How amusing to watch Democrats wring their hands over what they can do to get businesses to create jobs, when one of the biggest job killers is the minimum wage they keep hiking.
Recall that it was Democrats who raised the federal wage floor a whopping $2.10 an hour in the middle of the recession. The record 41% increase has led to record unemployment among young people, especially black teens.
Congress started ratcheting up the minimum wage from $5.15 an hour in mid-2007, arguing it would help abate poverty. But retailers looking to slash costs eliminated low-skilled, entry-level jobs rather than pay the mandated increases.
Now 1.5 million fewer teens are working. Last year’s unemployment rate for workers ages 16 to 19 shot up to 26% from 2007’s 15%.
As for black teens, their joblessness soared to a record 43% after the final raise to $7.25 took effect in mid-2009. It helped put more than half of young black men out of work — a first.
The president proposes cranking the minimum wage even higher to $9.50. Then he wants to raise it every year thereafter as a “living wage” indexed to inflation.
Yes, this is the problem that happens when you elect someone who knows nothing whatsoever about economics. And when I say nothing, I mean he is in disagreement with virtually all economists across the ideological spectrum.
Moderate economist Gregory Mankiw of Harvard University lists the policies that are accepted by virtually all economists.
Here’s Greg’s list, together with the percentage of economists who agree:
- A ceiling on rents reduces the quantity and quality of housing available. (93%)
- Tariffs and import quotas usually reduce general economic welfare. (93%)
- Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
- Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
- The United States should not restrict employers from outsourcing work to foreign countries. (90%)
- The United States should eliminate agricultural subsidies. (85%)
- Local and state governments should eliminate subsidies to professional sports franchises. (85%)
- If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
- The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
- Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
- A large federal budget deficit has an adverse effect on the economy. (83%)
- A minimum wage increases unemployment among young and unskilled workers. (79%)
- The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
- Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)
From CNBC, we get this article showing that any increase in the minimum wage will raise the unemployment rate for young people.
A quarter of teenagers were jobless in March, representing a surprising increase from February, even as the unemployment rate for the rest of the population decreased.
This figure may only get worse if budget-strapped states raise the minimum wage, and it could also be a sign of greater structural damage underlying our economy, analysts said.
The unemployment rate for 16- to 19-year olds jumped back up to 24.5 percent in March, up from 23.9 percent the prior month, according to the latest jobs data from the Labor Department.
[...]“Even when comprehending that teen employment is volatile in nature, the data that exists serves up some shock and awe,” said Brian Sozzi, a retail research analyst with Wall Street Strategies, in a note Wednesday. “If these (wage) increases do go through, the prospect for teen employment will remain grim as employers search for workers with advanced skills to fill positions.”
Twelve states, including Illinois and Pennsylvania, are considering a hike in the minimum wage. While this has been the subject of a long-running debate, many economists and analysts say raising this pay bar may cause more teen layoffs, even as it helps teens who manage to stay employed make more.
“Minimum wage increases over the past few years has definitely made it worse,” said Peter Boockvar, chief equities strategist at Miller Tabak. “In fact, there should be zero minimum wage for teenagers, or at most, something much less than the current rate.”
Teens typically are the first to be fired and the last to be hired back in a normal economic cycle, so this rate can be considered a kind of leading indicator of employment.
A new study shows that only 25% of teens will be able to find jobs this summer. And Obama thinks that this number is apparently too high. He wants to lower it by raising the price that must be paid by employers who would like to hire younger workers.
You can find out more about how raising the minimum wage increases unemployment from this comprehensive, 50-year, government study.
Summary of Research on the Minimum Wage
* The minimum wage reduces employment.
Currie and Fallick (1993), Gallasch (1975), Gardner (1981), Peterson (1957), Peterson and Stewart (1969).
* The minimum wage reduces employment more among teenagers than adults.
Adie (1973); Brown, Gilroy and Kohen (1981a, 1981b); Fleisher (1981); Hammermesh (1982); Meyer and Wise (1981, 1983a); Minimum Wage Study Commission (1981); Neumark and Wascher (1992); Ragan (1977); Vandenbrink (1987); Welch (1974, 1978); Welch and Cunningham (1978).
* The minimum wage reduces employment most among black teenage males.
Al-Salam, Quester, and Welch (1981), Iden (1980), Mincer (1976), Moore (1971), Ragan (1977), Williams (1977a, 1977b).
* The minimum wage helped South African whites at the expense of blacks.
* The minimum wage hurts blacks generally.
Behrman, Sickles and Taubman (1983); Linneman (1982).
* The minimum wage hurts the unskilled.
* The minimum wage hurts low wage workers.
Brozen (1962), Cox and Oaxaca (1986), Gordon (1981).
* The minimum wage hurts low wage workers particularly during cyclical downturns.
Kosters and Welch (1972), Welch (1974).
* The minimum wage reduces average earnings of young workers.Meyer and Wise (1983b).
* The minimum wage reduces employment in low-wage industries, such as retailing.Cotterman (1981), Douty (1960), Fleisher (1981), Hammermesh (1981), Peterson (1981).
* The minimum wage causes employers to cut back on training.Hashimoto (1981, 1982), Leighton and Mincer (1981), Ragan (1981).
* The minimum wage encourages employers to install labor-saving devices.Trapani and Moroney (1981).
* The minimum wage increases the number of people on welfare.Brandon (1995), Leffler (1978).
* The minimum wage hurts the poor generally.
* The minimum wage does little to reduce poverty.
Bonilla (1992), Brown (1988), Johnson and Browning (1983), Kohen and Gilroy (1981), Parsons (1980), Smith and Vavrichek (1987).
* The minimum wage helps unions.Linneman (1982), Cox and Oaxaca (1982).
* The minimum wage increases teenage crime rates.Hashimoto (1987), Phillips (1981).
* The minimum wage encourages employers to hire illegal aliens.
* Few workers are permanently stuck at the minimum wage.
Brozen (1969), Smith and Vavrichek (1992).
* The minimum wage has reduced employment in foreign countries.Canada: Forrest (1982); Chile: Corbo (1981); Costa Rica: Gregory (1981); France: Rosa (1981).
This is why it is important for voters to understand economics. When you raise the price of labor, fewer employers will purchase labor. Supply and demand.