There is a great article on Forbes that came across my LinkedIn news feed this week discussing how the $15 minimum wage is really just a booby prize for the American worker. I was going to make today’s post be all about that article because it is really good. Read it here.
Instead, I’m going to discuss what I think happens when Joel Kotkin’s analysis gets ignored and a national $15/hour minimum wage takes hold. Then I’m going to discuss what I have told my children, my nieces and nephews, and any other young person who has asked for my advice for how they should approach their future.
I have often said that doubling the minimum wage (MW) is a panacea that will not have the desired effect on the people it is meant to help. While its intent is to raise the standard of living for a class of people who don’t have the skills to compete in the current economy, the increased minimum wage will simply re-calibrate the American economy to a higher overall price point and once again leave these people in the same, if not worse, rut. It will probably be worse because jobs that weren’t worth automating will now become worth the cost so there will be fewer jobs for which those folks can compete. See this post from 2014 and this recent post. In essence, the $15 MW is an economy-funded social safety net. America is now running an Information Age economy. The underlying problem is that the Industrial Age skills of the minimum wage labor pool don’t translate into jobs in the Information Age.
There is another group of people who will be similarly affected. These are the people having minimal Information Age skills who are earning wages in the $15 – $20 per hour range. This is effectively the American Information Age Minimum Wage (AIAMW) as set by the market. Why is it set at this rate? It is here because the pool of workers with requisite skills is small enough and the pool of jobs requiring these skills is large enough to set the price in this range. By the way, the output from these workers must be sold at a profit so the wage rate can’t get too high. Also, these workers aren’t just competing with their neighbors in (name your American city) for work. They are competing with workers in India, Vietnam, and Russia. Those foreign workers would work for less pay (on a USD basis) because their economies are set at such a rate where AIAMW allows them to live quite well above their neighbors. So in effect, the AIAMW is just the US Dollar (USD) exchange rate for a Global Information Age Minimum Wage (GIAMW) in a global Information Age economy. That means that the buying power of the current AIAMW class will be degraded to be the same as the buying power of the MW class.
We have already experienced the effects of the GIAMW with the incredible volume of information technology off-shore outsourcing. I have worked with American software companies that have development shops in each of the aforementioned countries. These developers are very good at developing systems. What they are not very good at is figuring out what systems to write and identifying the American problems to be solved. The bad news is that they are getting better at this because US Immigration policy allows them to send people here to learn our businesses (and our problems) and then develop solutions for them in their shops back home. Our immigration policy reflects the skills shortage of the American workforce to fill Information Age jobs.
We have this gap in the number of American Information Age jobs available and the number of American workers with the skills to fill them for several reasons. First, the aging Baby Boomer workforce that filled the industrial jobs in the 1960s and 1970s don’t have the educational background to cope. Most of these folks went to work right out of high school or when they got out of the armed services. At the time, these were really good jobs that looked like they would be careers. The problem for these folks was that their jobs left them before they were ready to leave their jobs and they either wouldn’t or couldn’t learn the skills required for the new jobs in the new age. Frankly, these people listened to politicians who offered band-aid solutions or otherwise told them what they wanted to hear. They self-selected themselves into the labor pool unskilled for the new age.
The second reason was that many of those Boomers who did go on to higher education decided to major in disciplines that are not valued by the Information Economy. The 1960s and 1970s were the time of liberal expansion of social programs as the new Liberals took over the political and educational establishments. Many people majored in disciplines that allowed them to either help other people in non-technical ways (e.g. social work, psychology) or in things they just found interesting (e.g. archaeology, paleontology) but really weren’t in demand by a free-market economy. The fact that both types of jobs these workers filled needed to be funded by third parties (e.g. taxpayers, donors, educational institutions) who would not expect economic return kept their wages down because there is only so much money available from those sources. It appears that only a minority of the Boomers pursued disciplines that translated into the Information Age. And by the way, those people created the Information Age when they created the Internet, the personal computer, and the software that turned data into information to become assets.
