Green Room

“The minimum wage for the self-employed is $0.00”

posted at 2:43 pm on February 25, 2013 by

My good friend King Banaian has returned to political and economic analysis after a well-regarded term in the Minnesota state legislature, and now writes at the American Experiment Blog.  Last week he tackled the minimum-wage debate and brought his expertise in economics to bear on the debate, but not without reminding us that the self-employed don’t have a minimum wage — and yet seem to do all right as long as they bring value to the transaction:

Still, an increase in minimum wages from $6.15 to $9.50 is a large increase.  By my estimate that total effect reduces teen employment by approximately 5.5%.  Other estimates could place that anywhere between 3% and 16%.  Some of this has already happened with the rising federal minimum wage.  This effect was not nearly as large as the unemployment of teens due to the Great Recession (teen employment fell from 165,000 in 2005 to 108,000 in 2009) but the rise in the minimum wage did not help.

In Minnesota 93,000 workers made the minimum wage in 2011.  32,000 of them are teenagers, of which 29,000 work part-time.  The number of workers who work at the minimum wage full-time and are over age 24 is only 18,000 of that number (there are almost 2.5 million workers in Minnesota.)  According to a 2007 CBO study, workers below 200% of the family poverty guidelines receiving higher wages due to a minimum wage increase only received 44% of the total rise in wages; the rest went to those above 200% of the family poverty guidelines.

A decline in employment, if true, is a serious issue for those with low skills.  Teens, particularly those from difficult circumstances, must find ways to signal employers that they have the skills needed to hold jobs.  Often those involve little more than courtesy, punctuality, the ability to make change, to work with others, etc.  Teens take low wages to gain that opportunity, and they are frustrated by higher minimum wages.  The employer will be less likely to “take a chance” on a young person, the higher the wage that must be paid.  That loss of experience may lead to lower wages throughout the rest of that teen’s life.

Moreover, the wage is only one feature of an employment contract.  Stricter discipline is possible on almost any job that makes it less enjoyable for the employee.  So too could work conditions change, such as fewer coffee breaks, less heating and air-conditioning, buying your own uniform, fewer vacations and fringe benefits.  Employers will seek workers who are willing to tolerate worse working conditions.  Competition still pushes the value of the job down, even when that is not expressed by wages.  Workers who do not want these worse conditions either must find work in industries uncovered by the minimum wage or work for themselves.

The minimum wage for the self-employed is $0.00.

 

Recently in the Green Room:


HotAir — Politics, Culture, Media, 2017, Breaking News from a conservative viewpoint
Top Pick

Irreligion.

“Felix was out on bond after threatening another public servant and has a history of making threats.”

Chaffetz: House needs housing allowances?

Ed Morrissey Jun 27, 2017 8:41 PM

“There are dozens upon dozens of members living in their offices, and I don’t know how healthy that is long term.”

“This isn’t going to get a lot cheaper, it can’t, it won’t.”

“…what we failed to achieve with votes, we would do with weapons.”

“[S]o dumb it’s amazing we even have to have the conversation.”

“It was not necessary.”

“You’re inflaming everyone right here right now with those words!”

“Trump’s people said, ‘We’ll be writing the speech that the President’s Audio-Animatronic figure will be saying.'”

Excuses, excuses.

Not really a “kill all the lawyers” scenario

4 pm ET!

“it has not taken serious steps to end its own complicity in trafficking, including forced laborers from North Korea.”

Currently doing a search for “good international trade lawyers”

Ransomware attack spreads through Europe

John Sexton Jun 27, 2017 1:01 PM

“A massive ransomware campaign is currently unfolding worldwide.”

At least their address rarely changes

It just keeps on happening

“Trump is good for business right now.”

Start spreading the news…

“Now it’s time for the next step.”

A “cryptic” warning to Bashar al-Assad?

Jazz Shaw Jun 27, 2017 8:01 AM

The three strikes rule may be in effect

CNN reporters resign over retracted story

John Sexton Jun 26, 2017 9:21 PM

“The individuals all stated that they accepted responsibility and wanted to resign.”

Federalism’s greatest champion is now …

Ed Morrissey Jun 26, 2017 8:41 PM

“In the end, we’re a democracy.”

“Almost all controversial speech harms people, upsets or offends them…”

Obama: Back home again in Indonesia

Andrew Malcolm Jun 26, 2017 7:21 PM

The call to prayer and eating dog.

Testing the waters.

“primarily because the penalty for not having insurance would be eliminated.”

“If I were a Seattle lawmaker, I would be thinking hard about the $15 an hour phase-in.”

Days of future past

“Not only are taxpayers footing the bill, but people are dying unnecessarily because of this.”

Israel settles who can stand where at the Western Wall

Andrew Malcolm Jun 26, 2017 3:21 PM

Women to the right, men to the left.

Look on the bright side. There’s less snow in the summer

Big win … but for how long?

“Several Russian cities have unveiled monuments to Stalin in recent months.”

Massive disappointment