Raising the minimum wage making things worse

Back in August, I wrote about how raising the minimum wage can increase unemployment since government mandated wage increases puts a strain on small businesses, increases prices and deflates buying power.

Today, Morrissey over at Hot Air brings us news of a new book written by a professor of economics and an associate director of research and statistics at the Federal Reserve Board noting how the working class is getting punished for the minimum wage hike enacted a couple of years ago.

In early August I wrote a post titled Confirmed? Raising minimum wage increases unemployment, that highlighted some basic economics with analogies to help readers understand why government manipulation of the minimum wage is not a good thing. As a matter of fact, I’ll argue there should not be a minimum wage at all.

… employees are paid more than minimum wage depending on the going rate in the area, but this morning I was reminded of the minimum wage increase that Congress passed and the president signed a few years ago. The minimum (federal) wage went from $5.15 to $6.55 per hour in two years, and you may be curious if that change could be related to the unemployment rate of teenagers. Of course it is.

If a small business owner paid the federal minimum wage to teens, payroll went up 30 percent – that’s right – 30 percent in two years. If that business had 10 employees that worked 15 hours per week, that’s a difference of $210 per week. This does not include the increases in payroll taxes that must be covered.

How does the owner of the business come up with that extra $210 per week? He can cut services – lay off employees, increase prices or decrease the quality of his goods. He can also cut his or her own income to make up the difference.

More than likely, at least one of those teenagers would be laid off and the owner would make up the hours.

Hot Air notes a book written by a couple of people who are most certainly smarter than I on the subject.

For decades, lawmakers in the US have tried showing solidarity with the working class by championing the minumum (sic) wage and demanding increases in it. In the 110th Congress, Democrats could point to the minimum-wage hike as their only real accomplishment — and even that came as an amendment to funding the war in Iraq. Now a new book by a professor of economics at UCI and an associate director of research and statistics at the Federal Reserve Board argue that these efforts do more to hurt the working class by lowering real earnings and eliminating job opportunities. …

Minimum Wages sounds like a great Christmas gift … for your Representatives and Senators. Offer that instead of the traditional lump of coal those bad boys and girls should get in ten days, as it may be a gift that eventually benefits us all. I’m adding it to my wish list for Christmas.

Check it out. This book, and the comments and links provided above reflect another good learning opportunity for budding conservatives in high school and college.


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Steve McGough

Steve's a part-time conservative blogger. Steve grew up in Connecticut and has lived in Washington, D.C. and the Bahamas. He resides in Connecticut, where he’s comfortable six months of the year.

1 Comment

  1. db on December 22, 2008 at 11:40 am

    How about we shrink the minimum wage to zero. Then somebody should be able to make a lot of money. I thought some of these thought exercises when out with the Civil War, but I could be wrong.

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