Wednesday, December 4, 2013

Raising the Minimum Wage Will Result in Fewer Jobs for Teens and Low-Skill Workers

By Jared Meyer

Recent New York Times opinion articles by Arindrajit Dube and Paul Krugman suggest that raising the minimum wage will have no effects on employment. 
University of California (Irvine) professors David Neumark and J.M. Ian Salas and Federal Reserve Board of Governors economist William Wascher show that raising the minimum wage will result in fewer jobs for teens and low-skill workers. Their recent working paper,Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater, was released by the National Bureau of Economic Research this year. They conclude that “the research record still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.”
This debate shows the problems of statistical analysis when interpreting complex economic situations. Since fewer than 3 percent of American workers are paid the minimum wage or below, teasing out effects on the aggregate economy is complex—many are unseen.
Nevertheless, evidence is clear that teens and low-skill workers are disproportionately affected by increases in the minimum wage (see Neumark'sreview of minimum wage literature). When minimum wage is increased, workers whose skills are below the new level are pushed out of or blocked from entering the workforce. Young people (half of those earning the minimum wage) who are looking to gain experience are put at a disadvantage. In earlier work, Neumark has shown that higher minimum wages particularly affect African American teens, whose unemployment rate is now 36 percent. 
Read the rest here.


  1. And the explanation, when depicted with a Cartesian graph, is that...

    ...the demand curve for low skilled and entry level labor is neither horizontal nor upward sloping!

    But leftwing activists know this, and they expect the results of a higher minimum wage to be useful for recruiting gullible, resentful youngsters to the noble cause of socialism while, in the meantime, being good for forcing union wages higher.

  2. Supply and demand deniers, all of them!

  3. As a business owner, but not one that employs unskilled workers (thank God, they're a nightmare to deal with), I often think about what I would do if I was an employer of low skilled workers when faced with being forced to pay more than my workforce is worth. I would probably start with demanding higher productivity to match the cost and then shed those that couldn't deliver in favor of hiring more skilled workers that the wage would attract with the hopes they would provide me with a better ROI. I would also consider automating everything I can.

    Why do people think that labor cost is somehow different from any other cost a business incurs? I didn't start my business to buy inventory or create jobs. That is simply absurd. I do those things because that is what is required to serve my customers. If I could serve my customers better by lowering my costs to lower my prices, I'm going to do it.

    I wish people that support this nonsense would instead of telling us business owners that things like profits and labor costs don't matter in the greater scheme of things would start businesses and show us Neanderthals how to do it their way. If they succeed they will be successful beyond imagination and will no doubt be copied by all of us. But if they fail, I would ask that that they agree to never again try to impose their economic ideas onto others. Hear that Kurgman? Show us instead of telling us!

  4. This has nothing to do with economics, anymore than Keynesianism does. It's about politics: people with guns demanding what others have. Logical arguments are irrelevant to those driven by emotion and willing to use force.

  5. Further evidence (as if we needed any) that Krugman is a complete intellectual fraud. How is it possible that a law can raise the price of labor without negatively affecting demand in some way. You can argue that the social benefits outweigh the costs but you can't be a real economist and argue that there are no costs.