Thursday, May 23, 2013

Minimum Wage Laws and Full Service Stations

Does anyone remember full service stations? A generation or two ago, you were able to drive your car or truck to the service station and when you pulled in, a kid would come out and pump your gas, wash your windows, and maybe even check the fluids and tire pressure. Usually, these were kids with little to no skills that employers valued, so they earned little more than the experience that comes from working, rather like an internship. Jeffrey Tucker even says that we should work for free to gain skills, and I'm inclined to see the reason in the argument. If they earned any wages, they were minimal, but the skills gained helped them gain value over time to employers. These jobs were stepping-stones that those without the means to gain an expensive education could use to work their way to better paying jobs.

Minimum wage laws drove up costs to station operators, and full service stations faded into history. Politicians sought votes, and they promised that those at the low end of the pay scale, even those without skills valued in the market, would be able to "earn" higher wages through these interventionist price controls. Kids without marketable skills took jobs like these and learned basic skills that they could carry into better jobs in the future. They earned very low wages because they offered little skill, and these wage laws have a disproportionate effect of increasing youth unemployment at an even greater rate (are these laws discriminatory?). Minimum wage laws price basic jobs like this out of the market, effectively prohibiting employment below a subjective wage rate, leading to higher unemployment. Minimum wage laws can set minimum wage rates, but have no ability to guarantee employment at a higher, more competitive level where fewer jobs exist.

Today, states like Oregon and New Jersey force gas stations to hire pump attendants, believing that this will lower the unemployment rate. All this does is to reduce the number of these jobs available, since higher input costs lower the opportunity for this type of work. . The more expensive employees become, the fewer of them that employers demand, instead demanding higher productivity out of a smaller workforce. Minimum wage laws, as Murray Rothbard noted, lead to compulsory unemployment.

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