For an opposing viewpoint please see the other side of this Point/Counterpoint article here.
Much has been made of State Representative Laurin Hendrix’s recent bill to lower Arizona’s minimum wage. Rep. Hendrix proposes that employees under the age of 22 should be paid only 75% of the minimum wage, provided the business makes no more than $500,000 a year or participates in interstate commerce. Currently, Arizona’s minimum wage is $7.25 but under his proposal a 19 year old could be paid $5.44 an hour.
Let me begin by stating that I appreciate Rep. Hendrix proposal because it is innovative and worthy debate; however, I believe the drawbacks far outweigh the intended benefit.
The relationship between raising the minimum wage and an increase in unemployment isn’t as straightforward and conclusive as economist once believed. The economic forces behind unemployment numbers are far more complex and nuanced. Factors such as industry sectors, workforce demographics, and the general health of the economy play a greater role in influencing unemployment than the minimum wage.
To see whether Rep. Hendrix’s proposal would be effective we need to ask a few questions: Will the proposal help small businesses? Will it reduce unemployment for younger workers, while instilling a better work ethic? And finally, is this best for Arizona and its economy?
The first answer is fairly straight forward. Companies like our local dry cleaners, fast food restaurants, and a host of other small businesses would benefit, but is it worth it? Inevitably, younger employees will push out older employees because, let’s face it, it will save businesses money. This is bad because older workers typically remain unemployed longer than their younger counterparts (see For Older Workers, a Longer Job Search ). Furthermore, older individuals often require more training and job readiness skills (think of the basic computer skills high schoolers intuitively possess and older adults severely lack), draining the limited private and public resources available to the unemployed. It’s also worth considering that older employees are typically the primary breadwinners in their households and are further along in their life’s economic wealth cycle, as most of the wealth they’ve created for themselves is behind them.
This stands in contrast to younger workers, which some preliminary research has shown might actually gain from an economic downturn. This is due to the fact that income of young adult rises rather quickly as they age, prices on things like houses and cars are relatively low, and the majority of their life’s wealth distribution still lies before them.
Small businesses might make modest gains from the proposal, but the net effect would undermine older unemployed adults and not necessarily effect younger workers in the long run. Which leads me to ask why we’re attempting to employ young workers at the cost of disemploying older workers who have paid taxes and played by the rules all their lives?
Another point made by proponents is that the law would help instill a “habit of going to work and developing a work ethic.” That may be the case, but surely having the government attempting to create habits and work ethics doesn’t exactly square up with freedom and personal liberty, both cornerstones of the conservatism Rep. Hendrix espouses. But, let’s assume that’s the role government should play, and as my good friend likes to say, “the law is a teacher.” Then, what are we teaching our youth when we essentially discriminate against them because of their age? That’s a slippery slope. What happens when they become adults and begin asking, “why should we pay that geriatric Walmart greeter minimum wage, I mean seriously, what do they do anyways.” You don’t need laws to help form a work ethic, old fashion want and ambition will be more than enough to force the slothful teenager into the dreary eyed, pimple faced cashier we all love. In fact, I fear paying them less might actually be counterproductive and hurt their work ethic.
Finally, is this really what’s best for Arizona and its economy? It is, if we want the unemployed to be older and take longer to reenter the workforce so that teenagers can have a few more jobs and small businesses save a few dollars in the short-term. Studies have shown that stability and a friendly business environment is the best way to create jobs, not piecemeal wage reductions, selective tax cuts, tax deductions, or incentives for individual sectors.
Nothing can benefit the Arizona economy like a well functioning government and sound economic policies to buttresses the confidence of businesses in and outside of our state. Instead of a piecemeal approach to economic recovery, our elected officials should build on a comprehensive plan with short, medium, and long term goals. Our focus should be on forming smart and strategic policies in areas that are proven to bring about economic growth: tax reform for Arizona’s citizens while gradually lowering the corporate tax rate, investing in our children’s learning and incentivized teacher pay, promoting higher education which will create educated adults ready to work, and reforming our electoral process through open primaries or more competitive legislative districts to reduce political acrimony and eliminating the ideological radicalism.
