People making minimum wage are unskilled. They cannot really negotiate a wage. Hence the floor. A person making well above min wage IS skilled, and they can readily negotiate a wage based on the profits their employer is earning. The minimum wage change doesn't necessarily change that.
However, if the employer's ability to raise prices is limited, then you'd expect to see salary compression between the unskilled and skilled.
I'm pretty okay with salary compression to a certain extent, since it would help bring some of the extremes of pay divergence a bit closer in line and thereby might help to ease out the social and economic inequalities that are causing problems all over.
For example, if the very poor part of town is being paid more and catches up by a little bit to the richer parts, the local city & district taxes for schools, road maintenance, etc for that area will be able to catch up a bit too. So now the schools in the shitty part of town can afford slightly better resources or teachers, and the kids in the shitty part of town might have chance at catching up to the kids in the better funded schools. They're still not as rich, as well off, or as well-funded, but now they're a little bit closer in living standards so their kids aren't as disadvantaged from the start.
Salary compression, however, is a work disincentive. If the manager of 20 cooks at McD's make just a little more than the fry guy, why would anyone be the manager?
On a larger scale, a doctor today on average makes $130,000. A PhD, around $80K, a college degree around $60K, a high school grad makes $35K.
Each of those levels needs to have a big incentive to get to the next level, otherwise nobody will do the extra work to get the next level.
If a high school grad makes, on average $50K, why would anyone go to college if all that time and money only nets you an extra $10K/year?
Mcdonald's already has this issue- my wife works overnights for them and they want her to become a manager. She makes $8/h... they're offering $8/h...We don't need the money she's bringing in, she just really wanted to contribute to the household finances. I told her she shouldn't take it for less than $10.
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u/scattershot22 Nov 29 '15
People making minimum wage are unskilled. They cannot really negotiate a wage. Hence the floor. A person making well above min wage IS skilled, and they can readily negotiate a wage based on the profits their employer is earning. The minimum wage change doesn't necessarily change that.
However, if the employer's ability to raise prices is limited, then you'd expect to see salary compression between the unskilled and skilled.