Wednesday, November 6, 2013

Sliding Minimum Wages and Immigrant Labor

Australia enjoys some fame among labor economists who note its relative success with heterogenetic minimum wages. The specific figures aren't that important, but the idea is that young people have lower minimum wages than established adults. The economic intuition is easy enough to understand: it's difficult for new workers to get an entry-level job since they have no experience. A policy that makes it cheaper for employers to take on greenhorns means that these new workers get the important opportunity to build critical work skills without forcing firms to risk forking out hefty wages for someone who could turn out to be dead weight. Win-win, and the median voter can relax a bit knowing that since the lower minimum wage only applies to teenagers, working families won't have to risk ending up on the dole to cover their weekly bread (here is not the place to evaluate the empirical validity of this claim, merely to assert that this belief is common enough in the mind of the median voter to show up as near-universal policy).

How about for newly-arrived immigrants? Would voters be as willing to relax the minimum wage for people who don't necessarily speak English all that well, or would they be inclined to commit the zero-sum fallacy of labor allocation, assuming that jobs created by lowering the wage rate necessarily take work opportunities away from native-born Americans?

Is a flexible minimum wage for immigrants euvoluntary, in other words? If it is, is it politically feasible? Why or why not?

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Do you have suggestions on where we could find more examples of this phenomenon?