I appreciate Rep. Hendrix’s proposal, but it doesn’t do enough. We need a comprehensive approach to economic development and we need it now. The national economy is in the midst of recovery and we may be left in the dust of other states that are planning for the future.
For an opposing viewpoint please see the other side of this Point/Counterpoint article here.
Victor Jett Contreras
Victor Jett Contreras is a Democratic candidate for the State Senate seat representing Legislative District 16 which includes South Phoenix, Laveen, and Guadalupe. Professionally, Victor is a real estate agent and is involved in various community organizations. He also helps run a small non-profit called the Arizona Ivy League Project which works with academically excelling high school sophomores and juniors of disadvantaged backgrounds. Politically, Victor considers himself a centrist pro-life Democrat who despises cheap rhetoric, political talking points, and musty ideological dogma. In the Arizona State Senate, Victor will dedicate himself to job creation, government innovation and accountability, fiscal responsibility, and investing in our state's future, its children. 
If minimum wages increase wages why not raise the minimum wage to $50 dollars an hour? Wouldn’t that give working people more? But you don’t need to be an economist to understand the results of a high minimum wage. All minimum wage laws do is give more money to fewer people. It is minimum wages laws that try to “Redistribute Jobs”
“The relationship between raising the minimum wage and an increase in unemployment isn’t as straightforward and conclusive as economist once believed”
There is a market wage and then there is a minimum wage. If the market wage which is now around $7 is higher than the minimum wage (for example 5.15 per hour)then yes you will have not widespread higher unemployment because most are making more than the minimum wage.
University of California – Irvine economist David Neumark has found that for every 10% increase in the minimum wage, the poverty rate increased by ¾ of 1%. The wage increase from $5.15 to $7.25 is a 41% jump, meaning there could be measurable adverse impacts on the poverty rate. In a 2005 study, Neumark concluded that “although minimum wages increase the incomes of some poor families, the evidence indicates that their overall net effect is, if anything, to increase the proportions of families with incomes below or near the poverty line.”http://www.american.com/archive/2007/july-0707/government2019s-helping-hand-also-hurts
But as economic statistics will attest as the minimum wage has increased for the young so has unemployment.
http://online.wsj.com/article/SB10001424052748704761004575096150953378366.html?mod=WSJ_Opinion_AboveLEFTTop
I found this part particularly ironic. Another point made by proponents is that the law would help instill a “habit of going to work and developing a work ethic.” That may be the case, but surely having the government attempting to create habits and work ethics doesn’t exactly square up with freedom and personal liberty, both cornerstones of the conservatism Rep. Hendrix espouses.
Mr. Contras is definitely misguided on Conservatism as I have stated before it is minimum wage jobs that are the social engineering and not the repeal of them. By repealing all jobs you eliminate the structural unemployment and restrictions on the job market. By repealing the minimum wage laws and allowing more people to go to work your putting the emphasis on the individual and the small business to provide for themselves not some government engineered social welfare plan for a “living wage”
Mr. Contras does mention the real problem that repealing minimum wage laws for some members of a society the youth and not others the elderly is fraught with problems. But the elderly are unemployed longer not because they have fewer skills but because they have more skills and more financial reserves. While a young person will take any job he can get, but a those with specialized skills are more discerning and will wait longer for the perfect job.
David ~ your response is excellent. People feel like a minimum wage hike is only fair. However, you present actual data that confirms the destructive nature of wage controls. Unfortunately, it usually takes more than facts to override beliefs and feelings.
It is amazing how many people espouse to champion freedom yet act to control the behaviors of others at every chance. You enjoy as much freedom as you foster for others. Business owners should be free to enter into employee contracts without government wage controls. Potential employees are free to compete and negotiate.
David,
You should have written the article. Much more knowledgable and accurate on the subject than the author. There should be no minimum wage, let the market make the call.
David, Dan, and MikeinAZ. I appreciate your arguments and they have merit but I think your wrong. The negative effects of minimum wage on employment/unemployment were once universally agreed upon, however this is no longer the case. The negative effects of minimum wage laws are debatable. In fact, for every study arguing against minimum wages, I have another study to counter it. When you have free time consider the UK and their fairly recent introduction of a minimum wage. It did not have the effects that David described. Consider this: Why Has the British National Minimum Wage Had Little or No Impact on Employment? http://ideas.repec.org/p/cep/cepdps/dp0781.html
In the “real world” what effects employment/unemployment is much more complicated than minimum wage laws and often varies from sector to sector. Unfortunately, most arguments against minimum wage laws are influenced by an ideology and world view that has recently been shown to be…”flawed,” at best.
