. . . but One Size Doesn’t Fit All Workers

The minimum wage is an inefficient and ill-targeted tool to help the working poor. Many economists and economic textbooks will tell you that despite our best intentions, it is always the least skilled who suffer most when it becomes illegal to pay people based on their skill level. For those low-skilled adults trying to move from welfare to work, the minimum-wage law actually hurts.

Any objective analysis of those working at the minimum wage shows most to be second- and third-wage earners in a family. In most cases, they have no dependents. For those who are held up as typical minimum-wage workers, i.e., a divorced mother with two or three dependents, there are better ways to help.

As an industry that provides many “first job” opportunities, we have been exhorted by President Clinton to “try and to try hard” to hire people off welfare. Yet, those left on welfare today are the most difficult to employ. Many are functionally illiterate and need a lot of coaching, training and hand-holding. These are the ones who will find that another minimum-wage increase will effectively slam the doors in their faces, as employers are mandated to pay more for those with fewer skills than an average applicant. Here’s an idea that makes good sense in this environment: Rather than force every state to accept an increase in the minimum wage to $6.15 per hour from the current $5.15, as is now proposed, allow each state to determine what minimum wage is appropriate as long as it does not drop below the $5.15-per-hour federal floor.

Each state has the responsibility of moving low-skilled adults off welfare into the entry-level job market. It stands to reason that it also should have the authority to determine how high the bar is set preventing entry into that job market. If a state wants to treat locally depressed areas differently from high-growth areas, this approach would provide that flexibility. As Clinton said in May, there are cities, rural areas and towns that “still have not felt the warm sunlight of our prosperity.” All the more reason why labor rates should be set by the level of government most sensitive to individual job markets.

It’s time to reshuffle the deck on mandated wages. If we’re going to make it more difficult for people to survive without a job by moving them off welfare, then we need to make it easier for them to get employed and to benefit from the training that comes with work.

If we stay on the current path, we will either sabotage welfare reform by showing how difficult it is for the unskilled to get off welfare, or we will keep policies in place that will set some adrift with neither jobs nor available public support.