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.

Immigration and the Undesirables

I’m probably a bit late to the game with this post, as the talk about immigration reform seems to have died down, but the problem hasn’t gone away, so here goes. Immigration is a huge topic, but I’m going to focus on the tech side of things.

Technology related companies have been very vocal about their desire for immigration reform. The problem is that there aren’t enough skilled technology workers in the US to meet labor demand, so it is argued the best way to boost labor supply is to import skilled workers from other countries. In other words, the current pool of unemployed in the US is effectively unemployable in the tech sector. How’s that to boost your spirits? “You know, not only will we not hire you, but you’re so bad that we’d rather get laws changed so we can import a worker from another country to fill this job.” What would you call that, a “geek slap”?

Honestly, I have no problem with importing workers. People are just another asset businesses employ in order to function and countries should be able to engage in the free trade of their people just as they do their goods, services, and natural resources. Ignoring politics, what’s the difference between hiring someone that lives down the street versus someone that lives halfway around the world? There is no difference. If the world were one big country, we wouldn’t give it a second thought.

But importing skilled workers to meet labor demand is a short-term, narrowly focused solution to a much larger, longer-term problem. Even if the US could import tomorrow all of the skilled tech people it thinks it needs, what’s to be done with all of the “undesirables”? Are they to be educated and trained? Ignored and left to fend for themselves? Or perhaps we could enter into a bilateral trade agreement whereby, in exchange for each skilled worker imported to the US, we export a handful of our undesirables. After all, what’s undesirable to one country is likely to be a treasure to another.

Stemming (pun intended) from the technology labor problem has been a greater focus on STEM (science, technology, engineering, and math, which are all directly related, by the way) education and training. Much of the focus has been on younger generations, guiding them to these fields and/or better supporting students that are already genuinely interested. And that is a good solution, I think, that will help in the future when these kids are finally old enough to be legally employed, but we also need to do something about the “older” folks (in tech, I think that’s anyone over the age of 12), most of whom have likely spent their working lives in other disciplines, but would like to transition into the STEM world. Not only are these people already skilled at being employees, but they can also bring valuable non-tech insights that would compliment their newfound technological knowhow.

Certainly there are great education efforts being made to get people trained in STEM, largely only possible because of technology. Some great examples are Khan Academy, Codecademy, and things like Massively Open Online Cources offered by accredited universities. Education probably hasn’t changed this much since the formation of written language. But I think we need to expedite the process. Just as the first dotcom bubble of the late 1990s/early 2000s expedited the development of so many technologies we take for granted today, a similar level of investment in STEM education for young and old alike could transform the technology world yet again.