Minimum Wage destroys jobs--again!

[shanek]

Gee, it's just amazing how the predictions of economics just keep coming true, despite the claims of many on this board to the contrary. Like, the claim that the Minimum Wage doesn't destroy the jobs of the very people it's purporting to guarantee higher wages for.

New Study Reveals Minimum Wage Hikes Lead to Job Loss for Minorities and High School Drop-Outs

A study released today by the Employment Policies Institute (EPI) reveals the increasing job losses that plague minorities and high school drop-outs following minimum wage hikes.

The research, conducted by Dr. David Neumark, economist at the University of California, Irvine, looks at the effects minimum wage hikes have had since the welfare reforms of the 1990s. The author focused specifically on the impact of minimum wage hikes on employment levels, wages, and income for teens and young adults.

The author found that for every 10% increase in the minimum wage:

• Minority unemployment increased by 3.9%
• Hispanic unemployment increased by 4.9%
• Minority teen unemployment increased 6.6%
• African American teen unemployment increased by 8.4%
• Low-skilled unemployment (i.e., those lacking a high school diploma) increased by 8%

The study:

Minimum Wage Effects in the Post-welfare Reform Era

 

[TragicMonkey]

Is it better to have two people working full time but not making enough to survive on, or have one person make enough to survive on while the other is unemployed?

(Not that you can actually survive on minimum wage, even with the increase. Pretend you can, though, because you inherited a fully-paid for house that is, for some reason, tax free and you can walk to work and have no health problems.)

 

[Overman]

How many of those numbers overlap?

 

[Skeptic]

Is it better to have two people working full time but not making enough to survive on, or have one person make enough to survive on while the other is unemployed?

For the employers? The former, definitely.

 

[Ziggurat]

Is it better to have two people working full time but not making enough to survive on, or have one person make enough to survive on while the other is unemployed?

Both people working, of course.

If helping out the working poor is your objective, there's a much more direct and effective solution than raising the minimum wage: raise the earned income credit. Raising the minimum wage doesn't affect most working poor, but it does affect a whole lot of middle class teenagers. The earned income credit is the opposite: it misses those middle class teenagers and directly targets the working poor. And it doesn't price anyone out of the labor market either. There's really no good argument, even from a strongly progressive and pro-wealth redistribution persepective, to raising the minimum wage.

 

[TragicMonkey]

Both people working, of course.

But if they're both requiring state assistance even while working, and will have to declare bankruptcy if they get sick, then what's the point?

If I'm going to starve to death whether I'm working or not, I don't see what my motivation is to work. To drag it out a little longer?

 

[Francesca R]

I would prefer a negative income tax to a minimum wage. Doesn't destroy jobs, but raises taxes and admin burdens. There's no free lunch.

 

[Luke T.]

Is it better to have two people working full time but not making enough to survive on, or have one person make enough to survive on while the other is unemployed?

Actually, if you look at Neumarks study, it is more like, "Is it better to have 100 people working full time but not making enough to survive, or have 95 people make enough to survive on while 5 are unemployed?"

 

[TragicMonkey]

Actually, if you look at Neumarks study, it is more like, "Is it better to have 100 people working full time but not making enough to survive, or have 95 people make enough to survive on while 5 are unemployed?"

It'd work out perfectly if all 95 were employees at the welfare office, seeing to the needs of the 5.

 

[Snide]

Actually, if you look at Neumarks study, it is more like, "Is it better to have 100 people working full time but not making enough to survive, or have 95 people make enough to survive on while 5 are unemployed?"

Good point. I would like to see the numbers in more detail (didn't have time to thoroughly check all of the charts). Is their idea of a 3.9% increase in unemployment like having unemployment go from, say, 5% to 8.9%? I doubt it. What it probably means (and should) is that for every 1000 people who were already unemployed (minorities, in the 3.9% example), there were, after the minimum wage hike of 10%, a total of 1039.

So for every how-many-thousand employees got raises, 39 lost their jobs. Still not a "good" result, but a lot less alarming.

 

[ConspiRaider]

The state of Florida disagrees with this thread title:

http://www.floridatoday.com/apps/pbcs.dll/article?AID=/20070130/BUSINESS/701300323/-1/archives

But, I guess I can understand why a company like, oh, ExxonMobil, who had nearly $40 billion in profit last year, might balk at paying its service station employees a more livable wage. If they do that - then how could they fund "experts" to minimize the warnings about global warming?

 

[Ziggurat]

But if they're both requiring state assistance even while working, and will have to declare bankruptcy if they get sick, then what's the point?

Because they can GET government assistance. And because I believe that working is good for you, and sitting on your rear end getting a government check for nothing encourages social pathologies.

If I'm going to starve to death whether I'm working or not, I don't see what my motivation is to work. To drag it out a little longer?

Can you find a single case of someone in the United States starving to death in the last 50 years due to anything other than infirmity, insanity, or being lost in the wilderness (all causes which can strike the rich)?

 

[Ziggurat]

I would prefer a negative income tax to a minimum wage.

