Real-World Examples of How the Minimum Wage Destroys Jobs and Hurts Workers

October 29, 2018 – Dan Mitchell

Politicians can interfere with the laws of supply and demand (and they do, with distressing regularity), but they can’t repeal them.

The minimum wage issue is a tragic example. If lawmakers pass a law mandating wages of $10 per hour, that is going to have a very bad effect on low-skilled workers who can only generate, say, $8 of revenue per hour.

You don’t need to be a libertarian to realize this is a problem.

Catherine Rampell leans to the left, but she warned last year in the Washington Post about the danger of “helping” workers to the unemployment line.

…the left needs to think harder about the unintended consequences of…benevolent-seeming proposals. In isolation, each of these policies has the potential to make workers more costly to hire. Cumulatively, they almost certainly do. Which means that, unless carefully designed, a lefty “pro-labor” platform might actually encourage firms to hire less labor… It’s easier, or perhaps more politically convenient, to assume that “pro-worker” policies never hurt the workers they’re intended to help. Take the proposal to raise the federal minimum wage to $15 an hour… raising wages in Seattle to $13 has produced sharp cuts in hours, leaving low-wage workers with smaller paychecks. And that’s in a high-cost city. Imagine what would happen if Congress raised the minimum wage to $15 nationwide. …Why wouldn’t you want to improve the living standards of as many people as possible? The answer: You won’t actually be helping them if making their labor much more expensive, much too quickly, results in their getting fired.

By the way, while I’m glad Ms. Rampell recognizes how big increases in the minimum wage will have an adverse impact, I think she is rather naive to believe that there are “carefully designed” options that wouldn’t be harmful.

Or does she have a cutoff point for acceptable casualties? Maybe she thinks that an increase in the minimum wage is bad if it throws 500,000 people into unemployment, but a small increase that leads to 200,000 fewer jobs is acceptable?

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