Tuesday, December 7, 2010

Suspend The Minimum Wage To Help The Poor Build Workplace Skills

From The New York Times, "Unemployed, and Likely to Stay That Way" by Catherine Rampell:
The longer people stay out of work, the more trouble they have finding new work.
New data from the Labor Department, provided to The New York Times, shows that people out of work fewer than five weeks are more than three times as likely to find a job in the coming month than people who have been out of work for over a year, with a re-employment rate of 30.7 percent versus 8.7 percent, respectively.
With the US unemployment rate of 9.8 percent, was there ever more of a need to suspend the minimum wage for a year or two. The unemployed poor, often lower wage workers, need to be able to reenter the workforce quickly, need to retain and learn workplace skills and the easiest way is to eliminate the minimum wage for an extended period until the economy recovers. The US could modify the eligibility for Food Stamps and other government benefit programs to allow low-income workers who are paid below minimum wage to receive extra government benefits as a supplement to their wages.

Without a minimum wage, employers would hire many of the unemployed poor who would learn important workplace skills and increase their human capital value. With employment, workers will gain experience and increase their worth as they increase their human capital and their wages will rise as the economy recovers.

After a couple of years, the minimum wage would return to its previous legislated level. During the suspension period, many new workers will increase their workplace value through gaining many useful workforce skills that they would not otherwise be able to learn during an extended period of unemployment.

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