Is It Time To Rethink The Minimum Wage?

  • Author: Michael Saltsman

  • Publication Date: November 2010

  • Newspaper: South Florida Sun Sentinel

  • Topics: Minimum Wage, Teen Unemployment

Candidates for political offices across the country suggested it might be time to rethink the federal wage floor. Those questioning the minimum wage have been excoriated for daring to voice such a heretical opinion.

Given the nation’s problems, however — including a double-digit unemployment rate in many states and a veritable crisis in teen unemployment —shouldn’t every issue be on the table?

The economics of the matter are simple: Increases to the minimum wage destroy entry level, minimum wage jobs — jobs that are largely filled by less-experienced workers like teenagers. A recent study that controlled for the economic impact of the recession, for example, found that the 40 percent hike in the minimum wage between July 2007 and July 2009 resulted in more than 114,000 teens locked out of the work force. People with low skills get whacked by mandated wage hikes.

It’s not hard to understand why jobs disappear: Higher prices mean business owners with tight margins either need to sell more goods or cut their costs. Considering that even modest wage increases quickly become a burden in businesses with low profit margins like restaurants and grocery stores, it simply makes more sense to have fewer workers on the books. Teens are harder hit because their lack of skills makes them more likely to be doing minimum wage work in the first place. There’s also considerable evidence that the arguments in favor of wage hikes aren’t supported by the facts.

For instance, supporters of a higher minimum wage often argue that wage increases help impoverished parents supporting children. What they fail to acknowledge is that heads of household are almost never the ones working in minimum wage jobs. Census Bureau data show that the single largest group benefitting from the most recent federal minimum wage hike was 16- to 19-year-olds living at home with their parents. Raising the minimum wage simply isn’t an effective way to help low-income workers. A 2007 survey of labor economists by the University of New Hampshire found that seven out of 10 agree the Earned Income Tax Credit is the most effective anti-poverty policy. It does a far better job of targeting low-income families. It doesn’t impose a massive burden on business owners by forcing them to pay inexperienced workers wages that aren’t commensurate with their value as an employee.

Raising the minimum wage destroys entry-level jobs, discriminates against the least skilled and puts more money in the pockets of unintended beneficiaries. And this is a policy that doesn’t deserve at least a little scrutiny? Shutting down debate over the minimum wage is counterproductive to the good of the nation, especially in these challenging economic times.

Michael Saltsman is research fellow at the Employment Policies Institute, a nonprofit research organization dedicated to studying public policy issues surrounding entry-level employment.