When a Progressive Magazine Pays Less Than Walmart

The age-old misunderstanding over minimum wage laws may finally be resolving.

The Nation magazine is asking Walmart, to pay its workers at least $12 per hour. Never mind that according to Walmart its average worker already earns more than that.

In any case, Walmart turned the tables on the progressive political publication by exposing the fact that it pays its own interns much less than it demands of greedy capitalists. In an email labeled “people who live in glass houses…,” a Walmart executive points out that The Nation has paid its full-time interns below the federal minimum wage for the last 30 years.

Not taking this revelation lying down, The Nation shot back that starting this fall it was upgrading its intern pay to the federal minimum of $7.25 per hour. Of course, that’s still less than what the magazine itself cites as the average Walmart worker’s wage, but who’s counting?

The economic lesson here is hard to miss when the magazine’s intern program director says, “We are not yet certain how [our new higher wage policy] will work out long term, but for the fall we are anticipating hiring ten interns rather than twelve.”

As Reason magazine — on the other end of the ideological spectrum — noted, “One could forgive Walmart for being tempted to reply with something along the lines of: ‘No s**t.’”

Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Cascade in the Capitol: Testimony on benefits of the Earned Income Tax Credit and harm done by the minimum wage

Testimony before the Senate Committee on Finance and Revenue
Regarding SB 326 and SB 507
by Steve Buckstein

Good afternoon, Chair Burdick and members of the Committee. My name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a non-profit, non-partisan public policy research center based in Portland.

Cascade is supportive of any legislation that allows people to keep more of their own income, as these bills do. When the tax burden is diminished or eliminated, people are incentivized to work harder. This benefits both individual workers as well as the broader community.

However, if your goal is to help raise people out of poverty and lower unemployment, you should be aware that the Earned Income Tax Credit (EITC) works at cross-purposes with the state’s high minimum wage law, which punishes employers for trying to offer jobs to entry-level workers.

The contrast between the two approaches was quantified in a study published last year by economists Joseph Sabia and Robert Nielsen, which found a 1% reduction in state poverty rates associated with each 1% increase in a state’s EITC. Yet, a 2007 study by Mr. Sabia found that single mothers were made worse off by increases in the minimum wage: Their employment dropped by 6% for each 10% hike in the minimum wage.

I understand that you will consider SB 326 and SB 507 as stand-alone measures, while Oregon voters have said that they want a high minimum wage. But the two approaches are in conflict, and the committee would do well to address the punitive effects of minimum wage laws in the future.

Thank you.

Oregon’s Minimum Wage Prices Teens Out

By Michael Nielsen

Oregon’s minimum wage laws are changing our economy, and it doesn’t seem to be for the better. When analyzing Monthly Current Population Survey data from the Census Bureau for 2012, it is suspicious that we are behind the rest of the nation in teen employment, while our lowest paid workers are paid the second highest in the country. Teens, who often hold entry-level, minimum wage jobs, are severely disadvantaged by this policy.

Oregon’s unemployment among high school graduates aged 18 to 20 tops the national charts, with a rise of more than 200% from 2008 to 2011.* This gigantic leap dwarfs the U.S. unemployment rate for the same demographic, which only shows an increase of around 30%. Our minimum wage, being tied to inflation, has increased steadily over the last four years and has been harming the bottom line for employers because of higher labor costs.

It seems impossible that increases in the minimum wage are helping employment rates among teens. Considering that Oregon’s young workers are employed at some of the worst rates in the country, it seems probable that our minimum wage laws are pushing young workers out of the labor market. Our state wage regulations should be seriously reconsidered.

* This number was corrected on 7-9-12 from “more than 300%” in the original post. While the rate did more than triple from 2008 to 2011, the increase from 11.1% to 35.4% is actually about 218%, not 300%.

 Michael Nielsen is a research associate at Cascade Policy Institute, Oregon’s free market public policy think tank.

A “Training Wage” Can Get Teens Their First Job – And Jumpstart Their Earning Potential

Have you ever tried to hire an average teenager? A few years ago, when I needed some furniture moved, my mother reached out to some fundraising teenagers on my behalf, offering the wage that I had set. The three boys eagerly accepted the offer, showed up for work and proceeded to demonstrate why it can be so difficult for many teenagers to land and maintain employment. They not only lacked experience, but they required detailed tutoring in seemingly straightforward work. More time was spent teaching them how to lift, move and pack furniture than they actually spent working. 

In Oregon, you cannot legally employ anyone, teen or otherwise, for less than $8.50 per hour, even if his actual labor is worth much less. It should be little surprise then, that our population’s least experienced workers – teenagers – had an unemployment rate of 28.8 percent last year (much higher than the state’s rate of 10.2 percent). The national teen employment rate in 2010 was a meager 27 percent, which has dropped substantially since 2000, when it was healthier (but still too low) at 45%.

Such dismal employment levels are what inspired House Bill 3279, for which the Oregon House Business and Labor Committee held a hearing a few weeks ago. The bill would allow teens to work for less than minimum wage (as low as $7.25, the federal minimum wage) for their first 90 days of employment. Sadly, many legislators met the bill with suspicion, fearing it would create an unfair bias in favor of teenage workers. These legislators worry that teenagers would displace adults by being able to work for less.

Six percent of U.S. workers paid by the hour earn federal minimum wage or less. Only four percent of workers older than 25 earned at or below the federal minimum wage in 2010, according to the Federal Bureau of Labor Statistics. But 25 percent of working teenagers earned at or below minimum wage. Multiple studies have shown that most minimum wage workers move ahead to higher wages. A more detailed study of minimum wage workers revealed that few adults, and even fewer parents, rely on their minimum wage job as their primary source of income. Most minimum wage workers are providing a secondary or third source of family income. And most workers, as they build skills, eventually will earn more than minimum wage. Accordingly, it would behoove legislators to help teens build their skills earlier, rather than pricing them out of the market.

Instead, with the bar set too high for many teens, not only are they earning less money to spend and save for valuable investments later (like college), they are not gaining the invaluable experience that will allow them to earn more down the road by developing their skills, or “human capital.”

“Human capital” describes a person’s attributes that increase her earning potential and ability to grow wealth. It includes a person’s “intelligence, educational background, work experience, knowledge, skill and health,” according to Michael Sherraden’s influential book, Assets and the Poor. It is also important to our nation. According to Gary Becker, a prominent theorist, human capital accounts for around 75% of the United States’ wealth, with the rest consisting of capital in businesses, homes, goods, and government capital and cash. It is the proverbial knowledge of how to fish, versus the fish itself.

Teenagers are easily influenced. According to Andrew Sum, Director of the Center for Labor Market Studies at Northeastern University, especially among low-income and minority youth, “[t]he more teens work this year, the more they work next year.” If they do not work now, they are less likely to work later. But with increased experience, teens will earn better wages and be more likely to hold a steady job later. They are also more likely to graduate from high school (developing another form of human capital).

With such a weight of evidence, legislators should reconsider HB 3279. Inexperienced teens need the opportunity to work for a “training wage,” something less than minimum wage, so that they, too, can acquire the skills and experience to earn more in the future.

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