A Training Wage

by Reihan Salam

One of Michael R. Strain’s recommendations for spurring job-creation is to establish a lower minimum wage for a certain set of workers:

Lower the minimum wage for the long-term unemployed and for inexperienced workers, and couple it with an EITC-like payment.

Josh Barro is skeptical (“I’m wary of weakening the minimum wage since the evidence that it significantly drives unemployment at current levels is weak”). I think it is an excellent idea, having recently read Sarah O’Connor’s Financial Times article on work conditions at an Amazon fulfillment center in Rugely, Staffordshire, an English town plagued by long-term employment (which we discussed back in February). Britain has a higher minimum wage than the United States, and one unintended consequence is that many workers who have been out of the labor force for a long period of time struggle to meet the productivity expectations set in part by the official wage floor. That is, at a minimum wage of £6.19, an employer will want an employee to deliver at least £6.19 worth of work. An employer might accept that there is a learning curve, but the learning curve will have to be relatively steep. A training wage might mitigate this pressure on employers, and thus on employees. 

The National Employment Law Project, a union-backed advocacy organization, has made the case against a training wage, focusing exclusively on the idea as it pertains to teenagers. Michael Saltsman of the Employment Policies Institute, a group that tends to be more critical of wage floors, has made the case in favor, also focusing on teenagers. I doubt that a training wage would have a dramatic impact on employment levels, but it seems like a modest and attractive idea that merits experimentation. The federal government could establish a training wage for young workers and for the long-term unemployed, but state governments would be free to set a higher wage floor. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.