Wednesday, July 24, 2013

The Minimum Wages of Destruction

Two weeks ago, the DC City Council passed the Large Retailer Accountability Act, a bill that would raise the minimum wage for employees at big box retailers like Wal-Mart to 12.50 USD an hour. Since this proposed law would only apply to stores with retail space of at least 75k sq ft whose parent companies have gross revenues of over 1 billion per year, it is a bill designed to keep 3 proposed Wal-Mart stores out of DC, which would create about 1800 permanent jobs.

And that's a real shame. Right now, DC proper really only has two types of residents: upper middle class white yuppies and poor, uneducated inner city blacks. The latter group live in an environment of crushing poverty, a dearth of jobs (of any kind), and rampant crime and drug use. They need low end jobs provided by stores like Wal-Mart in order to gain work experience and make money.

According to the BLS, DC currently has an unemployment rate of 8.3%. But black unemployment levels in DC are around 20%. This staggering disparity is even more pronounced when you realize that blacks make up half the city. Whites in DC have an unemployment rate of under 4%.

The action taken by the city council represents the trifecta of bad government in the US: rent seeking by entrenched special interests, ignorance or indifference to sound economic principle, and the political goodwill of useful idiots needed to back such harmful laws.

The fact that Wal-Mart must pay 4 dollars above the DC minimum wage simply because it's Wal-Mart and not some small convenience store is sheer lunacy. And the only reason why only Wal-Mart has to comply is because those smaller mom and pop shops pay many of their employees at minimum wage. This law is designed to keep Wal-Mart out of DC in the most naked way possible.

Raising the minimum wage for large retailers disproportionately hurts poor blacks because it drastically increases the barriers to job entry for the least skilled/marketable members of society. Given the fact that employment has become so important to a person's career, high minimum wages do nothing but perpetuate an underclass of people who have no economic prospects whatsoever.

All this is made possible by a coalition of upper middle class progressives (who hate Wal-Mart and love Whole Foods) and politically connected blacks who couldn't care less about Wal-Mart and would rather build political capital than do things that would actually help the people they're supposed to serve. Even a minimum wage job at Wal-Mart is a good thing because it helps a person with no work experience (who could only be hired at minimum wage by a neutral employer) gain work experience.

Work experience is paramount to building a career. Every day you're working is another day that you're building your personal social capital and signalling to employers that you're employable. But if you can't get your foot in the door, you remain an unemployable bum in the eyes of prospective employers. For a person with no work experience, very few skills, and low marketability (which unfortunately describes the vast majority of young black kids living in DC), you need an employer to take a chance on you. And the higher you set the minimum wage, the more expensive it is for a business to take that chance.

My very first job was working at a movie theater for 5.50 an hour (at the time, 35 cents above minimum wage). I hated the job. I hated my bosses. But I kept working at it because I wanted spending money. The time I was there, I learned about how wage employees get paid and how they keep track of employee hours. I also learned that I had to suck up to both the customers and the bosses in order to be considered a good worker. And I learned that anybody could do my job, so even if I quit, they would just hire somebody else to take my place.

Learning and adjusting to be a cog in the system is something very, very important. And it's something that nobody teaches you in school. You learn it when you start working. But if nobody ever gives you a job, it's something you never learn and the hiring manager will easily dismiss you as a "bad culture fit".

Nobody dreams of working at Wal-Mart. And working at Wal-Mart at minimum wage is something that very few people want to do. But for some people, it's their only option. And that option is better than doing nothing.

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