You all have a right to believe what you wish, all I ask is that you reconsider the issue. It’s much more complex than the supply & demand model taught in textbooks, world without end.
Cheers!
This is from an Op-ed I wrote in 2005. The same holds true today:
A higher minimum wage can have negative employment implications for the demographic groups it is trying to help, and it is not likely to be effective in reducing poverty. Proponents of an increase point to the declining real purchasing power for those individuals who depend on the minimum wage to support their family. Yet, economists have long argued that increasing the minimum wage results in increased unemployment and/or reduced hiring. Moreover, the very individuals that the minimum wage law was designed to protect – entry-level, low-skilled workers – are the most prone to losing employment when businesses are under a cost squeeze.
Supporters of increasing the minimum wage often argue that low-wage earners have to support their families on a minimum wage income. However, the U.S. Census Bureau reports that nearly two-thirds of minimum wage recipients either live with their parents or are the secondary earner in the household. Only 14 percent of minimum wage recipients are the sole earners in their household, and sole breadwinners qualify for the Earned Income Tax Credit (EITC). In 2000, the EITC supplement was around $2.00 per hour – as much or more than many of the current proposed increases in the minimum wage. In fact, recent studies suggest that the EITC is a better tool for reducing poverty than increases in the minimum wage; and, best of all, the EITC does not have negative side effects such as higher unemployment.
Another argument against increasing the minimum wage would be the labor market itself. The latter 1990s produced an economic climate in which many firms paid wages exceeding the minimum due to competition for workers. In such a competitive market for laborers, the minimum wage is virtually irrelevant, as market forces work without intervention. Further, firms were able to pass on those increased costs to their customers. The economic climate is much different today. With a recovering economic climate, consumers are more price-sensitive. The ability to pass along wage increases to the consumer will certainly be hampered – especially for small businesses. This leaves reducing the least productive workers or hiring fewer new employees as the primary options available to businesses to absorb escalated wages. Policies that threaten to increase labor costs will likely create more unemployment, exacerbate poverty, and weaken the overall economic situation.
Okay, I’m 58 and got my first minimum job at age 16 (42 years ago) and it paid $1.80 an hour. Minimum wage really hasn’t risen that much. Cigarettes were 35 cents a pack and gas was 35 cents a gallon.
The people that are competing for the minimum wage job really need the work. When the price of anything goes up it hits them the hardest. They aren’t driving the gas stingy cars. The slightest change in their condition sends them spririling downward. They don’t take mass transit because its cool or their trying to save the world. They’re just trying to get to work.
I am a prosecutor in a very small county and we are fortunate enough to have a drug court program that has proven fairly successful in breaking the cycle of drug addiction and crime. Getting them clean and sober is the first step. Trying to find a job is next but is often complicated due to the fact they have a suspended license and have no way to work unless they can take mass transit. Their licenses are usually suspended due to unpaid tickets. Once we get their license problem solved transportation is still a problem. If they can afford a car it usually is a real beater prone to problems. Mandatory insurance often costs more than the car is worth. Other expenses common to the problem are court costs and child support. Now go to the interview and try to impress your future boss with your legal problems. If you get the job it will be at minimum wage. I’m sure that is not a concern because they are more interested in building a good work ethic.
Of course why should we care as they are just drug addicts and if they really wanted to quit they could. Contact ten of your friends and ask them if they have someone in their family or a close friend who has a substance abuse problem and I’d be willing to bet a 50% response.
To the millions who are struggling to make ends meet the concept of cutting their pay to stimulate jobs just doesn’t make sense.
Thanks for the opposing views to this nation-wide dilemma. While you hate to decrease a person’s pay, when they are already struggling, studies show that by lowering the minimum wage, more jobs will be created, therefore reducing the unemployment rate. Gives us something to think about! Thanks for 2 well written articles!