Older Workers in the Minimum Wage Pool

As the US economy weakens, increasing number of adults are finding themselves in minimum wage jobs that are traditionally done by young adults. The minimum wage jobs do not pay enough for a sustainable living and these are not meant to. For an efficient labor market these wages should be cleared at the market price that matches demand with supply.

WSJ says:

Weakness in the economy is accelerating a structural shift in employment patterns. More adults, including unemployed college grads, older workers, former welfare recipients, immigrants and working adults seeking second jobs, are competing for low-skilled hourly posts.

The increase in supply of labor will place a downward pressure on the wages. The increasing gas and food prices will continue to make to make it difficult for these adults and unemployed college grads to sustain a living.

The problem could get worse during this summer with the June 24th minimum wage hike. Business owners grappling with increasing prices of raw materials and supplies that cannot be passed on fully to their customers cannot let their thin margins erode with a wage increase. Any artificial increase in wages when supply far exceeds the demand will cause the businesses to not hire, aggravating the situation.

The alternative is to reallocate capital from social spending projects to infrastructure projects. May be even adopt a version of McCain's tax holiday plan, except instead of giving the tax holiday to the customers use the $6 billion dollar gas tax collected over the 90 period to fund startups, invest in special education for job training and other job creation projects.