Minimum Wage Jobs are allowing Teenagers to afford Smartphones and Tablets

Posted by PITHOCRATES - April 12th, 2014

Week in Review

There’s a lot of talk about raising the minimum wage on the left.  As they are running out of ways to buy votes.  And they feel they can buy a lot by paying unskilled and inexperienced workers closer to what people with a college education make.  But minimum wage jobs are entry level jobs.  They’re the first rung on the career ladder.  The left loves to point to grown adults trying to raise their families on a minimum wage. As sad as that is the minimum wage isn’t supposed to raise families.  It can supplement a family’s income by allowing a parent to work part-time while the kids are at school.  But this is extra money.  To help cover some other expenses.  Like these (see More than 60% of U.S. teens have their own iPhone and iPad, prefer Apple products to the competition: study by AFP RELAXNEWS posted 4/9/2014 on the Daily News).

Over 60 percent of teenagers already own an iPhone and excitement is growing over the much-rumored launch of an ‘iWatch…’

… teens with an average age of 16.4 years and reveals that gadgets and electronics currently account for just 8 percent of their spending, with games systems and games accounting for a further 7 percent.

And of that small percentage, Apple products appear to account for the largest outlay. Not only do 61 percent of teens say that they own an iPhone (up from 55% in Spring 2013), 67 percent say they’re planning to purchase an iPhone within the next six months. And it’s a similar story with tablets. Piper Jaffray says that 60 percent of US teens currently own a tablet and of that group, 66 percent are using an iPad. When asked, 66 percent of non-tablet-owning teens have earmarked an iPad as a future purchase…

Over recent years, branded headphones have exploded in popularity and 56 percent of teens are planning to purchase a set over the next six months.

According to the BLS, approximately 2.5% of all workers earn at or below the minimum wage (people who get tips can be paid less than the minimum wage as their tips plus their wages takes them over the minimum wage).  And about a third of these workers are teenagers.   Yet over half of these teenagers can afford costly smartphones and tablets.  And the very expensive monthly cellular charges that make them work.  Also, over half of all teenagers are going to buy an expensive set of headphones.  Which can only mean one of 3 things.  The minimum wage is sufficient to buy all of these things.  They have a parent working a second (and perhaps, a minimum wage) job to help their kids pay for these.  Or 60% of all teenagers have rich parents.  Is it worth raising the cost of small business owners (who will hire fewer people when people are more costly) so about a third of all minimum wage workers can more easily afford their toys?

As far as single parents struggling to raise their family on a minimum wage, is it right to diminish the value of a higher education by paying unskilled and inexperienced workers more?  Will people still put in the extra work to get an education or training and delay having fun (our young people, not those who find themselves by circumstances beyond their control working a minimum wage job due to a divorce, death in the family, etc.) to earn the skills necessary for a higher paying job when they can get nearly the same amount by taking the easy way?  People say they hate these jobs.  Will paying them more so they have no incentive ever to leave these jobs make them hate them any less?  Or will they be locked into these miserable jobs for the rest of their miserable lives?  A lot of people take pay cuts to leave jobs they hate.  So getting paid more for a job they hate isn’t going to make them hate that job any less.

Raising the minimum wage is not going to change anything.  Other than reduce the amount of jobs available for the unskilled and inexperienced.  No.  The best way to help people earn more is to create more jobs.  For when the economy is creating jobs there will be fewer people available to fill them.  Which will cause employers to bid up wages so workers choose their jobs out of the many that are available.  But when the economy is so bad that only minimum wage, entry level jobs are available there will be few people moving up the career ladder.


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Minimum Wage, Obamacare and Unintended Consequences

Posted by PITHOCRATES - February 3rd, 2014

Economics 101

The Affordable Care Act greatly increased the Cost of Unskilled and Inexperienced Workers

The Affordable Care Act has changed the employment landscape.  In particular it changed a lot of people from full-time employees to part-time employees.  Especially at entry-level jobs.  Or minimum wage jobs.  Jobs that may be physically demanding but require minimum skill or experience.  Making them ideal for unskilled and inexperienced teenagers entering the workforce.

Not everyone, though, is a teenager in these minimum wage, entry-level jobs.  Some adults find themselves in them, too.  Older adults.  Single parents.  Widows.  Widowers.  People whose circumstances have changed.  And who don’t have the skills or experience for other employment.  So they find themselves struggling to get by on their entry-level, minimum wage job.

