For instance, if a bunch of people decide to get journalism degrees, this does not increase the number of available jobs in the field of journalism–we only need so many journalists, no matter how many people there are who want to do the job. The increased competition for the same number of jobs only serves to allow employers to pay less for the same skills. So if our 1.5 million adult minimum wage workers attempted to enter more lucrative fields, this would not increase the number of total people employed in those fields–instead, it would depress wages and reduce the economic value of the skills the workers had gained. The same number of people would still be unable to get these jobs, and the ones who would get them would earn less. What happens to people with college degrees who are unable to get jobs that take advantage of their skill set? They end up working in low-skill jobs, which often pay minimum wage.
This is because the economy still needs 1.5 million people to fill those minimum wage jobs. McDonald’s, Wal-Mart, and other such firms hire adults because there are not enough young people to do all the jobs they need doing. These firms don’t care if the adults they hire have degrees (indeed, about 1/3rd of adult minimum wage workers already have bachelor’s or associate’s degrees). Because their skills are not relevant to the job they’re doing, adult minimum wage workers will not be paid any premium for the skills they may have. It is always in the interest of individual firms to drive down their labor costs, and so these firms will pay as little as possible. Because there are always adults who can’t find jobs that match up well with their skills, there is always a large surplus of adults available to do minimum wage jobs. The intense competition for low-skill jobs means that without minimum wage laws, these people could be paid what poor workers during the 19th century were paid–the bare minimum required to prevent them from starving to death. It doesn’t matter if every adult had a PhD–we would still need 1.5 million adults to work minimum wage jobs, and we would still have the same surplus of workers unable to get jobs in the fields for which they had relevant skills. Consequently, the state instituted the minimum wage for the explicit purpose of preventing this kind of outcome, to ensure that every person who ends up stuck with a minimum wage job can achieve a minimum standard of living beyond subsistence.
Now, some would argue back that this is perfectly acceptable, because this is the free market’s determination of what low-skill labor is worth, and that to have a minimum wage is to distort the wage market. This trouble is that there is no “natural” wage market that exists independent of the political system and the choices we make. To have a wage economy in the first place, the political system has to create a stable currency, construct and enforce a system of property laws, levy taxes to fund these operations, and so on. One of the choices states must make when constructing their wage markets is how much negotiating power to give workers relative to employers. Because the market is itself constructed by the state, there is no “natural” relationship, and it can range widely. If the state makes the position of the employer too strong (e.g. by prohibiting trade unions or eliminating the minimum wage), workers will not earn enough to maintain a sufficiently high rate of consumption, and the economy becomes demand-constrained. Conversely, if the state makes the position of the worker too strong (e.g. by making the minimum wage too high or requiring pensions that are too large), employers will be unable to afford the number of workers they require to meet demand, and the economy becomes supply-constrained. To choose not to have a minimum wage or not to raise the minimum wage is every bit as substantive a political choice as the choice to have it or raise it. Every system, even the most deregulated, remains a political choice, an artifice the state has created because it believes (rightly or wrong) it will benefit the population as a whole.
We can have substantive debates about whether the economy is demand constrained or supply constrained. We can argue about whether workers have too much or too little leverage under the current rules. But there is no fixed natural relationship that the economy will magically gravitate to on its own. The question is not whether to have rules, but what the rules should be to ensure that we maximize our society’s potential to generate good lives for its citizens.
And yet another very clear, well-written post.
I wonder why there’s a little jump in the 45-54 year old min. wage workers. That seems odd.
I had no idea that 45% of min. wage workers were over 24 years old. That’s eye opening. And really sad.
“But there is no fixed natural relationship that the economy will magically gravitate to on its own.”
I think you’re right that this is the assumption behind deregulation. I have yet to hear any persuasive arguments on their side, but I’ll admit that I haven’t done much reading in this subject. I’m certainly no economist.
And supposing there is a natural economy, is it morally right to let the natural cycle ruin millions of lives?
Thank you! I’m glad you liked it.
My guess would be that workers in the 45-54 range are caught between a rock and a hard place–they’re more vulnerable to economic changes (e.g. outsourcing or technological redundancy) than 35-44 year olds, but less able to retire, claim pensions, or quality for disability than 55 to 64 year olds.
Good point about natural phenomena–diseases are natural, but most people don’t accept the argument that because diseases are natural we should not attempt to intervene to prevent them from killing people. More abstractly, everything in the universe exists naturally, so it is rather odd to praise or condemn any practice on the grounds that it is or isn’t natural. And there’s also Hume’s is/ought fallacy–the mere fact that something descriptively does happen does not in any way imply that it should.
