The minimum wage is virtue signaling

Hillsborough County was in the top ten counties in the country for wage growth last year, and New Hampshire was among the top five states, according to Federal Bureau of Labor Statistics data released in August.

Amid all of this good news, activists and some politicians are telling everyone that things are bad for the simple reason that state law doesn’t mandate a higher entry-level wage.

This fixation on government mandates rather than the actual economy is a really telling difference in the way some people view the world. On one side, people look around and say, “things are good!” On the other, people bury their heads in statute books and say, “things are terrible!”

The “things are terrible” crowd is pushing again to raise the state minimum wage to $15 an hour. As always, the central assertion is that $7.25 an hour (New Hampshire’s minimum wage is the federal minimum) is not a ‘living wage.”

This is where the gap between the actual economy and economic notions expressed in law grows very wide.

The state Labor Market Information Bureau has compiled U.S. Census estimates for the number of people working at or below the minimum wage in New Hampshire. (Tipped jobs can pay below the minimum.) The data (based on surveys) show only 8,004 Granite Staters working at the minimum-wage or less in 2017.

That’s really low. In fact, it’s a 48 percent decline from the 15,284 Granite Staters estimated to have worked a minimum wage job in 2016. (The number for 2015 was 15,845.)

Why the drop? We don’t know yet. And because of the small sample sizes, it’s possible that a sizable chunk of the decline is a measurement error. Next year’s data will help fill out the picture. But even if 50 percent of the drop is a reporting error, New Hampshire would still have only about 11,600 people working at or below the minimum wage. That’s out of a working-age population of around 913,000, according to Census figures.

At the current estimate of 8,004 people, less than 1 percent of New Hampshire’s working-age population makes the minimum wage or less.

The data further show that 73.5 percent of Granite Staters making the minimum wage or less work in “food preparation and serving-related occupations.”

Tips, commissions and overtime pay are not included in the minimum wage figures, so the actual take-home pay of about three-fourths of New Hampshire employees who are classified as minimum-wage workers will be considerably higher than the minimum wage.

The Census estimates also show that 3,951 people, or 49.4 percent, of Granite Staters who make the minimum wage or less are between the ages of 16-24. These are high school and college-age employees with fewer skills and limited experience.

And experience, as in axe throwing or being Jose Canseco, is a key factor. Looking at the lowest-paying sector, food preparation and serving-related occupations, we see an entry-level wage of $8.36 an hour, a mean wage of $10.55 an hour, and an experienced wage of $13.76 an hour —just $1.24 an hour less than the $15 an hour wage some activists and politicians are demanding.

This tells us that wages are not a measure of a person’s moral worth or dignity, but of economic value. Employers pay inexperienced teens less than experienced adults for reasons that ought to be obvious to anyone who’s ever had a job or waited in line at a McDonald’s. And they pay higher wages to attract better employees.

Even in the fast food industry, competition for good employees is driving up wages so that the minimums in many paces are $10 an hour or higher.

More than doubling the minimum wage to $15 an hour would have a relatively small effect on the pay of experienced employees even in the lowest-paid industries. But it would have a big effect on entry-level positions, effectively pricing younger, less-experienced people out of those jobs.

In an economy in which employers are voluntarily raising wages, we are being told that the government must mandate a very high wage floor, which gets us back to the point about markets vs. laws.

Laws are expressions of moral values. Markets are expressions of economic values (mostly). Even when markets are pushing pay rates higher, people who view the world a certain way find this unacceptable precisely because it does not come from a moral directive.

For the conspicuously virtuous, everything all the time has to be an expression of moral values. Markets don’t operate that way. They consider tradeoffs, which the conspicuously virtuous rarely do. Everything is black and white, good or bad.

So even if markets are driving wages higher, society must act collectively to mandate that wages never fall below whatever the virtuous wage floor of the moment is. Refusal to pass such a mandate is considered a society-wide moral failure.

Or to put it in the contemporary vernacular, minimum wages are virtue signaling.