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Raising Minimum Wage Destroys Job Opportunities

. . . , Ted Kennedy, argues that the minimum wage should be increased because it's difficult to raise a family with the only breadwinner making the current minimum.  It's a popular claim, but it is flawed, for three reasons.

  •  First, a study by economist David A. Macpherson of Florida State University and Craig Garthwaite of the Employment Policies Institute suggests that only 20% of the workers who would have been directly affected by an earlier $1 increase in California's minimum wage were supporting a family on a single minimum-wage income.  The other 80% were teenagers or adult children living with their parents, adults living alone or dual earners in a married couple. 
  • Second, as economists David Neumark of the Public Policy Institute of California and William Wascher of the Federal Reserve Board show, increases in minimum wages actually redistribute income among poor families by giving wage increases to some and putting others out of work.  They estimate that the federal minimum-wage increase of 1996 and 1997 increased the proportion of poor families by one half to one percentage point.
  • Third, consider the long run.  Mr. Neumark and Olena Nizalova have found that even people in their late 20s worked less and earned less the longer they were exposed to a high minimum wage, presumably because the minimum wage destroyed job opportunities early in their work life.

 

For the full commentary, see:

David R. Henderson.  "Rule of Law; Minimum Wage, Minimum Sense."  Wall Street Journal (Sat., Feb 25, 2006):  A11.




Comments

Quite surprisingly, libertarian economist Steve Landsburg argues quite convincingly that the minimum wage is not the big job killer that most economists believe it to be. Nonetheless, an expansion of the Earned Income Tax Credit would be a much more effective and equitable way of helping the working poor than raising the minimum wage.
I don't see people getting 'laid off' from work by a degree that would negate the benefits of minimum wage hike. The cheap labor pool is already being added to by immigrant labor. Just because a few low income jobs might be eliminated, it doesn't mean there wouldn't be enough opportunities for american workers.

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