I suspect that there’s a little jump in the 45-54 year old minimum wage category because it’s around that time when, if you lose your job, you will need to be trained for just about any new one (any college training is by then at least a little obsolete) but you are old enough that the employer may not be sure you’ll remain in the workforce long enough to make it worth that retraining.
That 45%? That’s at or below minimum wage. If you really want to open your eyes, find out how many are working wages within $3 or so of minimum wage. That’s still well below a living wage in most places, but those workers don’t get included in the minimum wage statistics.
Another VERY important statistic which should not be overlooked here: that 1/3 of workers with degrees. That means that 1/3 of workers earning minimum wage or below HAVE STUDENT LOANS TO PAY OFF. They don’t just need money to live on, they need money to pay off the debt for the education they got so they wouldn’t have to take a job that pays less than they can live on. Yes, we have tools now which allow for reduced payments, but those payments are often less than the interest the loans are accruing, so the debt of a large percentage of minimum- and near-minimum-wage workers is increasing EVEN IF THEY DON’T BORROW ANY MORE MONEY FOR ANY REASON, EVER.
Except that they DO borrow more money, because they need a car to get to work, and about the time they’ve amassed enough 5 and 10 cent raises to save up money so they can buy a car with cash next time, that dinky raise kicks them into a higher income calculation and their student loan payments go up and gobble all the potential emergency savings.
And there are a LOT of those older and/or more educated low-wage workers in that just-above-minimum-cage category. They are the ones who are smart, resourceful, and disciplined enough to become shift managers and department heads and store managers, just as they were smart, resourceful, and disciplined enough to make it through degree programs and managerial training diploma programs. They are the ones who are motivated enough by the need to keep a roof over their children’s heads and food in their kids’ bellies to actually show up every single day for the sake of a paycheck, even when the job is killing them by inches physically, mentally, and emotionally. They are the ones who can be relied on not to take vacations or to show up even when slightly ill so that there isn’t a staffing challenge. Those people, the ones with job skills, are working at or JUST above minimum wage (and, yes, sometimes below minimum wage) and they are not earning enough to live, to survive and have ANY hope that the future will be better, not even any hope that their children’s lives will be better than theirs.
These are good points. As a country we seem to think that all anyone needs to do to get a good job is to go to college. But in many cases that degree just isn’t enough, or it’s too much and prevents them from getting hired.
I’m with you on these points. The Hume thing—that’s a huge controversy. I can’t quite make sense of it all because the is/ought distinction seems so obviously true to me. I can barely make out what the opposition means in blurring the distinction.
1933 lol. The economy hasn’t changed one bit.
This is the most eloquently written article on minimum wage that I’ve ever read. Thank you!
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This was a good read – thank you for this. I’m curious on your thoughts about jobs that don’t fit into either category – neither a “minimum wage” job or a job that requires a college degree. Jobs like truck-drivers, landscapers, flight attendants, painters – jobs that have “on the job” training and provide some pretty nice annual compensation. Wouldn’t these be a logical next “rung” in the ladder for adults making a living? These jobs aren’t nearly as easy as the minimum wage jobs you’ve referenced – which I think is the basis for the “they should try harder” argument.
I think (but I want to get your thoughts) it’s a slippery slope to have jobs like fast food cooks, grocery store cashiers and waitstaff pay “wages that can support a decent living” because that increase just inflates the cost of living, salaries of “college educated jobs” and so on… because ultimately, if everyone could make a decent living out of a cashier position, what’s the incentive to take a job that is difficult or stressful? If I can pay my mortgage by flipping burgers, I would certainly take that avenue rather than the stress of meeting project deadlines, balancing budgets, or managing people.
I think it’s also relevant to mention that many of those minimum wage jobs can be replaced by machines – they already are. Toll booths, grocery check outs, fast food ordering, even waitstaff bringing food to the table – companies are investing in machines that can perform all these tasks. Soon, we will need far less than 1.5 million people to fill these positions.
Just to be clear, I’m not a supporter of people having to earning college degrees to make a decent living. There are far too many college graduates with liberal arts degrees that can’t make enough money in their respective field to pay off their student debt (me being one of them) but I think that people no longer want to consider physically demanding or difficult jobs, because they feel they shouldn’t have to. We have a serious tradesman deficiency that needs to be filled – carpenters, welders, roofers, electricians, truck-drivers, bridge builders – all jobs that provide training onsite (and yes, may require a certificate of some sort). These jobs are so viable and so necessary and it seems that all anyone wants to talk about is how it’s outrageous to require someone to have a 4 year degree just to make a living.
In my humble opinion, it’s not a black or white / minimum wage ors college graduate world. There are shades of grey that fit somewhere in between and they need to be acknowledged. Would love your thoughts.