Students on college campuses often hold protests calling for a minimum or “living” wage. It’s appealing to the average, not-so-well-informed undergrad: it sounds all progressive and like you really care for the poor, and who really wants to bother thinking through all of the implications.
IWF tried to educate college students about those implications in this guide on the issue. The Wall Street Journal offers additional evidence on the consequences of the most recent minimum wage hikes, which have contributed to a surge in teen unemployment:
There’s plenty of competition, but our vote for the recent act of Congress that has caused the most economic hardship goes to the May 2007 law raising the minimum wage in three stages to $7.25 an hour from $5.15. Rarely has a law hurt more vulnerable people more quickly.
A higher minimum wage has the biggest impact on those with the least experience or the fewest skills. That means in particular those looking for entry-level jobs, especially teenagers. And sure enough, as nearly all economic models predict, the higher minimum has wreaked havoc with teenage job seekers, well beyond what you would expect even in a recession.
…The first increase, to $5.85 from $5.15, came after a decade of no increases and when the overall jobless rate was below 5% and the teen rate was 14.9%. The demand for labor was sufficiently strong in many areas that most employers were probably willing to absorb the higher wage.
But as the minimum wage increased even as the overall job market began to worsen, the damage to teen job seekers became more severe. By the time the third increase to $7.25 from $6.55 took effect in July 2009, the teen jobless rate was 24.3%, and by October it peaked at 27.6% before dropping to 26.4% in January.
The story is even worse for black teens, who often have lower than average education levels or live in areas with fewer job prospects. Their jobless rate climbed from 38.5% before the third wage hike to 49.8% in November 2009, before falling back to 43.8% in January….
Most readers remember the work habits they learned from their first job. Showing up on time, being courteous to customers, learning how to use technology-such habits are often more valuable than the actual paycheck. Studies have confirmed that when teens work during summer months or after school they have higher lifetime earnings than those who don’t work. So raising the minimum wage may inadvertently reduce lifetime earnings.
The Senate recently passed a (flawed) “jobs bill” that’s purpose is to lower the cost of employment to encourage hiring. Policymakers should recognize that the minimum wage does exactly the opposite: it raises the cost of employment and it should be of no surprise that less work for the low-skilled is the result.