NCPA - National Center for Policy Analysis

Higher Minimum Wage Depresses Employment

March 1, 2004

In a move to create a "living wage," San Francisco recently decided to raise its minimum wage to $8.50, a pay hike that also affects waitresses and waiters. Other major cities, have made similar strides in boosting minimum wages. However, a report by the Reason Foundation argues that these policies just end up hurting the people they are meant to protect -- workers.

Small businesses in the Bay Area, particularly restaurants, have been hard hit. The report says:

  • Restaurants are already overly burdened by regulation, ranging from licensing restrictions to menu label laws to tax targets for tip income, making employment as a waiter significantly more difficult.
  • Minimum wage laws have a tendency to cause employers to freeze hiring, layoff existing workers, and cut back on benefits in order to offset the new expense.

Unfortunately, the study remarks, the proponents for these minimum wage hikes cite the same discredited study of Card-Krueger which had found, based on skewed and false data, that minimum wage laws have no ill-effects on low-skill employment.

Source: Tim Cavanaugh, "Sin of Wages," Reason Foundation, February 2004.


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