Don’t vote for $15, work for it

Photo from Twin Cities Daily Planet

During the campaign to get Minneapolis to adopt a $15 per hour minimum wage, activists, like those pictured above, often said ‘I want to vote for $15/hr’. If they want a wage of $15/hr, why don’t they go and get a job paying that?

This might sound glib. But consider that builders in the Twin Cities are currently struggling to find workers.

Labor leaders say the industry has struggled to attract young people to replenish the pool of workers drained by the 2008-2009 recession, even though construction jobs pay above-average wages and most require just a high school diploma.

One reason for that, says Tim Worke, chief executive of the Associated General Contractors of Minnesota, is that vocational training has been devalued. “Everyone has been told that you have to have a four-year degree to be prosperous at life,” Worke said.

But it’s a fine line, he added, because the old notion that construction is a field only for those with a “strong back and a strong body” isn’t the case anymore. The work is more technical and workers need advanced training, Worke said.

James Mahler, a 35-year-old project manager for River City Tile & Underlayment in Chanhassen, joined the trades at age 19. “College was never something that appealed to me,” he said. “I was eager to begin working and making my own career path.”

In the recession, as others fled the industry, he stayed the course and is glad he did. He has never been without work and has been able to pick and choose jobs.

“We make extremely good money, work reasonable hours, get to be active and build actual communities within the Twin Cities,” he said. “I want young people to realize that it is not a step down to go into construction.”

Two weeks before the start of a luxury house tour in the Twin Cities, Scott Busyn and several other custom homebuilders were scrambling to finish in time for it. Busyn paid overtime and offered other perks to discourage subcontractors from jumping ship to work with other companies.

Mark Scherer, an owner of the one of the largest lumberyards and truss-building plants in the region, has managed to keep his staffing levels steady by regularly raising wages. At a plant in Albertville, he gave workers a nearly $1 an hour raise last fall. “That seemed to take care of the problem,” he said.

This is how labor markets work. Employers will have an estimate of how much a worker will add to their revenue (worker productivity). It will pay the employer to hire that worker at any wage up to that estimate. They will not hire a worker at a wage above that estimate because they would be losing money on the hire. If we want to raise that estimate and the wage, one thing workers can do is increase their skill levels. Looking at the construction industry we can see the dividends that pays.

If you do not increase the employers estimate of your contribution to revenue you cannot expect a higher wage. Last year, one activist explained “I’ve been at Burger King since I was 14, now I’m 19 and still making $9.75” If their productivity has increased only very little over that time period where is the mystery?

There is an idea that prices, such as wages, can be whatever we want them to be. It is thought that legislators can sign a bit of paper and fix everything. That is the central belief behind the ‘Fight for $15’.

It is a profoundly mistaken belief. Prices are not picked by this or that person. They are the outcome of the purposeful but uncoordinated decisions of millions, or even billions, of people, every second of every day. The outcomes of these decisions are usually aggregated as ‘supply’ and ‘demand’ which determine price. Just as changes in supply and demand effect price, so tinkering around with the price will effect supply and demand, as the low paid workers of Seattle are learning at a cost of $1,500 a year.

Maybe protesting for a $15 wage is more fun than upskilling to get it. Maybe voting for it is easier. It is certainly less effective.

John Phelan is an economist at the Center of the American Experiment.