Minimum Wage Discrimination

There is an article in today’s The Wall Street Journal that talks about Los Angeles being on the verge of approving a $15.37 minimum wage for workers at “large hotels”, defined as a hotel with 300 or more rooms. Hotels with 125-299 rooms would have to comply by 2016. The proposal hasn’t yet passed, but it’s likely to and would take effect July 2015.

I started working when I was 16 and the minimum wage was $3.35 an hour. By the time this law takes effect, that will be 28 hours ago. Going from $3.35 to $15.37 in 28 years is an annualized increase of 5.6%, almost twice the rate of general inflation.  At 5.6% annualized increases, by the time I retire, in say another 22 years, the minimum wage for a worker at a large hotel in Los Angeles will be $51 an hour (that’s over $100,000 a year). But I digress. A couple of questions about this:

  1. Why do certain hotel workers deserve a higher government mandated minimum wage than any other worker?
  2. Why are people with less than $15.37 an hour worth of skill being discriminated against and completely eliminated from the job market?

Regarding #1, it’s only a matter of time before this legislation is spread to all workers and $15.37 or something close to that will be the standard minimum wage in California. And that’s great…for someone already worth $15 or more an hour. That means you get to keep your job. But what if you’re not worth $15 an hour?

Regarding #2, by mandating a minimum wage, whatever that wage is, anyone lacking the skills (work ethic, specific job skills, education, etc.) to make them worth that minimum wage are guaranteed to be unemployed. Because if a minimum wage is being set, a minimum experience level and economic attribution level are also being set. To think that an employer would pay $15 an hour to someone worth $10 an hour is nonsense. What would happen is that the $10 per hour worker would be fired and a worker worth $15 an hour would take their place. Raising the minimum wage to $15 an hour for a $10 an hour worker doesn’t make the $10 an hour worker worth $15 an hour, it makes them overpaid.

So why are inexperienced workers (high school kids, anyone with no work experience, etc.) being discriminated against and almost guaranteed not to find a job? This question has never been answered by politicians, largely because they do not at all understand the economics and implications of a minimum wage.