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.

Simultaneously Buying and Selling

We are all familiar with buying and selling. We buy all sorts of things. We sell all sorts of things. And it’s generally understood that in every transaction one side is the buyer and the other side is the seller. But this is incorrect thinking. Buying and selling aren’t mutually exclusive, but rather in every transaction both buyer and seller are simultaneously a buyer and a seller. Let me explain.

For a transaction to occur, the parties involved, commonly referred to as the buyer and seller, have to come to an agreed upon exchange of value. Party B has something Party A wants and Party A has something Party B wants, and those two parties agree that the things each other wants are at least of equal value otherwise they would never agree to an exchange. But there is more to it than that.

Let’s assume Party A has $1 and Party B has a pack of chewing gum. Party A wants the chewing gum and Party B wants the $1. Party A thinks the chewing gum is worth $1 and Party B thinks the $1 is worth the chewing gum. Wait, what? The $1 is worth the chewing gum? Yes, the $1 is worth the chewing gum. In other words, just as Party A is willing to give the $1 in exchange for the pack of gum, Party B is willing to give the pack of gum in exchange for the $1. Do you see what is going on here? In this example, Party A is “buying” a pack of gum FROM Party B. Simultaneously, Party A is “selling” $1 TO Party B. Conversely, Party B is “selling” a pack of gum TO Party A and simultaneously “buying” $1 FROM Party A. Both buyer and seller are simultaneously a buyer and a seller.

But we never think about transactions in this way, do we? We think if we have the money we are the buyer. The person with the good or service is the seller. How odd would it be to walk into a store and say to the store owner, “I’ll sell you this dollar if you’ll sell me that pack of gum”? This is technically correct, but we’re not taught to think this way, to our detriment.

“Oh, it’s just semantics”, you say. Well, perhaps. But failing to understand the concept, that we’re always simultaneously a buyer and a seller, oftentimes leads to poor buying and selling decisions. We are usually pretty knowledgeable about what we are buying, but much less so about what we are selling, which is typically money.

I’ll cover money and its value in my next post, but, for the time being, the next time you purchase something with money think about both sides of the transaction. Spend just as much time thinking about the value of the money you are selling versus the value of the good or service you are buying.

Driving Me Safely With This App

Microsoft recently released the Windows Phone GDR3 (general distribution release 3) update, which included some behind-the-scenes code improvements as well as some new features for Windows Phone devices. One of those features is Driving Mode. I’ve been using Driving Mode for about a week now. Honestly, it’s brilliant.

Driving Mode is a built-in setting/application, accessible in Settings, that allows you to reject calls and/or texts while driving. For both calls and texts, you can set auto-text replies with a custom message (the same message is used for both). My message, which is just a small change from the default message, is “I’m driving right now, I’ll get back to you later … (auto-sent from Driving Mode on Windows Phone)”. The application starts automatically when paired to your car’s Bluetooth or any other Bluetooth device. You can link multiple devices and independently enable or disable them to activate Driving Mode when they pair with your phone.

At first I thought Driving Mode was just a “neat” feature — “Oh cool, something new to play with”. But after using it now for just a week I can tell you, at least for me, it has completely changed my driving experience. We’ve all read about the dangers of talking and texting while driving, and we all think those rules don’t apply to us because we think we’re more conscientious than the average person and don’t get easily distracted. And that’s nonsense, of course.

For many, myself included, smartphones have become an extension of our selves. We don’t go anywhere without them. We constantly check them to see if we’ve received an “important” message or if someone has shared a pic of their latest meal. We’ve programmed ourselves to be hyper-sensitive and hyper-reactive to anything related to our smartphones. As such, when we get a call or an email or a text message, no matter how focused we think we are on driving, our attention immediately shifts to the smartphone. Distraction sets in.

With Driving Mode, I’m slowly programming myself to not even think about my phone while driving. And it’s not that hard. At first you’ll feel odd because “surely someone has texted me from the time I got in my car to the time I got on the freeway, I must have a bad connection”. But slowly you forget your phone is even on. There’s no ringing, no buzzing. Your phone sits by your side, ready in case of emergency, but otherwise silent. Before you know it you find yourself consciously paying attention to your driving. You’re more aware of your surroundings. You’re safer. And best of all, you’re more relaxed because you’re not constantly being bombarded by people begging you to pay attention to them.

So give Driving Mode a try and see how it changes your driving experience. At the very least, hopefully you’ll be a safer driver for using it.