The Truth About the Minimum WagePosted: October 23, 2014
From the Foundation for Economic Education: People don’t like to think that anyone’s labor is worth less than the minimum wage. Someone might end up flipping burgers for $5.00 an hour. You might think the minimum wage is a way of paying some sort of dignity premium–hence language like “living wage.” People with such good intentions look at the direct beneficiaries of these policies, say, burger flippers now making $7.50 an hour. They pat themselves on the back. But they rarely count the invisible costs: willing human beings who never get hired in the first place.
“But $5.00 an hour is not enough to live on!,” they’ll say. For whom? A teenager living at home with his parents? An elderly person who wants simply to stay active? A single mom with three kids? A single woman sharing an apartment with 2 roommates? Of course, not all of these people could live off of $5.00 an hour. But some of them could given the opportunity. Concerns about those who couldn’t don’t justify minimum wages even if we ignored the invisible costs of the policy, which include reduced margins to businesses that might otherwise grow (and hire more people).
In other words, if you take off the bottom two rungs of the income ladder, many will never climb it. That’s the effect of the minimum wage. The more cynical side of me says that’s how many politicians and the overpaid teamsters want it.
Enjoy this great video and some timeless pieces on the minimum wage by some of FEE’s excellent scholars.
The Truth About the Minimum Wage
“While there is a debate over the magnitude of the effects, the weight of research by academic scholars points to the conclusion that unemployment for some population groups is directly related to legal minimum wages. The unemployment effects of the minimum-wage law are felt disproportionately by nonwhites. A 1976 survey by the American Economic Association found that 90 percent of its members agreed that increasing the minimum wage raises unemployment among young and unskilled workers. It was followed by another survey, in 1990, which found that 80 percent of economists agreed with the statement that increases in the minimum wage cause unemployment among the youth and low-skilled. Furthermore, whenever one wants to find a broad consensus in almost any science, one should investigate what is said in its introductory and intermediate college textbooks. By this standard, in economics there is broad agreement that the minimum wage causes unemployment among low-skilled workers.”
“With the money-wage hike and the reduced benefits, workers can be left worse off since the fringes and slack work demands taken away were provided in the first place because workers valued them more highly than the wages forgone for those benefits. Given the findings of his own as well as other researchers’ studies, Wessels deduces that every 10 percent increase in the hourly minimum wage will make workers 2 percent worse off.”
“Minimum-wage legislation prohibits wages from falling low enough to equate the number of people seeking jobs with the number of jobs being offered. As a result, the supply of unskilled labor permanently exceeds the demand for unskilled labor at the government-mandated minimum wage.
Minimum-wage legislation thus creates a buyers’ market for unskilled labor. And as in all buyers’ markets, buyers (employers) have an unequal bargaining advantage over sellers (unskilled workers).”
“There are three principal effects of this general increase in wage compensation…(read more)
- Small business owners say minimum wage raise would hurt workers (journalstar.com)
- Small business owners oppose minimum wage hike (columbustelegram.com)
- Board Question #79398: Should a burger flipping job pay a living wage for … (theboard.byu.edu)
- NY considers raising minimum wage for tipped workers (hotair.com)
- The Minimum Wage Could Be Raised in November – but Not Where You’d Expect (mic.com)
- #RaiseTheWage Campaign Ignores Economic Reality (legalinsurrection.com)
- Democrats Demagoguing the Minimum Wage, Again (powerlineblog.com)
- Fast Food Management and Customers Alike Have Every Reason to Tell Big Labor: ‘Go Pound Sand’ (punditfromanotherplanet.com)