Wednesday, February 2

Ever Wonder What Happens to Low-Skill Jobs When the Minimum Wage Increases?

With the legislature considering a minimum wage hike, I have been considering a post to put in my 2¢. Personally, I think that any hike is a very bad idea.

Why? Well, the net effect is to eliminate low-skilled, entry-level jobs from the workforce. As the productivity of higher-paid, higher-skilled employees increases, an employer will just not fill a minimum wage position, if the wage that must be paid for that position is greater than the benefit that will be accrued by the employer.

The traditional response to this view is to point out that there are a number of menial jobs that must be performed at any workplace. However, that is getting less and less true.

Today, when you talk to a customer service rep on the phone, the odds are that you are speaking to someone in a different state or in many cases even a different country. In fact, our low wage base is what brought telecommunication companies, like NEW, to Great Falls.

Nothing illustrates this better than this news report from the KIRO-TV station in Seattle. Apparently, a McDonald's in Oregon found a unique way of circumventing Oregon's $7.25/hour minimum wage -- they patched all conversations through their drive through to order-takers in Grand Forks, ND (a state with a $5.15/hour minimum wage). Is that the sort of thing that backer's of the minimum wage hike want here?

Thanks to Craig at for finding that gem or an article. It was originally posted on his blog here.


KarbonKountyMoos said...

hmmm... I don't know, Aaron - when I "lived" (more like survived) in Red Lodge - the only jobs I could get were at minimum wage. And when you hear about all the tips that folks make - keep in mind that employers report the tickets from their servers tables (or to-go orders) to the IRS. So the server is taxed on it - even if they didn't make any tips from them... I always had 2 or 3 of jobs. And then some clown would tell me, "No wonder I can't find a job - you have so many of them!" Maybe so, but the clowns were sitting around waiting for $20.00 an hour - good luck... A bigger problem is the fact that many MT employers refuse to give their employees full time hours - to avoid offering health insurance.

Treasure State Jew said...

Sally, I hear what you are saying. However, I can't agree that raising the minimum wage is the way to solve the problem.

Resort towns like Red Lodge are entirely service based, almost entirely dominated with do-you-want-fries-with-that jobs. Those type of jobs will never provide the high-paying, high-skilled employment we need to kick our State's economy into higher gear.

Places like Red Lodge, Hamilton, Paradise Valley, Flathead Lake, etc. are entirely dependant on tourism. If we increase the minimum wage, employers in places like that will be able to increase prices to make up the difference.

However, in places like Great Falls, anywhere on the High-line, etc., employers will not be able to pass along those costs and the net effect will be less available jobs.

Instead of tinkering with the bottom of the pay scale, we need to attract industry that will provide jobs with a net pay in the $20 to $40 per hour range. The only way to do that is to convince the rest of the country that our state is open for business. Increasing the minimum wage just turns that open sign around to closed.

KarbonKountyMoos said...

Sally? Hey that's my mother's name - Sarah/Sally! I don't think that there are any easy solutions for our state. When I first came to Montana in 1980 I was told that I was overqualified to work in the bank - HA! Overqualified? I had worked in banks & brokerages on Wall Street - but not as a teller, so I was overqualified? I needed to tend bar and cook. Since I've always worked and had to work, I couldn't be fussy.

At one time I worked at Eagle Electric - in their engineering department. They had a couple of factories in Long Island City - maybe still do - but they had most of their US manufacturing plants in the Carolinas
the rest were overseas.

Crazy Creek products - those jobs weren't exactly high paying, but they did insure their employees - the majority of those jobs are gone from Red Lodge, too.

When I first worked at the minimum wage I was glad to be working & making my $1.85 an hour. See how old I am! Now that I'm a farmer - I'd bet that there are days that I don't clear that...