Then the Affordable Care Act (i.e., Obamacare) made their struggle more difficult.  For it required employers to offer health insurance to anyone working 30 hours or more per week.  Greatly increasing the cost of unskilled and inexperienced teenagers.  And their other entry-level, minimum wage workers.  So they did the only logical thing.  They cut their hours below 30 hours per week.  Shrinking the paychecks of both teenager.  And those who are struggling to live on their minimum wage paychecks.

The Unintended Consequences of Obamacare changed Full-Time Workers to Part-Time

We call it unintended consequences.  When a government program to solve one problem creates another problem.  In an attempt to give people with insufficient income to buy health insurance Obamacare forced their employers to provide health insurance for them.  This caused employers to cut hours for these employees.  To keep the cost of their entry-level, minimum wage workers from rising.  Thus reducing their insufficient income even further.

The rollout of Obamacare did not go well.  In the effort to give people affordable health insurance a lot of people actually lost the health insurance they liked and wanted to keep.  Another unintended consequence.  (Unless the Democrats designed the Affordable Care Act to destroy the private health insurance industry as many believe then things are going exactly as planned as people may soon start demanding that the government step in and provide national health care).  Causing a bit of a problem for the political party that gave us Obamacare.  The Democrats.  In the upcoming midterm elections.

It’s one thing causing people with individual insurance policies to lose their health insurance that may or may not have voted for you.  But to further impoverish the impoverished working those entry-level, minimum wage jobs was another.  For thanks to endless class warfare the Democrats put the impoverished into the Democrat camp.  So they needed to do something to replace the income they lost when Obamacare changed them from full-time to part-time employees.  And chose further class warfare.  By forcing those ‘rich’ employers to pay their entry-level, minimum wage workers a ‘living wage’.  By increasing the federal minimum wage.

Obama wants to Raise the Minimum Wage to replace Earnings lost when Obamacare made Full-Time Workers Part-Time

In the State of the Union address President Obama said he wanted to raise the federal minimum wage to $10.10.  But why $10.10?  The current federal minimum wage is $7.25.  And if you earned that working 40 hours each week for 50 weeks (assuming you take 2 weeks off over the year for personal reasons, holidays and vacations) that comes to $14,500 per year.  Raising the minimum wage to $10.10 brings those annual earnings to $20,200.  Or $5,700 more at the higher wage rate.  It’s a lot of money.  But probably not enough for someone to quit a second job.  For if someone is working 20 hours a week at a second job that would come to an additional $7,250 a year.  If they work 30 hours a week in a second job that would come to an additional $10,875 a year.  And some people have to work 70 hours or more a week to approach a ‘living wage’ when they don’t have the skills or experience for a job that pays more than an entry-level, minimum wage job.  So raising the minimum wage to $10.10 an hour probably won’t solve everyone’s financial woes.  But it will do something else.

If people who were working 40 hours a week went to working only 29 hours a week after Obamacare they would lose 11 hours of pay.  At the current minimum wage that comes to $79.75 less in their paycheck each week.  A significant amount for someone struggling to make it on something less than a ‘living wage’.  But look at what happens when we raise the minimum wage to $10.10 for those 29 hours.  If we multiply the additional $2.85 per hour to those 29 hours that comes to an additional $82.65 a week.  Which is a little more than the $79.75 they lost when Obamacare cut their hours.  So it would appear that the new push to raise the minimum wage to $10.10 is to put the money the Obama administration took out of these workers’ paychecks back into their paychecks before the fall midterm elections.  So they still won’t be angry and vote Republican because of what the Democrats and their Affordable Care Act did to their paychecks.

They want to sound compassionate to those with insufficient income by wanting to raise the minimum wage to replace what they took away from them with Obamacare.  To give these people a ‘living wage’.  For the current minimum wage is actually worth about 20% less than it was during the Reagan administration.  When it was $3.35.  Wait a minute, you say.  How can $7.25 be worth less than $3.35?  Because of the Democrats’ embrace of Keynesian economics.  The government wants to print money to spend.  To provide economic activity when the private sector is not.  And when President Nixon decoupled the dollar from gold in 1971 they ramped up those printing presses.  And have been depreciating the dollar ever since.  Because they made the dollar worth less and less over the years the purchasing power of the federal minimum wage fell.  Even when people were earning more dollars.  And raising the minimum wage won’t address this problem.  Only voting the Keynesians out of office will.


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FT207: “Raising the minimum wage only discourages upward mobility.” -Old Pithy

Posted by PITHOCRATES - January 31st, 2014

Fundamental Truth

McDonald’s is one of the Few Places that will hire an Unskilled and Inexperienced Person

Teenagers want a lot of things.  A car.  A smartphone.  Nice clothes.  Popularity.  Fame.  But one thing you’ve never heard a teenager says is this.  “I love working at McDonald’s.  I wish I could work here forever.  If only they would raise the minimum wage so I could.”

