Raising The Minimum Wage Hurts Young And Low-Skill Workers

minimum wage cartoon2

In the Wall Street Journal, George Mason University economists Don Boudreaux and Walter Williams argue that New Jersey’s decision to raise the minimum wage to help young and low-skill workers will actually have the opposite effect:

The evidence is overwhelming that minimum-wage legislation has a negative effect on the employment of low-skilled workers. As a careful empirical study done in 2000 by Cornell University economist Richard Burkhauser and some co-authors concluded: “Minimum wage increases significantly reduce the employment of the most vulnerable groups in the working-age population—young adults without a high-school diploma (aged 20-24), young black adults and teenagers (aged 16-24), and teenagers (aged 16-19).”

Even the loudly and proudly progressive economist Paul Krugman—who called the Card-Krueger result “iffy”—has admitted that raising the minimum wage likely reduces employment prospects for low-skilled workers.

If minimum-wage legislation only destroyed jobs for teenagers, it would be bad enough. But its long-term consequences are more dire. Precisely because the climb to higher wages begins for most workers during their teenage years with entry-level jobs, the minimum wage—by knocking off the bottom rungs of the economic ladder—effectively tells young workers: Unless you can jump immediately to higher rungs on the ladder, you must remain unskilled and unemployed for the indefinite future.

There’s another aspect here worth mentioning. If you inflate the price of labor, you inflate the costs of goods and services provided by that labor. When the government mandates higher wages, they also mandate higher prices. So not only does a higher minimum wage mean less employment for low-wage workers, it also means a higher cost of living for everyone.

The government shouldn’t be in the business of price fixing, be it fixing the price of milk and bread or fixing the price of labor.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • igx

    It was extremely stupid for Obama and the democrats to raise the cost of labor in various ways (most notoriously Obamacare) during a recession. 

    Profits over people.  

    • Ken08534

      The very nature of Health Insurance is to over-charge the vast majority of plan participants to help cover the higher-cost needs of the minority of plan participants.

      Obamacare is about lowering healthcare costs, right? Well if the vast majority of people are paying more for health insurance than they would pay for the services they normally use, seems to me it actually RAISES costs instead of lowering them.

      But I can hear you now – but when they cut back reimbursements to providers, costs will go down! Sure, but will lower, and in many cases below the cost of providing the service, reimbursement rates drive doctors out of their practices?

      It already is.

  • WOOF

    “A rising tide raises all ships.”

    • two_amber_lamps

      Yes, that’s called INFLATION.

    • suitepotato

      Actually, in this case, it drowns the least skilled and least experienced. Not that you actually care.

    • http://sayanythingblog.com Rob

      That’s the saying used by you leftists all the time, and it’s accurate.  Raising the cost of labor drives up all wages.  But also the costs of goods and labor.

      At best, the impact is moot, because any gain in wages is set off by increases in prices.  But in practice, the impact is much worse, because it distorts the labor markets by making them less flexible and less open to young and low-skill labor.

      But as long as it makes you feel warm and fuzzy supporting it, I guess we can ignore the fact that this policy hurts those it’s intended to help.

      • No

        I hate to tell you this, Rob, but you’re totally wrong about raising the minimum wage has historically lead to job creation, not the reverse as you claim.

        Of course, that’s only out here in the real world. I don’t know what it’s like up there in Limbaugh’s ass…

    • Ken08534

      If each McDonald’s employee costs 20% more, will food prices go up or will they find a way to get by with fewer workers?

  • http://nofreelunch.areavoices.com/ Kevin Flanagan

    For every dollar it is raised, the feds collect 15.3%.

  • WOOF

    Food Stamps, medicaid, welfare or minimum wage?
    (Better a living wage)
    What do you think happens when a population is impoverished.
    Put’ em to work.

    • igx

      The problem is businesses have to run on a model that produces a profit. When you mess with one input (cost per hour) they will have to adjust another input (number of employees or what type of projects they tackle) to get to a profit. Higher labor costs frequently mean fewer employees or less gets done for society. 

      No one wins. 

      It’s better to do it with transfer payments. 

      • igx

        Also, if a government entity isn’t producing a “public good” it’s almost definitionally misallocating society’s precious capital because it isn’t creating a real life profit. 

    • donwalk

      Why don’t we just increase the minimum wage to a level that gives everyone the home of their choice, the car of their choice and the education of their choice.
      If increasing the minimum wage has no effect on profits, expenses, number of employees, or the prices involved with the product then no damage under your thinking?
      Why stop at increasing the minimum wage to, let’s say $12.00 per hour? Why not make everyone upper middle class with $25.00 to $30.00 per hour?
      Where would you draw the limit WOOF, since you claim there are no drawbacks to the economy by doing so?
      After all, if “Unemployment Checks” are good for the economy, then unlimited minimum wage increases should be good for the economy also!

  • igx

    Does the minimum wage do anyone any good in inner city Detroit, where housing is cheap and no one has much money? 

    • No

      RAISING the minimum wage would do them a lot of good, as a matter of fact. 

      • igx

        THERE IS MONEY FOR DEMAND OF PRODUCTS AND SERVICES. 

  • http://Sayanythingblog.com The Whistler

    Raising the minimum wage is racist.  The Democrats want to keep black people dependent on them.  

    • igx

      That’s the effect, in reality. 

  • WOOF

     Reality is states with no/low minimum wages are poorest.
    Miss, La, Alabama, Arkansas, South Carolina, Tenn.

    They are already engaged in transfer payments .
    Get more from the Feds than they send.

    • igx

      One variable. One. 

      • WOOF

        Three variables,
        no minimum wage
        receive higher transfer payments
         lower income states
         

        • igx

          Uh, those are on different sides of the equation. Try again. 

          • http://nofreelunch.areavoices.com/ Kevin Flanagan

            What do all those states have in common? Buehller? Buehller?

    • http://www.bikebubba.blogspot.com bikebubba

      Since the minimum wage is a federal law, there are no states without a minimum wage, Woof.

    • http://pocketjacksblog.blogspot.com Jay W.

      You’re confusing the fact that those states don’t have minimum wage laws with the state ignoring the federal minimum wage.

      Each of those states have a minimum wage of $7.25/hr, which is the federal wage. In the absence of a state law that increases the wage, the federal law still applies.

      Alabama
      Arkansas
      Louisiana
      South Carolina
      Tennessee

      (edited for fomatting)

      • http://sayanythingblog.com Rob

        Please, don’t confuse Poodle with the facts.

      • Game

        Employers  are exempt from the federal minimum wage if they have revenue of
        less than $500,000 per year and don’t  engage in any interstate commerce.

        That is why state minimum wage varies and why some states set different standards.

      • WOOF

        Not covered by federal minimum wage laws

        independent contractors (only employees are entitled to the minimum wage)outside salespeople (a salesperson who works a route, for example)workers on small farmsswitchboard operators employed by phone companies with no more than 750 stationsemployees of seasonal amusement or recreational businessesemployees of local newspapers having a circulation of less than 4,000newspaper deliverers, andapprentices, students, and learners, as defined by federal law.

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