I’ve been reading for some time now the ever-expanding quest to prove your political virtue by raising the minimum wage, adding regulations on who is allowed to work in any particular profession, and outlawing automation. All of this is done purportedly in the name of doing good for low-wage entry-level workers. Instead it is destroying jobs for those same people.
King Canute has nothing on these political do-gooders as they attempt to command the tide of progress and reverse the laws of economics. Of course, their arrogance in thinking they know best for everyone is only exceeded by their ignorance of the factors at play. And, all of that cannot be moderated by any sense of humility, since that quality appears to be totally absent from their endless quest of doing good but never actually fully assessing the outcomes of their actions. In nearly every case it appears that the response to something that isn’t working is to do more of it.
When I began work in a small local chain of grocery stores at age 14, my first job was bagging groceries and getting them to our customers’ cars. I believe I started at $0.75/hour. That bumped up to $1 and maybe even $1.25 before I graduated from high school and headed off to the U.S. Air Force.
The Pew Research Center reports that adjusted for inflation, that’s about where the Federal minimum wage is now at $7.25. That is remarkable given the nature of our Federal regulatory bodies. But more damage comes about when states and cities start raising it ever higher in the name of doing good.
That first job gave me considerable experience in the workplace, provided me skills that I still use, and generated motivation to land a better job. It also allowed my first experiences managing my own money, buying a car, paying for insurance, and more.
You can tell from your own experience that few of today’s youth are employed in a grocery store bagging groceries and carrying them to your car. It’s pretty simple really. It’s a job that few grocery stores can afford and that few customers are willing to finance with the cost of their groceries.
What is happening is that a minimum wage sets a minimum value on labor. If an individual’s skills and expertise are not worth that much, they will not be hired. Further, if an existing worker cannot bring increased value to the workplace when wages rise, they will be let go. Not only that, but as regulated wages rise, the business opportunities to achieve savings and efficiencies through automation will increase. You’ve no doubt seen this in restaurants with kiosks replacing wait staff.
The National Bureau of Economic Research in a study released in August stated: “we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become unemployed.”
The climb of the minimum wage and the devastation wrought on low-skilled employment levels, including youth, the aged, and the disabled, appears to be driven by the desire to do good and to do that good with someone else’s money.
Politicians are in that business — taking your money through taxes and allocating it to other people and their own pet projects. This is just an expansion of that principle that extends to businesses and seeks to drive those business decisions to suit their own sense of goodwill. Both these approaches to spending other people’s money ignore the economic factors at play that in turn drive individual and business behavior.
When I started work as a television broadcast engineer after my U.S. Air Force tour of duty I had prepared by studying for and passing the FCC First Class Radiotelephone License. This was required by regulation for anyone operating a broadcast transmitter. Today, few are employed as transmitter engineers due to advances in equipment stability as well as automation. Sound familiar?
The Institute for Justice published a report in 2012 titled License to Work that documented the license requirements for 102 low to moderate income occupations. These included barber, cosmetologist, emergency medial technician, etc. They found that the broad range of regulations “can pose substantial barriers for those seeking work, particularly those most likely to aspire to these occupations—minorities, those of lesser means, and those with less education. Moreover, about half the occupations studied offer the possibility of entrepreneurship, suggesting that these laws hinder both job attainment and creation.”
They go on to note the wide disparity across states. A case in point is that ten states require four months of training for a manicurist while Iowa requires nine days and Alaska three days. They also found a disparity based on public health or safety risk between occupations, finding that 66 occupations have greater licensure burdens than emergency medical technicians. Case in point, the average cosmetologist spends 372 days in training while the average EMT spends 33 days.
Plus, this burden has grown over time. In the 1950s just 1 in 20 workers needed government permission for their occupation. Today that number is almost 1 in 3. I will note that much of this growing restriction on work comes from those already in that particular field of work, those that sought out the licensing regulations and now sit on the licensing boards. They are using regulation minimize competition from anyone attempting to enter the occupation.
Just as with the minimum wage, these onerous occupational regulations prevent people from working. It’s further interesting to note that similar licensing information is collected by the Pacific Research Institute as part of their U.S. Economic Freedom Index — the freedom to find and hold a job.
Rolling Back the Tide of Automation
I mentioned above the automation of television transmitter engineer jobs. As technology advances automation will impact more and more jobs. This has been true since tools were invented, followed by the wheel, and the steam engine.
PricewaterhouseCoopers estimates that almost 40% of jobs in the USA are potentially at high risk of automation by the early 2030s. Those jobs range from retail and manufacturing to healthcare and transportation. Few sectors are spared from the potential wave of automated tasks and entire jobs. See my article Finding Job Security in a World of Robots and Automation for more thoughts on how to cope with this growing impact on jobs.
The geniuses in California through the Jobs of the Future Fund propose: “The idea is simple: if an employer replaces a human worker with a robot or algorithm, he or she would pay a tax. That revenue would then be used to fund job training, education and investments in new industries.” Others in the Golden State propose to eliminate robots entirely. One example is to prohibit delivery robots. How they find any organization willing to do business in that state is simply amazing.
What to Do?
This is not to say that political leaders’ concerns are not valid. Nor that their drive to do something is not commendable. But knowing and choosing the best path forward is not really possible. And, of course, any specific path depends on each organization and each individual based on their own self-interest, which stems from their strengths, weaknesses, and their desires.
From ongoing examples of minimum wage regulations, occupational licensing, and automation’s impact on employment, no one is really in a position to choose the winners and the losers. No one has any sure knowledge of the future neither can they confidently predict the outcome of still more regulation.
I’ve got an idea. How about letting the marketplace make these choices? How about freeing up that marketplace to be as efficient as it can be and opening up the spigots of transparent information on what’s working and what isn’t working so that business and individuals can make their own informed decisions without interference from political virtue seekers who feel they know best?
Just a thought for our PathForeWord.