NCPA - National Center for Policy Analysis

More Minimum Wage Victims To Come?

February 24, 1998

According to one survey, 90 percent of economists agree raising the minimum wage costs jobs. Yet President Clinton is proposing to increase the minimum wage by another dollar, after increasing from $4.25 to $5.15 over the past two years. Some Democrats want to increase it by 50 cents per year for the next three years.

Clinton will need the support of Republicans to increase the minimum wage; last time 160 Republicans in the U.S. House of Representatives and 27 in the Senate voted for the hike.

Economists say that in a growing economy, when employment is increasing, minimum wage hikes mean fewer net new jobs will be created than would have otherwise been.

The effects have been measured dozens of times, and only one dubious study -- by David Card and Alan Krueger of Princeton University -- found a 1992 hike in New Jersey's minimum wage led to an increase in employment in fast-food spots.

  • Charles Brown of the University of Michigan, for example, cites 19 studies between 1970 and 1991 and concludes "a 10 percent increase in the minimum wage reduced teen employment by one to three percent."
  • Using Labor Department data, the Employment Policies Institute says that is precisely what has happened since the last increase: it "resulted in 128,000 fewer teen jobs."
  • Even Alan Krueger says of another $1 hike in the minimum wage so soon after the last one, "I would think it's probably more likely that it could have an adverse effect."

Interestingly, in 1923 the Supreme Court ruled in favor of Willie Lyons, who lost her job as an elevator operator after the District of Columbia passed one of the earliest minimum wage laws. Justice George Sutherland wrote that by paying $35 a month to Adkins, her employer "has neither caused nor contributed to her poverty. On the contrary, to the extent of what he pays, he has relieved it." Thus the court overturned the minimum wage law -- but reversed its decision in 1937.

Source: James K. Glassman (American Enterprise Institute), "Don't Raise the Minimum Wage," Washington Post, February 24, 1998.

 

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