American Elephants

“Minimum wage lowers earnings, produces unemployment.” by The Elephant's Child

Over at Hot Air, Ed Morrissey reviews Minimum Wages, a new book by a professor of economics at UCI and an associate director of research and statistics at the Federal Reserve Board, which argues that efforts to increase the minimum wage do more to hurt the working class by lowering real earnings and eliminating job opportunities.

Mr.  Morrissey says:

The minimum-wage increases that enjoy such popularity among politicians generate much less enthusiasm among economists, and for good reason.  It artificially inflates the cost of labor, especially in low-skill markets, which pushes employers to either reduce their labor through automation or scale back on staffing.  The higher the cost of labor goes, the less competitive the lowest-skilled workers become.  Those n that cannot absorb the costs will pass them along to their customers, raising the cost of living and eventually  eliminating whatever transient increase in actual buying power the wage increase produced — which prompts politicians to raise the floor again and start the cycle over.

I couldn’t agree more.  Beginners have to start somewhere.  Studies have shown that most people who start out at minimum wage move up within 6 months.  Politicians, anxious to raise the minimum wage, assume that someone is trying to support a family on that wage, but that is not usually the case. Politicians just distort the market once again.

Do read Hot Air’s review of Minimum Wages by David Neumark and William Wascher.  Might make a perfect Christmas gift for someone on your list.  As Ed says: “Told You So.”

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