Sunday, August 29, 2010

Help The Little Guy

Consider the following: Teenage unemployment is about 26%. The round-number breakdown, I just read, is 22% for white females, 26% for white males; 35% for black females, 45% for black males. The numbers improve gradually up to age 25, but are still terrible. How is that not an automatic recipe for disaster in terms of that generation's learning work skills and becoming adults? I mean automatic. What possible amount of government intervention, education subsidy, inspirational speeches, parental and societal guilt imposing, or affirmative action is going to counteract that? All those efforts, noble as any of them are, are not going to do more that cut that back a small percentage each. We can pretend that better education and more job training programs will "equip our children for the new economy," but the numbers say that's crap. We do a lot of that now.

So lower the minimum wage. Lower it until those numbers go down. If your knee is jerking too hard, with images of poor but honest and hardworking adult breadwinners unable to support families on such a low wage, then lower the minimum wage for young people. Heck, you can even do one of those over-complicated gradual things that governments love to design, with different minimums at every age, and not allowing employers to fire you just because you turned 20 and someone else is cheaper. Like employers are going to fire the kid with 2 years experience to save $.50/hour on an untrained kid anyway, but even if some boss was stupid enough to do that, we won't let him.

Won't those less-expensive kids take jobs away from mummies and daddies, then? (If you ask that, you are acknowledging that lowering the MW creates jobs, BTW). Not really. The 2% of those over 25 working MW include the disabled, the recently-imprisoned, and the addicted. That covers most of it. Those groups could likewise benefit from lowered minimums.

You want to get really radical? (But the thing is politically impossible.) Allow black kids to underbid white kids for jobs. Opponents won't portray it that way, of course. A different MW for blacks will be seen as paying them less for the same work. If you look at it one way, sure. In some places, that ugly reality might even be true. Okay, then allow them to overbid on how many hours they can work.

When you're unemployed you want to bring something to the table that the other guy doesn't. If you've got more experience, or better skills, or more training, you bring that. But what if you haven't got any of those things? Then you have to come in with a promise that you'll work cheaper or work harder.

Small business/New business. Since the 1970's, new businesses (less than a year old) have created 3,000,000 jobs a year. If you are wondering how these brand-new businesses are hiring people so quickly, think franchises and branch offices - though start-ups do their share as well. A new name-brand business gets built in your town, whether it's a new Dunkin's or a bank, and those are new jobs. Large, established businesses, on the other hand, lose 1,000,000 jobs a year.

Now of those two, which gets corporate welfare? You'd think liberals would be all over this. Well-connected, older companies with lobbyists get the loopholes in legislation, often in the form of protection against baby competitors. The more complicated the regulations, the more advantage a big company has over a small one. If you have 30 employees but have the same reporting and compliance responsibilities as a company with 3000, how are you going to absorb that? So how about the first year you don't have to report much of anything. Year two, a lot of the rules start to apply. Year three, you go in the same pot as everyone else.

Plus you have to pay a few hundred bucks to get a vendor's license in most states. Heck, the government should probably pay you a few hundred to start a business. And if it doesn't work out, you can get a few hundred the next year, too. We should require some proof you're doing something. That would flush out some underground economy, too, I imagine. Even five years in a row, a kid trying new businesses on the side while she works elsewhere. None of them work. Well, she knows a lot more about how the economy works than she'd get in most job training programs. For a lot less money.

So we are paying companies to lose jobs for us, and charging them to create jobs. That sounds like a business plan with legs, eh?


Anna said...

Whoa, radical stuff there! lol.

jaed said...

(Conspiracy theory ahead: proceed at own risk.)

Raising the minimum wage has one of two results depending on the specific amount. Either it's below or at the market-clearing wage, in which case it makes no difference, or it's above the market-clearing wage, in which case low-level employees get fired or don't get hired because they cost more than they're worth. So far, basic economic theory, known to all.

During the last minimum-wage hike but one - in 2007, I think - I started wondering why Congress raised the minimum wage to that specific level, and I came up with a disturbing idea: the market-clearing wage is not the same across the country. Generally it's lower in small towns and rural areas than it is in cities. Small towns and rural areas tend to have Republicans, and cities tend to have Democrats. When you raise the minimum wage above the market-clearing wage in an area, that area loses entry-level jobs. Because it loses entry-level jobs, it bleeds people, particularly young people; they head for a city so they can find work.

If you can set the minimum wage at a point that's above the market-clearing wage for Republican-majority areas, but below the market-clearing wage for Democratic areas, you can limit the impact to Republican regions. Democratic areas are unaffected, but Republican areas are economically damaged, and many of their young people respond to this by moving to Democratic areas. The population gain means such areas gain political power when they're redistricted. Impoverishment for areas typically Red, increased power for areas typically Blue.

(Of course, at this point the minimum is above the market-clearing wage for everywhere. I don't know what possessed Congress to go ahead with the last increase, with a serious recession obviously starting. Maybe they have a death wish, or maybe it's just that Nancy Pelosi wouldn't know a market-clearing price if it danced up to her and drew wrinkles on her forehead with an eyebrow pencil.)

Anna said...

Jaed, I am going to start using that disclaimer in real life.

Dubbahdee said...

I'm going to skip the minimum wage discussion.

Of course I favor the idea of removing barriers to small biz startup. For all the lip service given to such endeavors, lawmakers don't seem to actually want to DO much about it.

Paying startups rather than charging for registration sounds rather nice, but on principle I would have to object. That would go beyond merely removing a barrier and become another type of subsidy.

I myself am building a new business but it won't create jobs beyond my own. It is a direct response to my inability to find a job with adequate pay in another business. I just figure I'll go ahead and do it myself. In my late 40's now, I have the chops to make it work.

I know a young man in his twenties who is staring an auto detail business with a friend. They will be hiring eventually I imagine. He is an excellent example of the same philosophy as mine, but applied earlier. Lawmakers should certainly go out of their way to stop tossing logs in his path.

Texan99 said...

The minimum wage was a horrible idea. One of those ideas that sounds so enlightened it permits its proponents to disregard the real harm it does.

Gringo said...

What many proponents of raising the minimum wage do not realize is that the proportion of those covered by the minimum wage was about 12% 40 years ago, and is about 3% today. [figures are from memory so could be off..]