Elizabeth Warren has some quotes about minimum wages that are making the rounds these days. Here’s one:
There’s another variant that claims if minimum wage had risen at the same pace as productivity for such and such arbitrary length of time, it would now stand st $22/hour. On the surface, these statements seem like a reasonable argument for raising the minimum wage, until you realize the clever sleight-of-hand being applied here.
It is true that there tends to be some sort of correlation between productivity and wages, but Warren is comparing AVERAGE productivity to MINIMUM wage. Averages can go up while minimums remain the same; with productivity, people discover more efficient ways to do things, but it is still possible to do them the old inefficient ways if you don’t know any better.
If Alice and Bob both pick 30 grapes an hour until Alice gets a machine that lets her pick 200 grapes an hour, then their average productivity has gone up to 115 grapes per hour. But that’s not an argument for raising Bob’s wages, at least not until he acquires the skills to use the machine.
Incidentally, I like Warren’s framing of the debate here. Even though she is making the wrong relation between wages and productivity, she is at least hinting that there is a relation, which is something minimum wage proponents often ignore.
It makes less sense to raise someone’s minimum wage if you realize you’re not raising their minimum productivity. That requires gaining skills and experience – which, of course, is harder to do if the minimum wage is set too much higher than your minimum productivity in the first place. Mathematically unsustainable jobs tend to disappear.
But apparently Warren doesn’t really mind if you need to pay someone less than the minimum wage to match their productivity. You just have to call it an internship.
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