Minimum Wage Earners only become Valuable after Costly on the Job Training
Minimum wage jobs are entry level jobs. And they’re starting to get that in the UK (see Minimum wage harming job opportunities for young by Richard Tyler and James Kirkup posted 10/2/2011 on The Telegraph).
Firms may be reluctant to create jobs by recruiting inexperienced staff because they are put off by the increased wage bill, the Low Pay Commission has suggested.
The Commission’s intervention comes amid calls from businesses for minsters to freeze or even cut the rate to enable more young people to find work…
Official figures last month showed that almost 1 million of the 2.5 million people officially counted as unemployed in Britain are aged between 16 and 24.
Almost 220,000 have been out of work for more than a year and some economists fear a “lost generation” of young people who never learn the habits of work and face a lifelong struggle ever to find employment…
“The concern is that the current rate is discouraging some employees from taking on young people and giving them a chance to get into the workplace,” he said. “Some companies are finding the rate is a real problem.”
The New England Patriots pay Tom Brady more money than the Detroit Lions pay Mathew Stafford. Stafford was the number one draft pick. Brady wasn’t. But Brady has 3 Super Bowl rings. Stafford doesn’t have one. Yet. He may have one soon, though. He’s having a very good season. Undefeated through 4 weeks. But Brady is better. Because of his 3 Super Bowl rings. And his experience. It’s that experience that makes him worth more.
What’s true for quarterbacks in the NFL is true for workers everywhere. Experience makes a worker worth more to an employer. Inexperienced workers are worth less. So they’re paid less. Just like in the NFL.
The New England Patriots pay Brady a lot of money. But they can’t pay everyone that amount of money. Most players will make less than him. Just like in the workforce.
Key employees are paid more. And less critical employees are paid less. Entry level workers with the least skill and the least experience get paid the least. These are the minimum wage workers. Who are just starting their working careers. Most of who are grateful for the work experience. Because they know if they show ability they can move up. Gain more experience. And earn more as they become more valuable to their employer. Or to their employer’s competitor.
So of course employers oppose high minimum wages. Because minimum wage earners only become valuable after costly on the job training. That’s why they’re paid the least. They come in with nothing. And don’t provide any value until the employer gives them value through training. Mentorship. And experience.
If you Protect your Markets too much from Imports you will Hurt your own Export Markets
Costs are costs. And labor costs are some of the more expensive costs. Because there are a lot of other costs attached to wages. They add up. And often are a percentage of an employee’s wages. The higher the wage, the higher these other costs. Which makes it harder for a business to be competitive. And in today’s competitive global economy, nations will help their businesses be competitive any way they can. To try and make up for all those onerous regulations they impose on their businesses (see One more such victory posted 10/1/2011 on The Economist).
A YEAR ago Brazil’s finance minister, Guido Mantega, declared that the world had entered into a “currency war”. He worried that in a depressed global economy, without enough spending to go around, countries would sally forth and grab a bit of extra demand for themselves by weakening their currencies. The dollar, for example, fell by 11% against Brazil’s real in the year to August 2011, much to the chagrin of Brazil’s manufacturers. Like other emerging economies it fought back by imposing taxes and other restrictions on foreign purchases of local securities…
A cheaper real, zloty and rupee will help emerging economies win a bigger share of global spending. But that is small consolation if global spending declines…
Falling export orders was one of the complaints voiced by Chinese manufacturers in a preliminary survey of purchasing managers published by HSBC last week.
Yes, a cheaper currency gives you an advantage. So a nation wants it. But so do other nations. And what’s more, these other nations don’t want your nation to have a cheap currency. Because a cheap currency means more exports.
But a currency war is a double edged sword. If you protect your markets too much from imports you will hurt your own export markets. Yeah, you may succeed in having a cheap currency but little good that will do if your primary export market slaps a punitive tariff on everything you sell there.
And then there’s the danger of releasing the inflation genie from its bottle. If you devalue your currency too much your own manufacturing costs will rise. It’ll take more dollars to buy the stuff you need to manufacture the things you sell. Which means you’ll have to raise prices. And anyone who buys from you will have to raise their prices. And so on until this inflation ends in a recession. Which will slash overall consumer spending. Making any win in a currency war a hollow one.
The Senate Bill to Punish China for Currency Manipulation is nothing more than Pandering to a Recession-Weary America
So rational thinking bets against any currency war. Or antagonizing any trade relationships. Of course, in an election cycle, rational takes a back seat to winning an election (see Senators court 2012 voters with China currency bill by Doug Palmer posted 10/2/2011 on Reuters).
For lawmakers eyeing their re-election prospects next year, this week provides a chance to show they mean business about cracking down on China’s currency practices and returning jobs to America…
“It is very easy to say that China is the bogeyman,” said Doug Guthrie, dean of business at George Washington University. He said the bill would do little to help U.S. jobs and would raise U.S. import costs, but said it might yet pass…
The Senate bill is the wrong approach because most of the goods the United States imports from China are no longer made by U.S. industry, Frisbie [president of the U.S.-China Business Council] said.
“I’ve always been of the view that, if the Chinese currency were to appreciate, we’re not going to get those jobs back in the U.S. They will migrate to Indonesia or Vietnam or Bangladesh perhaps Sub-Saharan African — the lowest next lowest cost place,” Lardy [a senior fellow at the Peterson Institute for International Economics] said.
So this Senate bill is nothing more than pandering to a recession-weary America. It won’t help the economy. And probably will end up making things worse. By making life that much more expensive for the American consumer. By replacing those cheap Chinese goods with almost as cheap goods from Indonesia, Vietnam, Bangladesh or Sub-Saharan Africa. All the while creating zero American jobs. It will just make life more difficult. But it may elect a politician or two. And really, now, isn’t that what’s really important? I’m jesting, of course.
Why Exactly is the ‘Made in USA’ Stamped Stuff more Expensive?
Perhaps it isn’t the Chinese. Or the other emerging economies. Perhaps it isn’t the weak currencies of our trading partners. Maybe it’s us. I mean, why do we play with the currency in the first place? To make our goods cheaper.
So the issue we should be addressing is why are our goods more expensive in the first place. Why exactly is the ‘Made in USA’ stamped stuff more expensive? Higher labor and regulatory costs. Such as the minimum wage. And the hundreds of other costly regulations American businesses have to comply with. Remove these and America can be competitive again. With anyone. Anywhere. And in any industry.