Should Your Minimum Wage Depend on Your Age?
That's how they do it in Australia. Could it work here?
Speaking on Fox News recently, conservative columnist Charles Krauthammer proposed what, to many, might have sounded like a rather novel compromise on the minimum wage. His idea? We should have two of them, a higher minimum for "breadwinners," and a lower minimum for everybody else.
Here was Krauthammer's thinking, paraphrased. It might be hard to feed a whole household on $7.25 an hour. But raising the minimum is most likely to hurt teenagers and minorities who rely on low-paid, entry-level jobs to get a foothold in the working world. So how do you lend a hand to hard-pressed families without penalizing the young? Force employers to pay the "breadwinners" more, and everybody else less.
He called his two-tiered solution "a reasonable answer that Republicans and conservatives could offer."
Already, Krauthammer has gotten a bit of pushback. "Proponents and skeptics of a higher minimum wage can agree that Krauthammer is wrong about this," Slate's Matt Yglesias quipped on Twitter. The Washington Examiner's Philip Klein argued that figuring out who qualified as a "breadwinner" and making sure employers paid them appropriately would be a regulatory headache. But more importantly, he says:
...the economic effects would be most detrimental for those Krauthammer's proposal is intended to help. Under Krauthammer's idea, businesses who want to avoid paying the higher minimum wage on breadwinners have an easy solution: Shift toward hiring more teenagers or other nonbreadwinners.
Klein is right that that whole "breadwinner" concept would probably be more trouble than it would be worth. But what if we tweaked the idea just a little bit, and based the minimum wage on something more straightforward, like a worker's age?
We wouldn't be the first country to try it. Take Australia. The national minimum wage for adults down under is $16.37 (in Australian dollars). But workers under 21 can be paid less, as shown below on this table from the country's Fair Work Council:
As one Australian labor expert explained to me, the system does encourage companies like McDonald's to rely heavily on young workers. But given the country's generally low unemployment rate, that's not a huge cause for concern. A thirtysomething Aussie doesn't need to worry much about finding work flipping burgers because there are plenty of opportunities elsewhere.
The U.S. might be a different story in these glum post-recession years. Our economy isn't even close to reaching full-employment, and shifting jobs towards teenagers might well mean fewer opportunities for working parents (remember: more than a quarter of fast food workers are taking care of children).
On the other hand, staggering the minimum wage might also save some low-skill jobs that are at risk of disappearing altogether thanks to technology. For instance, some fast food restaurants are already beginning to replace cashiers with digital kiosks that allow customers to order for themselves. Raising the minimum wage for everybody could speed up that process. But restaurants might be more likely to continue hiring real live humans to take orders if they can pay teenagers cheaply to do it.
What about the possibility that employers would fire older workers in order to replace them with cheap youths, or hand employees pink slips the second they hit the magic age for a raise? I'm sure a few would try, but I wouldn't lose sleep over the possibility. First, companies generally dislike turnover because it's expensive to find and train new workers. Second, the U.S. has labor laws designed to deal with these very issues. Turns out, there already is a federal youth minimum wage. For their first 90 days on the job, businesses can pay workers younger than 20 as little as $4.25 an hour, provided they don't "displace" anyone else from their job. It's also illegal to let these workers go once the 90 days are up just to avoid paying them more. Somewhere out there, there are labor lawyers who are used to making these schemes work. The concern, in so far as there is one, is that companies would simply choose to fill whatever vacancies popped up with low-low-wage teens.
So here's the upshot: in a weak economy, an age-based minimum wage might mean fewer jobs for workers who need them most. But at a time when computers are replacing labor, it might mean also mean more jobs overall. I wouldn't exactly call it a guaranteed win-win. But Australia has certainly had worse ideas before.