How the Minimum Wage Hurts Young People

Summary

The script discusses wage disparities among workers with varying skills, using the example of hiring a lawn mower. It highlights the unintended consequences of raising the minimum wage, such as increased unemployment among lower-skilled workers. When the minimum wage is increased, businesses may cut costs by laying off less skilled employees, prioritizing those with higher skills, which can disproportionately affect those who need the wage increase the most.

Takeaways

• 💼 Different job skills and responsibilities lead to different pay levels.
• 🤔 It's widely accepted that higher positions, like the President of the United States, earn more than local positions.
• 💬 This concept is often overlooked in discussions about minimum wage earners.
• 🏡 Homeowners may choose the cheapest or first available teen to mow their lawn.
• 🔧 Basic skills for simple tasks like lawn mowing ensure satisfactory job completion.
• 📈 A government-mandated wage increase could force homeowners to reconsider who they hire.
• 🤷 Homeowners might do the job themselves or choose more skilled workers, leaving others unemployed.
• 🔄 The same dynamic occurs when the government raises the minimum wage.
• 📉 Higher wages mean higher costs for employers, potentially leading to layoffs.
• 🙁 Lower-skilled workers, who need higher wages the most, are often the ones most negatively impacted.

Q & A

Why do people with different job skills and responsibilities get paid different amounts?

People with different job skills and responsibilities are paid differently due to the varying levels of expertise, experience, and the value they bring to their respective roles, which justifies the disparity in compensation.

Why is it not strange for the President of the United States to earn more than the president of a local school board?

It's not strange because the President of the United States holds a position of much greater responsibility and influence, which justifies a higher salary compared to a local school board president.

What is the debate about people who earn the minimum wage often forgetting?

The debate often forgets that the skills required for certain jobs, like mowing a lawn, are basic and may not justify a high wage, which is why some people are willing to pay less for such services.

What might happen if the government passes a law requiring a 40% increase in the minimum wage for lawn mowing?

If the government mandates a 40% increase in the minimum wage for such jobs, homeowners might decide to mow the lawn themselves or become more selective in choosing who gets the job, potentially leading to unemployment for those who charged less initially.

Why might a homeowner decide to mow the lawn themselves if the minimum wage for lawn mowing increases?

A homeowner might mow the lawn themselves to avoid the increased cost of hiring someone at the new, higher minimum wage rate, especially if the task doesn't require specialized skills.

How does a higher minimum wage impact business owners' decisions regarding their employees?

A higher minimum wage makes employees more expensive, leading business owners to lay off workers they can't afford or to retain the most skilled employees, which can result in lower-skilled workers losing their jobs.

What unintended consequence of increasing the minimum wage affects lower-skilled workers?

The unintended consequence is that lower-skilled workers, who may need the raise the most, are often the ones who end up out of a job due to the increased cost of labor.

In the context of the script, why might a business owner choose to keep an employee who pays more attention to detail over one who charges less?

The business owner might choose to keep an employee who pays more attention to detail because the quality of work justifies the higher cost, especially when labor costs are increased due to a higher minimum wage.

What does the script suggest about the relationship between skill level and the impact of minimum wage increases?

The script suggests that as the minimum wage increases, lower-skilled workers are more likely to be affected negatively, as employers may prioritize retaining or hiring higher-skilled workers to maintain business efficiency.

How does the script illustrate the potential impact of minimum wage laws on employment opportunities for teenagers?

The script uses the example of teenagers mowing lawns to illustrate that an increase in the minimum wage could lead to fewer job opportunities for them, especially if their skills are basic and easily replaced.

What broader economic principle is highlighted by the script regarding the effects of minimum wage increases?

The script highlights the economic principle of supply and demand, where an increase in the cost of labor (supply) can lead to a decrease in the number of jobs available (demand), particularly for lower-skilled workers.

Outlines

00:00

💼 Wage Disparities and Minimum Wage Effects

This paragraph discusses the natural wage disparities among individuals with varying job skills and responsibilities. It uses the example of hiring a neighborhood teenager to mow a lawn, illustrating how the cheapest or first applicant might be chosen due to the basic nature of the task. The paragraph then explores the implications of a government-mandated increase in the minimum wage, suggesting that employers might opt to perform tasks themselves or become more selective in hiring, potentially leading to unemployment for those with lower skills, who ironically need the wage increase the most. The summary emphasizes the unintended consequences of minimum wage hikes on the job market, particularly for less skilled workers.

Keywords

💡Job Skills

Job skills refer to the abilities and knowledge required to perform specific tasks or duties within a job. In the video, the concept is used to illustrate the difference in pay based on the level of skill, such as the President of the United States earning more due to higher job skills compared to the president of a local school board.