A lot of teenagers work at McDonald’s.  Why?  Because it’s one of the few places that will hire an unskilled and inexperienced person.  Because a job at McDonald’s is an entry-level job for a teenager new to the workforce.  A place they can earn a paycheck without having the ability to do anything.  Where they are taught everything they need to know on the job.  While McDonald’s pays them to learn.

Some teens will work enthusiastically at McDonald’s.  Enjoying their first job.  And earning their first paycheck.  So they don’t have to depend on Mom and Dad to buy them what they want anymore.  While others hate these jobs.  And refer to them derisively as ‘hamburger flipper jobs’.  They don’t want them.  And those who do work there do so reluctantly as they are a lot like that teenager.  They are unskilled and inexperienced in doing anything else but an entry-level job.

There is a Direct Correlation between Paycheck Size and Skills & Experience

Some teens work while in high school.  Some go on to college and work at another McDonald’s on campus.  Or at some other entry-level job that requires no skills or experience.  So they can learn workplace skills.  Gain working experience.  And learn the responsibilities that come with having a job.  Others get bored or want more money.  And use their newly acquired skills and experience to get another job.  After graduating from high school.  Perhaps entering an apprentice program in the skilled trades.  Or becoming a line-cook somewhere.  Gaining more experience.  And earning more money.  To become an electrician.  Or go to culinary school and become a chef.  Even open his or her own business.

These people are moving up.  Which is why we call this upward mobility.  They go from an entry-level job to one requiring more skills and experience that pays better.  They may go to night school or college to gain skills that will help them get a job requiring greater skill and/or experience.  Which pays even more.  Allowing them to look to and plan for their future.  Acquiring education, skills and experience along the way that opens the door to bigger paychecks.  Which you need to raise a family.  Have a nice house.  A new car.  Nice vacations.  To save for your children’s college education.  And your retirement.

You can’t have many of these things, though, if you never leave that entry-level job.  If you stay in that entry-level job you’ll never be an engineer, a doctor, a pilot, a millwright, a pipefitter, an accountant, a hotelier, an architect, etc.  And you’ll never get the larger paycheck that comes with these professions.  For there is a direct correlation between paycheck size and skills & experience.  The more you have the more you’re worth.  It’s just that simple.  Which is why it is a good thing that entry-level jobs pay the lowest wages.  For it encourages upward mobility.  Mastering the skills at one level.  And then moving on to master new skills at a higher level.  For we want people to move on so there are pharmacists to fill our prescriptions.  Dentists to fix our cavities.  Engineers to build and maintain our cellular networks.  Aircraft mechanics to keep our planes safe.  Etc.  None of which we would have if no one left their entry-level job.

Staying in an Entry-Level Job for 5 Years could put you 5 Years behind your Earning Potential

The Democrats always want to raise the minimum wage.  To get votes by giving people more stuff.  In the case of a higher minimum wage it’s a bigger paycheck.  They’ll cite the single mother of 3 struggling while working 2 jobs to support her children.  And say it’s just not teenagers working these entry-level jobs.  These are single mothers and single fathers who are barely making it.  And we need to give them a living wage.  But paying people more for these entry-level jobs is the worst thing you can do for them.  For it removes the incentive to leave these jobs.  Jobs that these employees don’t love to begin with.

President Obama wants to raise the minimum wage to $10.10 per hour.  Others want to raise it higher.  Some would even like to make it $40,000 or $50,000 a year.  But imagine the affect of that on kids graduating high school who want a lot of things that Mom and Dad won’t buy for them.  If you can have a lot of money now instead of working hard to earn that same amount of money later what do you think these kids and young adults will do?  A lot of them will take that bigger paycheck now.  And maybe work there 3-5 years enjoying life.  Flipping those burgers.  While some of their former classmates from high school will have started a career.

Raising the minimum wage only discourages upward mobility.  Life is short.  Time passes fast.  Staying in an entry-level job for 5 years could put you 5 years behind your earning potential.  It could change where you live.  And what school your kids go to. Because that smaller paycheck will limit your options in life.  A higher minimum wage may sound nice.  But it would be the death knell of any hope or aspiration you ever had.  People stay in jobs they hate because they don’t like leaving their comfort zone.  If they have decent pay and benefits they will endure some of the worst jobs ever (bad boss, office politics, a coworker they can’t stand, dealing with unruly customers, etc.) because it is easier and less scary than finding a new job.  These people are never happy.  They never truly enjoy life.  And they just dread Mondays.  Raising the minimum wage will only condemn more people to this fate.


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