This minimal matriculation into Information Age disciplines seems to have carried through the X, Y, and Millennial generations. It seems we have far more college graduates who’ve used their educations to either self-actualize or just party than we have that can participate in this economy. The fact that over half of the American workforce doesn’t make enough to pay federal income taxes tells everything we need to know. It’s not the fault of the economy, it’s a lack of preparation for most of them. And they have a crushing student debt load to show for their (lack of) efforts. This forces them to work rather than go get the educations they should have pursued the first time. That the current generation of college students needs “safe places” and can’t deal with what they consider to be “mean people” illustrates that they may not even have the capacity to participate in the new economy. The outcome is that America is still producing workers with Industrial Age skills who will compete with an ever growing labor pool for an ever shrinking pool of Industrial Age jobs. Unless there is an artificial wage floor imposed (e.g. $15 MW), these people would be looking at working for basically nothing as inflation, population growth, and regulation drive prices upward. They would effectively become serfs.
When I was a kid, during family gatherings my grandfather would make my brothers, my cousins, and me stand on a chair and recite a poem or talk about something we had done. He would pay us a quarter (big money in the 1960s) when we did so. When I got older and discussed the memory with him, he told me that his aim was to train each of us to be comfortable interacting with people and talking in front of them. He told me that I could always earn a living if I could do that. It was the basic skill of a salesman. While that was a great skill to learn, today’s eCommerce world makes that a slightly less valuable skill for many people. People make good livings on eBay and Etsy without ever talking to a soul.
The skill that was in demand then and still in demand now is the ability to solve problems. Everyone has problems and the ability to solve those problems in an economically advantageous way is the means to economic freedom and full participation in this new Information Age. The Information Age is the spawn of advanced problem solving.
So here is my advice…
Get an education that helps you develop problem-solving skills. Your education does not have to be in a STEM discipline. In fact, I wrote a post last year about Walter Isaacson’s book, The Innovators, that supports a more liberal curriculum in our schools. I have a child who earned a communications degree and she does just fine because she uses her skills to solve communications and messaging problems. I have another child who became world-ranked on Tactics Arena, an online strategy game website that made him solve strategic problems in order to win games. We allowed him to play computer games because of the way they developed his problem-solving skills. We’ll soon see how that translates into the real world. As an aside, Halo and Call of Duty are not realistic problem-solving skill-developing game environments.
Learn a business. The solutions to most problems that need to be solved are constrained by the context in which they are found. You need to know and understand the context. A communications professional probably can’t write a Java program and a Java programmer probably shouldn’t write a press release for their employer who is having to defend some crisis situation. But the communications professional needs to understand what their employer/client does so they can write an effective message and the Java programmer needs to understand how his program fits into the business so he doesn’t need to ask a question of a subject-matter expert every time he wants to write a line of code. Both need to understand what they are doing before they apply their skills of knowing how to do it. My first employer out of college, a man who owned a small accounting firm in southern Indiana, told me the best thing I ever learned outside of what my parents and grandparents taught me. He said, “Those who know how will always work for those who know why.” You have to learn the business in order to know why.
Expect to start at the bottom. I was twenty-nine when I graduated from college. I took an entry-level programming/consulting job because the only thing I knew how to do was write code and solve problems. I didn’t know any business except for my prior career in the automotive aftermarket and I was done with that. The only way I could get started in a second career was to start over. So I did. In the case of my kids, they are just starting out. Same rules apply.
Never stop learning. This new Information Age is so fast and so dynamic that you must always keep learning to keep up. Technology is measured in dog years (1 calendar year = 7 technology years). Your past technical education is now woefully out-of-date. Only your problem-solving skills are transferable but you can’t solve problems if you can’t overcome the tools constraint of your business environment. C and Pascal were the hot programming languages when I got out of school. There’s not a lot of that going on today and what is going on is very niche or local to a market. I had to learn Java, PHP, and C# in order to find programming work. Those have mostly been supplanted by even newer programming languages. Most of my work today is about defining the solutions to problems and being the subject-matter expert that the programmers consult. I learned those problem-solving skills many years ago. But I do have to understand the current tool set used to implement the solutions.
So there it is…my advice for how to cope with the next catastrophe brought on us by well-meaning politicians who are trying to solve problems when they have no problem-solving skills or knowledge of the real problem context. They only know that their problem is to get re-elected and so they offer us band-aids and safety nets as solutions. Their futures and their safety nets are already in place.