💡Responsibilities

Responsibilities are the duties and obligations that come with a particular job. The video script implies that higher responsibilities, like those of the President of the United States, are associated with higher pay, reflecting the principle that greater responsibilities often command higher compensation.

💡Minimum Wage

Minimum wage is the lowest wage permitted by law or by a special agreement. The video discusses the debate around minimum wage, suggesting that increasing it can have unintended consequences, such as unemployment for those with fewer skills, as businesses may not be able to afford the higher labor costs.

💡Unemployment

Unemployment refers to the state of being without a job while actively seeking work. The script uses the example of a teenager, Ned, who becomes unemployed when the minimum wage is increased, as employers may choose to hire someone with more skills or lay off workers altogether to cut costs.

💡Government Legislation

Government legislation refers to laws or regulations enacted by the government. In the context of the video, the mention of a government passing a law to increase the minimum wage is central to the argument that such legislation can lead to increased unemployment among low-skilled workers.

💡Layoffs

Layoffs are a reduction in the workforce, usually due to economic conditions or company restructuring. The video script explains that when the minimum wage is raised, business owners may lay off workers to manage increased labor costs, which can disproportionately affect lower-skilled employees.

💡Labor Costs

Labor costs are the expenses associated with employing workers, including wages, benefits, and other related costs. The video script uses the term to discuss how an increase in the minimum wage can make employees more expensive, prompting business owners to reconsider their hiring practices.

💡Skills

Skills are the abilities and competencies that enable individuals to perform tasks effectively. The script contrasts basic skills, like mowing a lawn, with more advanced skills, suggesting that businesses may prefer to retain or hire employees with higher skills when faced with increased labor costs.

💡Economic Consequences

Economic consequences are the outcomes or results of economic decisions or policies. The video discusses the unintended economic consequences of raising the minimum wage, such as increased unemployment among lower-skilled workers who are often the most in need of a wage increase.

💡Business Sense

Business sense refers to the ability to make practical and effective decisions in a business context. The script implies that it makes good business sense for employers to retain the most skilled employees when labor costs rise due to minimum wage increases.

💡Attention to Detail

Attention to detail is the quality of being careful and thorough in one's work. The video uses this concept to illustrate that employers may become more selective in their hiring, choosing employees who demonstrate a higher level of attention to detail, as opposed to those with basic skills.

Highlights

People with different job skills and responsibilities get paid different amounts.

It's no surprise that the President of the United States earns more than the president of a local school board.

This difference in pay often gets forgotten in the debate about people who earn the minimum wage.

For example, if you own a home with a large lawn and several teenagers in the neighborhood are interested in mowing it, you might pick the one who charges the lowest price.

Because the skills needed to mow the lawn are basic, you're confident the job will be done to your satisfaction.

If the government passes a law that increases the minimum wage by 40%, you might decide to mow the lawn yourself or become pickier about who gets the job.

You might switch to the person who pays the most attention to detail, which could leave someone like Ned unemployed.

When the government increases the minimum wage, it makes employees more expensive for businesses.

Business owners often lay off workers because they can't afford the added expense.

It's good business sense to keep the most skilled employees.

Unfortunately, lower-skilled workers, who may need the raise the most, are often the ones hurt by the unintended consequences of a higher minimum wage.

Higher minimum wages can lead to increased unemployment for lower-skilled workers.

The intention of raising the minimum wage is to help workers, but it can have the opposite effect.

Lower-skilled workers might lose their jobs because businesses prioritize retaining more skilled employees.

The scenario of choosing someone to mow your lawn illustrates the broader economic impact of minimum wage laws.

Transcripts

People with different job skills and responsibilities get paid different amounts.

That’s no surprise to anyone.

No one thinks it’s strange for the President of the United States to earn more than the

president of your local school board, after all.

But it’s something that often gets forgotten in the debate about people

who earn the minimum wage.

Let’s say you own a home with a large lawn and there are several teenagers in the neighborhood

interested in mowing that lawn.

You might pick the one who will charge the lowest price or Ned… well, because he asked first.

Because the skills needed to mow the lawn are pretty basic, you’re confident the job

will be done to your satisfaction.

Now let’s say the government passes a law that says you now need to pay at least 40%

more than you intended. What do you do?

You might simply decide to start mowing the lawn yourself or you might become a lot pickier

in deciding who gets the job.

You may switch to the person who does it with the most attention to detail,

which isn’t Ned’s strong point.

So now Ned is unemployed.

Well the same thing happens when the government increases the minimum wage.

In accounting terms, a higher minimum wage means employees are more expensive.

When this happens, business owners often lay off workers simply because they can’t afford

the added expense, and it makes good business-sense to keep the most skilled employees

(like our lawn-mowing scenario).

Unfortunately, it’s the lower-skilled workers -- who may need the raise the most -- who are out

of the job and are often the ones hurt by the unintended consequences.