The Purgatory of Minimum Wage Jobs

Readers responded positively to my recent essay on the emerging economy and jobs: A Teachable Moment: to the Young Person Who Complained About Her Job/Pay at Yelp and Was Promptly Fired

Many young people are stuck in the purgatory of minimum wage and/or part-time jobs: that raises the question: how do you get out of minimum-wage purgatory?

The conventional answer is, “get another college degree.” Perhaps this once had some value, but this now yields rapidly diminishing returns due to supply and demand: everyone else seeking an escape from low-wage/part-time purgatory is pursuing the same strategy, so there is an oversupply of over-credentialed job seekers.

As I point out in my book on jobs and careers in the new economy, Get a Job, Build a Real Career and Defy a Bewildering Economy, issuing 500,000 MBAs does not automatically create jobs for all those graduates: credentials don’t create jobs.

What creates jobs are opportunities to earn high profits via developing profitable skills. Not all businesses are highly profitable; low-margin businesses don’t make enough profit to pay high wages.

Take a high-skill person and put them in a low-margin setting such as fast-food prep (very fast-paced and hard work), and their labor can only generate a limited value for the employer.

Value and profits flow to what’s scarce. Low-skill labor is not scarce–it’s abundant, hence the low wages paid for low-skill work. Workers with credentials are no longer scarce, with the exception of physicians and nurses and a few categories of advanced degrees such as computer science.

What’s scarce are opportunities to earn big profits. Those who have never started a business or operated a business always assume a busy restaurant (for example) is very profitable–but this is not necessarily true. A restaurant with high rent, high labor costs and high overhead expenses could be losing money even if it’s filled with customers every night.

Not only is it not easy to earn a profit, it’s getting harder by the day. Rents are soaring, permits and fees are soaring, regulationary compliance costs more, taxes are higher, minimum wages are rising and competition in most sectors that aren’t protected by the government is fierce.

Employees have to generate a substantial profit for their employers, or the employer will go under. Even large corporations that report big profits are slashing payrolls, trimming bonuses and benefits, and demanding more free labor (though they don’t call it that) from remaining employees. Executives who fail to top profit estimates are sacked.
What’s scarce and what’s abundant? Answering these questions helps us understand the economy and why high wages and profits flow to what’s scarce.

If there’s only one grocery store in town, access to fresh food is scarce, and that store can charge a premium. If there is only one plumber in town, the plumber can charge a premium equal to the travel time that would have to be paid to plumbers in other towns.

In the age of automation, what’s scarce are problem-solving skills. Software and robotics are good with set situations and routines, but not so good at responding to unique situations. If someone wants a high-wage job in a profitable sector, one avenue is to become a better problem-solver.

The best way to become a better problem solver is to start a small enterprise yourself, because the entrepreneur–even the smallest scale entrepreneur selling on Etsy or performing some service in the community–must solve a wide range of problems on a daily basis.

Another way is to volunteer for organizations that are woefully understaffed. A beginner will be given responsibilities in these settings that would never be given to him/her in a government or corporate setting.

The more you take on, the faster you learn because you fail often and fail fast. Problem-solving is largely intuitive and a function of experience and networking with those who can help solve the problem.

This is the basis of the eight essential skills I recommend everyone acquire if they want to exit low-wage purgatory.

A third way is to actively acquire knowledge and experience in fields that are not within your chosen speciality. Specialization is not necessarily the best or only way to develop scarce skills; being able to cross boundaries and draw insights from other fields– the opposite of further specialization–makes for better problem-solving skills. Flexibility, adaptability and the ability to bypass rigid boundaries–these are scarce.

Nowadays, virtually every field requires good communication and collaboration skills. Credentials don’t generate these skills–experience is required. Many people complain that they can’t get the experience needed to qualify for a job, so they puff up their resume/CV and lie about their experience.

The better strategy is to get the experience and consciously set out to acquire solid communication and collaboration skills–what’s known as “soft skills” as compared to “hard skills” such as welding or coding Python.

As noted above, there are two avenues: volunteer for an organization you believe in that happens to be woefully understaffed, or start your own enterprise, no matter how small.

What’s scarce and what’s abundant? The answers are not always clear, but the process of seeking answers will be helpful. Finding work you enjoy and developing skills that are scarce–this is the way forward.

Regards,

Charles Hugh Smith
for Of Two Minds

P.S. Ever since my first summer job decades ago, I’ve been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.

And like most of you, the way I’ve moved toward my goal has always hinged not just on having a job but a career.

You don’t have to be a financial blogger to know that “having a job” and “having a career” do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept “getting a job” has changed so radically that jobs–getting and keeping them, and the perceived lack of them–is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I’ve verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.