MINIMUM WAGE, MINIMUM SENSE
March 8, 2006
After humiliation at the polls in November, California Gov. Arnold Schwarzenegger now advocates raising the state minimum wage from its current $6.75 an hour to $7.75 by July 2007, says David Henderson of the Hoover Institution. While Democrats support the idea of helping poorer families, researchers claim artificial wage rates adversely affect lower income people.
Consider the findings of various economists:
- Only 20 percent of the workers potentially affected by an earlier one dollar increase in California's minimum wage were supporting a family on a single minimum-wage income. The other 80 percent were teenagers or adult children living with their parents, adults living alone or dual earners in a married couple.
- Increases in minimum wages actually redistribute income among poor families by giving wage increases to some and putting others out of work. They estimate the 1996 and 1997 federal minimum-wage increase amplified the proportion of poor families by one-half to one percentage point.
- People in their late 20s worked less and earned less the longer they were exposed to a high minimum wage, presumably because the minimum wage destroyed job opportunities early in their work life.
- A comprehensive survey of studies of the minimum-wage increase found that a 10 percent increase in the minimum wage reduces employment of young workers by one percent to two percent.
- If this estimate holds for California, Gov. Schwarzenegger's proposed 15 percent increase would destroy 1.5 to 3 percent of young Californians' jobs -- about 35,000 to 70,000 jobs.
Source: David R. Henderson, "Minimum Wage, Minimum Sense," Wall Street Journal, February 25, 2006.
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