I wasn’t always a professor. Before I earned my asbestos-covered corner of the ivory tower, I was just another starving student trying to piece together enough money to stay in school.
In the process, I had a couple of jobs of the sort I never hope to see again. My favorite was working as the maintenance guy at a high school. That job featured such great moments as pulling a dead seagull out of an air conditioner intake and driving home in my underwear after being coated head to toe in hydraulic fluid by a blown compressor.
It was the kind of job that gave me a pretty strong incentive to stay in school. It also gave me a different take on minimum-wage laws than most people get out of an Econ 101 course. As an economist, I was always taught that minimum wages, like all price “floors,” are bad. I was taught that if wages were set higher than what the market would otherwise provide – and they have to be, if they are going to have any effect at all – then they cause demand for jobs to outstrip the supply of jobs and some people who would otherwise be working wind up unemployed.
What I learned as a maintenance guy is that this theory, like a lot of what gets taught in Econ 101, is a great story – but it’s just that, a story. What the nifty graphs didn’t show is all of the assumptions about the way labor markets work in the basic Econ 101 setting: People have good information; there are no major quality differences in jobs; locations are flexible; there are enough employers and jobs around that people can move around without major dislocation; yadda, yadda, yadda … .
As an 18-year-old in a company town who needed to find work for three months between school years, I was over a barrel. I didn’t have the luxury, the time, or the savings to find a better job – and the folks who were hiring knew it. So they could lowball all of the college kids coming back from school into doing just about any work at minimum wage. Anyone who tried to negotiate or hold out for a better deal would be replaced – pronto – by someone who was a little more desperate. So all of those nifty assumptions from my Econ 101 class? Not exactly relevant to my situation.
Being in that position made me feel like cattle, like nothing I knew or could do mattered. My sole value was as a pair of hands and a strong back, and if I put up any sort of defense of my humanity, I’d be replaced in a second. And this is why I learned to love minimum wage: It’s the only protection I had.
To be sure, this was not an economy that was working correctly. In fact, this was a labor market that was just about as fouled up as you can find it, where workers have no power and where employers can get away with pretty much whatever they want. In this situation, more than anything else the “invisible hand” is sending only one message, and it’s a single-finger salute to labor.
Fortunately, this stage of my life didn’t last too long. Thanks to being a middle-class white boy with a pretty solid Protestant work ethic and access to some student loans, I educated myself out of the shallow end of the labor supply. By my junior year, I was working in nice clean offices tending to a computer and writing reports. Of course, not everyone else chose their parents and gene pools as well as I did, so their path upward might be a little harder, if not impossible.
Looking back with the benefit of a Ph.D. and Lord knows how many hours of training as an economist, I have a much clearer understanding today than I did then. Now, I know that I was in a situation where short-time horizons, limited information and a geographically constrained employment base coupled with geographically immobile workers led to an imbalance in relative market power between employers and the individual participants in the labor market, resulting in excessive downward pressure on wages. To avoid a situation in the labor market that would have been welfare-reducing for society, the appropriate policy action was to introduce a countervailing distortion in the form of a minimum wage law.
But back then, I just knew I was getting screwed and the only guarantee I had was being paid $4.35 an hour.
Eric Schuck is an assistant professor of agriculture and resource economics at Colorado State University.