That's effectively what the earned income credit is, and it already operates that way.

 

[Skeptic]

Let's take an extreme case: suppose there are no minimum wage laws. Suppsoe further A is B's slave but, to avoid charges of human slavery, B pays A a symbolic $1 a year for his 16 hours of work per day. Now, a minimum wage law is passed; B, cursing, instantly fires A, who--lacking the ability to find a job--is now unemployed.

On Shane's interpretation, the minimum wage law had horribly hurt A by causing his unemployment, thus "hurting the very people it proposes to help".

The problem with this claim, as the example illustrates, is that the minimum wage law is in there no to maximize employment per se, but to prevent exploitation of the poor. The idea is, it is sometimes better to be unemployed than to be exploited.

 

[Luke T.]

The author found that for every 10% increase in the minimum wage:
• Minority unemployment increased by 3.9%
• Hispanic unemployment increased by 4.9%
• Minority teen unemployment increased 6.6%
• African American teen unemployment increased by 8.4%
• Low-skilled unemployment (i.e., those lacking a high school diploma) increased by 8%

I am curious to know for how long the employment level is depressed after a mininum wage hike.

 

[Random]

Can you find a single case of someone in the United States starving to death in the last 50 years due to anything other than infirmity, insanity, or being lost in the wilderness (all causes which can strike the rich)?

Death by starvation may be rare, but poor nutrition can lead to any number of medical conditions ranging from diabetes to immune deficiency to, ironically, obesity. These can lead to large medical costs, lost work time, etc.

 

[marksman]

That's true, Skeptic. but Shanek's post was merely to respond to only one, apparently erroneous, defense of minimum wage: that it doesn't affect unemployment.

Responding with a different defense shifts the goalposts. Shanek is not, not in this thread to date, anyway, claiming that minimum wage laws do not reduce the exploitation of the poor, only that they do increase unemployment.

Of course, the question is at which point the costs of increased unemployment and employer wage costs outweigh the benefits of diminished exploitation of the poor. And that's something upon which I think reasonable minds will differ.

 

[Snide]

Let's take an extreme case: suppose there are no minimum wage laws. Suppsoe further A is B's slave but, to avoid charges of human slavery, B pays A a symbolic $1 a year for his 16 hours of work per day. Now, a minimum wage law is passed; B, cursing, instantly fires A, who--lacking the ability to find a job--is now unemployed.

On Shane's interpretation, the minimum wage law had horribly hurt A by causing his unemployment, thus "hurting the very people it proposes to help".

The problem with this claim, as the example illustrates, is that the minimum wage law is in there no to maximize employment per se, but to prevent exploitation of the poor. The idea is, it is sometimes better to be unemployed than to be exploited.

I think you're right in principle. If, say 50,000 got 10% raises, while 40 lost their minimum-wage jobs and thus had to go on welfare, is that really such a bad result? Maybe, but let's debate that instead of starting the discussion in the manner this one was.

 

[Snide]

That's true, Skeptic. but Shanek's post was merely to respond to only one, apparently erroneous, defense of minimum wage: that it doesn't affect unemployment.

Responding with a different defense shifts the goalposts. Shanek is not, not in this thread to date, anyway, claiming that minimum wage laws do not reduce the exploitation of the poor, only that they do increase unemployment.

Of course, the question is at which point the costs of increased unemployment and employer wage costs outweigh the benefits of diminished exploitation of the poor. And that's something upon which I think reasonable minds will differ.

OK, that's a good point regarding this post. I too was quick to shift the goalposts because of the past discussions we've had here with Shane. IMO, Shane over-emphasizes the counter-"no effect on unemployment" argument.

IOW, we get it, we're (mostly) not stupid...we KNOW minimum wage hikes lead, at least temporarily, to lost jobs. If one finds someone arguing otherwise, he should please go after that particular poster and straighten him out.

 

[Beerina]

Let's take an extreme case: suppose there are no minimum wage laws. Suppsoe further A is B's slave but, to avoid charges of human slavery, B pays A a symbolic $1 a year for his 16 hours of work per day. Now, a minimum wage law is passed; B, cursing, instantly fires A, who--lacking the ability to find a job--is now unemployed.

On Shane's interpretation, the minimum wage law had horribly hurt A by causing his unemployment, thus "hurting the very people it proposes to help".

The problem with this claim, as the example illustrates, is that the minimum wage law is in there no to maximize employment per se, but to prevent exploitation of the poor. The idea is, it is sometimes better to be unemployed than to be exploited.

I think someone paid a dollar a year would die of starvation rather quickly. Hence it would not be in their interest to work for such a wage (nor anybody's interest). Hence the job position would remain unfilled.

So A could either raise his wage offer, or do without. It isn't A's fault that B is poorly educated, not very smart at figuring things out, lazy, or some combo of the above. B, and everyone else, should be glad A even offers the job to begin with.

"Four dollars an hour? No? Five? No? Six? Ahh, three takers. I pick...you. Off you go!"