Tag Archive | underemployment

The Failure to Pair Workers With Work

According to the known liars in the Federal Government, the unemployment rate in the United States is a mere 4.3%. That number is obviously wrong, but it’s really not important. Any degree of unemployment is a bad thing, even if it’s only 1%, because that means one in every one hundred people cannot find a job in order to earn money.

Now, let me point out something that many people seem to have overlooked…

Ridiculous amounts of work are going undone in the United States. Bridges and road signs are covered in graffiti, streets are littered with trash and refuse; storefront windows are smudged with fingerprints and streaks of rain, buildings need to be repainted, countless yards need to be cut, and statues and monuments throughout the nation are covered in bird droppings and graffiti. If you simply begin looking for it, you will see thousands of things, just on your daily commute to work, that need to be done–things that could be done. Things that, you would think, someone would be willing to pay to have done.

And then there’s that number looking at us: 4.3%.

It’s not simply a matter of location, obviously. If only we could make the assertion that our unemployed people are nestled in the valleys of the Smokey Mountains, where there are no bridges to be cleaned of graffiti or monuments to be cleaned. Yet we know that isn’t the case. These unemployed people are scattered throughout the United States unevenly, just as are the tasks that need to be done. This sort of “undone work” exists in the city of Southaven, Mississippi, and, yet, there are unemployed people in the city of Southaven.

The question we have to ask is simple:

If there is work to be done, why isn’t it being done?

The answer is just as simple: the Minimum Wage.

I learned about the Balance of Power when I was a preteen, when I was required to cut the grass each week (in addition to household chores) to earn my $1.50/week allowance. My sister had similar household chores to complete, but didn’t have to cut the grass, and yet she earned exactly the same amount that I made. I pointed out that I had to spend one entire Saturday every two weeks cutting a rather large yard, while my sister didn’t, and I received basically no payment for it, and I argued that I should have been given a raise to my allowance.

“I’ll give you a raise when you start doing a better job of cutting the grass,” my grandmother replied.

I’m sure the problem is obvious. My grandmother could make me cut the grass; I had no real choice in the matter. I couldn’t simply say, “Well, then I’m not cutting the grass anymore.” Yet, she could say, “I’m not paying you anything. You’ll get out there and cut the grass, and that’s that.”

I was at her mercy regarding payment. She didn’t need to pay me, but I needed her to pay me.

The same thing is true in the United States today, especially in regard to Minimum Wage jobs. The individual worker is not needed by the employer, because there are ten others waiting in line if that particular worker proves to be a hassle. Just like my grandmother didn’t need to pay me, so does McDonald’s not need to pay Jim. If Jim demands a higher wage, they can simply fire him and hire from among the 4.3% of people who need that job in order to survive. As it was with my grandmother, the Balance of Power is tilted entirely toward the employer.

If there is one job and ten potential employees, then the workers compete with one another for the job. Think of it like an auction. Each worker offers up the most labor for the lowest cost to the employer, because all of the people bidding for the job need the job.

“I’ll do it for $9/hour plus health insurance,” says the first.

The second laughs. “I’ll do it for $8/hour. Forget the health insurance,” says the second.

The third laughs. “I’ll do it for $6/hour! Forget all the benefits!”

The Minimum Wage then prevents the first and second people–and the fourth, fifth, sixth, seventh, and however many more there are–from proceeding to undercut the third guy. They can come forward and match his offer, but they cannot stack the odds in their favor by lowering the wage for which they will work. This is why Unions despise “scabs” so much. The second person might go away, grumbling, angry that he didn’t get the job, saying, “It’s not fair! He shouldn’t be able to undercut me like that! There ought to be a law!

That “law,” of course, is the Minimum Wage.

The other consideration to this is that the employer may have already decided that the task is not worth more than $7 an hour. By the employer’s calculations, it’s just not worth more than that to hire someone to keep their parking lot clean of litter and trash. So, unknown to him while he cries that the third person shouldn’t be able to undercut him, the second person had overbid anyway.

It’s similar to the television show The Price is Right. Overbidding in the show is an instant loss. If one says $550 for a washing machine that MSRPs for $349, the contestant cannot win that round, no matter what. This is also the case with demanding a wage that is higher than the employer is willing to pay: the worker cannot “win that round.” The worker cannot get that job. It’s instant disqualification. Though the employer, like on the show, has hidden the actual value of the job, the first two people have overbid and have disqualified themselves. This is why everyone cuts their eyes angrily at the person who bids $1–on the show, if everyone else overbids, that person is assured to win the round; that employee who bids the lowest intentionally is assured to get the job, if they are otherwise qualified–and, often, even if they are not.

What happens, though, when everyone is disqualified, because no one is able to bid below a certain amount, and the employer has already calculated to find out that the value of the job is lower than the “certain amount” they aren’t allowed to bid below? Everyone is disqualified. No one gets the job. The job goes undone.

Imagine the foolishness of having on the show The Price is Right the rule that “No one may bid under $100 for an item.” Now imagine the added folly of featuring a toaster that is valued at $40. What happens? Everyone overbids, because everyone must bid over $100. Yes, it’s a rather stupid state of affairs, isn’t it?

Yet the “toasters,” such as they are, exist. There are jobs–tens of thousands of them–that need to be done, but simply aren’t worth $7.25 an hour to the person who would pay to have them done. In our analogy, the toaster is on the show, and the toaster can’t be removed from the show. The circumstances we’ve created are idiotic. We see the toasters on the show, and we know they’re going to have to be bid on, we see the requirement that no one can bid below a certain amount, and we see that this means people are overbidding by default and can’t do anything about it. It’s truly idiotic.

Yet our stakes are so much higher in the real world than round after round of contestant overbidding on the toaster because they can’t bid below a certain amount. In the real world, we end up with unemployment. We end up with people being fired because the employer is unwilling and/or unable to pay someone $9 an hour to do some menial task. We watch a father of three panic over money because he can’t find a job–even McDonald’s continues to hire one teenager after the next, because there are more potential workers than there are jobs available, and the father of three inherently involves more hassle than hiring another pimply seventeen year old nerd.

Yet imagine the opposite! Just as there are, right now, more potential workers than there are jobs available*, so could there be more jobs available than there are potential workers. Look at what this does to the Balance of Power–instead of having a condescending interviewer ask, “What can you do for the company?” we have a grinning worker asking one interviewer after the next, “What do you have to offer me?”

Instead of the workers undercutting each other out of necessity, the employers undercut each other.

“I’ll give you $8.25 an hour,” says the first.

“They offered you $8.25/hour?” asks the second. “Ha. We’ll match that, and we’ll give you stock options.”

“Hm, those are pretty good offers,” says the third. “I tell you what. I’ll give you $10/hour, stock options, and a 3% 401K match.”

That world is possible. It’s a world that exists only when there are more jobs to be done than there are workers to do them. The Minimum Wage ensures that this world does not come to fruition; the Minimum Wage guarantees that workers compete with one another for a job, instead of employers competing with one another for workers. The Minimum Wage is at the heart of this issue. Just look around, at all the stuff that needs to be done–yet isn’t being done. And then look at the millions of Americans who are unemployed, and ask yourself, “Why can’t these unemployed people be hired to do this stuff that isn’t being done?”

The answer, of course, is “Because we made up the rule that contestants couldn’t bid below a certain amount.”

Because, for some weird ass reason, we thought that doing so would make the toaster more valuable.

* Note that, per the title, this isn’t strictly true–the jobs are available, but no one is allowed to hire anyone to do them because of the requirement that bids be a certain amount.