http://msnbc.msn.com/id/6890092/
The article listed above is short, but here's a still shorter synopsis: Since the minimum wage is much higher in Oregon and Washington than in North Dakota, McDonald's is putting the drive-through order takers in a "call center" in North Dakota. At a difference of over $2 per hour for every order taker, that's pretty significant.
Of course the locals in Oregon and Washington are outraged and think government should step in. What they don't consider is that the government did step in, and this is the effect, rather than the other way around. Minimum wages hurt those that need jobs the most. Whether the minimum wage is $5.15 per hour (as in North Dakota) or $7.25 per hour (as in Oregon) is irrelevant to people like me with skills in developing software, but it's deeply relevant to unskilled labor. That is, those without significant education or experience.
If the value of a task is $5, and could be done by a person for $5 or could be done by a machine for $6, the business is going to employ someone. If the government steps in and says that the price of labor has a floor (in other words, a minimum wage) of $7, the business is going to use a machine and the person is going to have to look elsewhere for a job. If that person has no skills or experience worth $7, the minimum a business may now pay, he is only going to have available a job that can't be done in some other way for less than $7 and can't be foregone in favor of a more profitable alternative. With less jobs available, but more inexperienced workers competing for those jobs, some just won't get jobs. So who was helped by a minimum wage?
It's always helpful to see a real-world example of the long-term effects of a given economic policy. It's unfortunate that those expressing outrage over the problem should choose to seek more government intervention, the original source of the problem, rather than less.
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2 comments:
I'm surprised they didn't put the call center in a bunker somewhere (not Baghdad) in Iraq and pay the $80 a month the Iraqui security guys are paying. You're looking at a consequence of capitalism, though. MacDonalds could be considered to be malfeasant in their duty to share holders is they don't choose the cheaper option.
Do you have an alternative answer? Minimum wage came from the need to get rid of sweatshops where people were paid a pittance because the owners could get away with it. It addressed a real problem, however well or not. I agree it is less and less effective, especially when living on a minimum wage job is, shall we say, challenging. What we need, though, is an answer to the problem.
If it were feasible to put the call center somewhere out of the country, I'm sure that in the absence of govenment intervention, that's what would happen. As for a solution to the problem, how about doing away with the minimum wage? Thomas Sowell points out in one of his books that the real minimum wage is actually zero, because an employer can always choose not to hire someone if they are not worth the cost, just as a consumer can choose not to buy something not worth its price.
Frankly, when the choice is then between working in a sweat shop for a pittance and no job at all, I think people will take the pittance, but keep looking for options. I don't think people get as readily stuck with only one choice any more.
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