Why has the left become so outraged about low-wage jobs? Every economy needs them if it’s going to operate efficiently and at the highest level of employment possible. In fact, it’s likely that most of the current critics of low-wage jobs have had one, at least when they first entered the workforce—and were thrilled to get it.
The definition of a low-wage job varies, but in the U.S. the minimum wage is currently at $7.25 per hour. A recent Pew Research Center paper, based on Bureau of Labor Statistics data, says that there were 1.5 million hourly minimum-wage workers in 2013, and another 1.8 million earned less, for a range of reasons. That’s 4.3 percent of all hourly workers.
President Obama and most Democrats are pushing for a much higher minimum wage—to $10.10 an hour, a nearly 30 percent increase over the current $7.25. And some labor unions are demanding an increase to $15.00—at least for some fast food workers—more than doubling the current rate.* Add to that an extra $3,000 to $4,000 per employee per year that employers with 50 or more employees will have to pay for health insurance.
The economic problem is that with any product or service the public needs a range of “price points”—that is, a maximum level that buyer is willing to spend.
Employers, who are consumers of labor, have to live within a budget just like workers. In other words, they have a labor price point. And if they can’t afford workers, they simply don’t hire them.
Those companies and industries that don’t have the revenue to pay high wages need to have access to workers who charge less for their time, usually because they are young—about half of minimum-wage workers are under 24—have fewer skills, have been out of the workforce for some time, or want part-time or flexible hours.
Consider the retail clothing industry. Department stores know there is a wide range of price points for clothing. Some stores cater to the high-end buyer, others to the low-end. But even high-end stores will eventually put their merchandise on sale until it’s gone.
As a result, pricing freedom maximizes consumers’ options and vendors’ profits.
But if the government forced the price of garments up by, say, 40 percent and prohibited any department store from selling at a lower price, a lot of lower-income workers would have very few clothes.
Low-wage jobs in a free market are not a bad thing, they are necessary to allowing unskilled workers to get a job. Instead of complaining, critics should be thankful they exist.
*updated