Is raising the minimum wage a good idea? Where would the money come from for the higher wages? Would job creators be able to afford to pay people more for the same level of productivity?
Investors Business Daily discusses a new study about the minimum wage increases that will take effect in 2017:
One of the most vexing economic issues today is the minimum wage. For many, the failure to raise the minimum wage to $15 or higher is a sign of our nation’s stinginess and an essential part of the fight for income equality. However, the truth, sad to say, is quite different, as a new study shows.
The study by the American Action Forum, a nonpartisan think tank led by former Congressional Budget Office Director Douglas Holtz-Eakin, looked at minimum-wage hikes scheduled to take effect in the coming years in 14 states and the nation’s capital and found they will “cost millions of jobs across the country and each lost job only leads to total wage earnings rising by a few thousand dollars.”
The reason is simple: When you raise the minimum wage of low-skilled, low-productivity labor — a group that disproportionately includes young minority males — you inevitably destroy jobs. No business will hire someone and pay him more than he’s worth.
So all those states might think they’re helping the downtrodden and the poor, and striking a blow for equality by mandating higher wages, but they’re doing just the opposite: Pricing many young people out of entry-level jobs.
The study estimates that minimum-wage hikes in just 2017 will kill off 383,000 low-end jobs. When phased in over a series of years, the losses become truly big: 2.6 million jobs. But wait, won’t the minimum-wage hike at least boost incomes?
Yes, but not much. For each job lost, earnings for the employees affected by the increase would go up just $6,900.
“While proposals to raise the minimum wage are well intended, it is important to consider the negative labor market consequences,” the report said. “A 10% increase in the real minimum wage is associated with a 0.3 to 0.5 percentage-point decline in the net job rate.”
What will happen when all of these young workers come out of high school and cannot find entry level jobs? Answer: they will have to get money through crime or black market or by collecting welfare. That’s how you earn money if you can’t get employment through legal means.
If we left the minimum wage low, they would be able to find entry level jobs and move up the ladder, perhaps by taking classes at night, like my parents did. My Dad was able to earn his Bachelor’s degree by working in a flower shop and as a security guard for minimal pay. Then he was able to find full-time work that allowed him to have another child, i.e. – me. My parents married first, got jobs, then had children later. But they relied on the availability of entry level jobs in order to work that plan through.
It’s very important to understand that not everyone who INTENDS to help the poor really ACHIEVES helping the poor. I really hope that Americans start to understand from disasters like Obamacare that you cannot let economic illiterates drive policy decisions. No matter how good the happy-talk sounds when read off of a teleprompter, there is no getting around the laws of economics.