Greenspan challenges wage increase

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Posted on Feb 26 1999
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When the nation’s “chief economist” challenges President Clinton’s proposal to raise the federal minimum wage, it’s big news in that the Federal Reserve Board Chairman Alan Greenspan has all the facts he needs on this issue at his disposal. Clinton, doesn’t.

Mr. Greenspan warned that all the “evidence I’ve seen suggests that the people who are most needy of getting on the lower rung of the ladder of our income scales, develop skills, getting the training, are unable to earn the minimum wage. As a consequence, they cannot get started.”

This is because wages are “inextricably linked with skills”. For instance, if a job applicant has low skills, the best he or she can hope for is low pay. They are people with low or no skills at all who are functional illiterates. They have trouble filling out job applications because they simply can’t read. The question then focuses more appropriately on what exactly do they (unskilled or low-skilled adults) need from Uncle Tom?

In what’s becoming a highly competitive job market, the unskilled or low-skilled workers are lost at the take-off point easily outscored by highly skilled applicants. Therefore, raising the entry level (minimum wage) won’t even assure them of a chance at employment opportunities.

As such, the answer, as Mr. Greenspan explained isn’t in hiking the minimum wage, but appropriate training where low-skilled workers can learn lifetime skills. This group needs to be taught eleven skills for career growth identified by the US Department of Labor. It includes communication, getting along with others and following directions–qualities employers look for and that employees learn…in entry level jobs.

“Confirming research from Boston University suggests that employers respond to higher mandated wages by seeking higher-skilled young people capable of reading, therefore, less training, to the detriment of low-skilled adults (the ones who might need the money to support a family).” While a “rising tide” lifted boats all over the country, a rising minimum wage drowned some or the nation’s neediest workers.

History is also replete with economic contraction or death of various industries when wages became too high as to make production of per unit cost unprofitable. It killed the pineapple industry in Hawaii, including the once thriving fishing industry. Hawaii lost both sectors to Asian countries where labor cost is far cheaper.
Whether we like it or not, manufacturing industries are highly mobile and would deploy elsewhere when the host country (NMI included) brings wages beyond their means to rake-in decent profits.

If anything, we must learn to ride on the success of our business partners. Perhaps more so than anybody in the public sector, they go through more than their share of sleepless nights viewing the NMI’s investment radar screen quizzing if all the troubles of sinking their lifetime investments are worth it. They are saying it’s worth it! So let’s pitch-in our share to expand upon what we have today where the fruits of our collective efforts “Is Ours To Share”. Si Yuus Maase`!

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