Minimum Wage Yet again

Posted By Elgin Hushbeck

It is an election year, so once again the Democrats have rolled out the old stand by of the minimum wage, and Kerry is proposing an increase.

If raising the minimum wage is really such a good thing, why is it just election years when this comes up? Why is the increase so small? Why not raise it to $10, $15, $20 or even a $100 per hour?

The answer is simple. While is many sound so good and compassionate, and conversely make those who oppose it sound so mean and heartless, nothing is free and raising the minimum wage does have costs. One cost is to increase the costs of goods and services. (which tends to offset the benefit of any increase) and the other is that it cost jobs.

If a job has an economic value to a business of $5.00 per hour, raising the minimum wage above $5.00 simply means the job will disappear, and anyone doing that job will loose it. If a potential employee’s skills are only worth $5.00 per hour to a business, and the minimum wage is above $5.00 per hour, then the person will not get a job.

This loss of jobs affects those at the bottom of the job ladder the most, particularly those just entering the job market seeking thier first job. Thus while national unemployment is currently at 5.6% for 16 to 19 year olds it is 17.2% and for minorities in this age group it is even higher (19.7% for Hispanics and 32.5% for blacks).

As the Wall Street Journal pointed out this morning “These low-paying jobs are important because they are a gateway into the world of work for people who lack experience and skills. One study showed that, of a sample of workers earning minimum wage, fully 63% were already making more a year later.”

Given the already high unemployment in these groups are we really making things better if by raising the minimum wage, and thus making it even harder to hire these people? Sure those who already have a job and do not loose it will get some benefit, but it will be at the expense of those who don’t have a job, and will find it even harder to get one.

Jun 24th, 2004

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