MINIMUM-WAGE FOLLY

July 10, 2009

As if the recession hasn't been rough enough on those near the bottom of the economic food chain, fresh bad news is on the way.  Beginning July 24, the federal government will be making it more difficult for employers to hire low- and unskilled American workers.  Thanks to an ill-advised law enacted with bipartisan support in 2007, the cost of providing an entry-level job to individuals with few skills or minimal experience will be going up by more than 10 percent.  Those who cannot find a job paying at least $7.25 an hour will not be permitted to work, says columnist Jeff Jacoby.

Welcome to the latest chapter of America's minimum-wage folly.  This will mark the third time in recent years that Washington has forced up the cost of employing low-skilled workers, says Jacoby:

  • Last July the federal minimum hourly wage was increased from $5.85 to $6.55.
  • The July before that, from $5.15 to $5.85.

By the end of this month, in other words, the lowest rung on the employment ladder will be nearly 41 percent higher than it was just two years ago, says Jacoby.  Needless to say, this last increase will put employment beyond the reach of many marginal workers, leaving them without work.

Those who press for a higher minimum wage often claim that making entry-level jobs more expensive won't reduce the number of entry-level jobs:

  • Sen. Edward Kennedy (D-Mass.), for example, blithely asserts: "History clearly shows that raising the minimum wage has not had any negative impact on jobs."
  • Activist Holly Sklar, campaigning for a $10 minimum wage, likewise insists that "raising the minimum wage does not increase unemployment in good times or bad."

However, Jacoby asserts that economists are singing a different tune:

  • Joseph Sabia of American University and Richard Burkhauser of Cornell University estimate that the minimum-wage hikes of the past two years will wipe out more than 390,000 jobs.
  • David Neumark of the University of California at Irvine, says the minimum-wage jump scheduled for this month will lead to the loss of an additional 300,000 jobs among teens and young adults.

Politicians cannot cure poverty by raising the cost of entry-level employment any more than they can do so by waving a magic wand, says Jacoby.  After all, if aiding the needy were as easy as setting a compulsory minimum wage, why not set it at $20 an hour -- or better yet, $120 an hour -- and really help them out?

Source: Jeff Jacoby, "Minimum-Wage Folly," Jewish World Review, July 8, 2009.

For text:

http://jewishworldreview.com/jeff/jacoby070809.php3 

 

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