The Case Against a Fifteen Dollar Minimum Wage

The political movement in favour of increasing the minimum wage to $15 / hr is very strong right now in both America and Canada. Advocates of the minimum wage hike argue it is time to give low-income workers a raise, and that low paying jobs shouldn’t exist. But they are mistaken. They are wrong about the impact of the minimum wage and wrong that low paying jobs shouldn’t exist.

It is important to understand how the minimum wage works. The economic is not some static thing, where you need to have say 10,000 fast-food jobs and 15,000 construction jobs. It is actually quite dynamic. Take the example of dishwashers in a busy fine dining restaurant. One dishwasher, with ten years of experience, might be able to handle the work of two brand new dishwashers with no experience. So the veteran might command a rate of $14 / hr and the newer dishwashers of $7 / hr. Now productivity doesn’t necessarily have to follow this rigid X # of widgets produced in an hour scale. The experienced dishwasher might only wash and put away 50% as many dishes, for example, but also have abilities to work as a cook or in prep, and do a better job cleaning up. Regardless, it is clear there exists a wide range of skills and abilities in kitchen jobs, which can be expressed as their productivity. And wages tend to mirror productivity. Technically, the upper bound of a workers wage is their marginal revenue product (how much value they produce in an hour) and how close they get to that wage depends on the competitiveness of the marketplace.