There’s a movement in cities across the country
to raise the minimum wage to $15 per hour.
One of the most prominent advocates
is former Labor Secretary Robert Reich
who thinks that $15 per hour
should be the minimum wage for the entire country.
This is a bad idea.
Here are 3 reasons why:
first of all, it would kill jobs.
One of the basic lessons of economics
is that when the price of something goes up, people buy less of it.
So, if the price of pumpkin lattes rises,
you can expect consumers to buy fewer of them.
This law of demand also affects the market for low-skilled workers.
Raising the minimum wage
means a higher cost of employing each worker,
which makes workers less affordable than before.
Our coffee shop won’t keep a worker at a mandated $15 per hour
if that worker’s efforts only result in $7.25 per hour
in added revenue.
Over the course of the year,
a shop which keeps such a worker full-time would lose $15,500.
So, instead, it would eliminate that job,
and evidence shows that employers in fact
do respond in this way to minimum wage hikes.
Recent research by economists Jeffrey Clemens and Michael Wither
finds that 1.4 million jobs were destroyed in the late 2000s
when the minimum wage rose across all 50 states
by an average of nearly 30%.
And worse, those job losses were probably suffered
by the people who need jobs the most.
This fact brings us to reason number 2.
The minimum wage actually hurts the people we most want to help.
When the minimum wage rises,
the workers fired first and the ones hired last
are those who employers judge to be the least productive.
The inner-city teen from the lousy school district
or the immigrant with poor English
will be fired before the suburban American teen
from the excellent school district.
So, those who are most disadvantaged
tend to suffer the most job losses.
This reality is compounded by the fact
that raising the minimum wage causes more competition for jobs.
A supermarket job that once paid $8 per hour
draws more applicants when it pays $15 per hour -
applicants who include retirees
and people with higher education who re-enter the workforce
only because of the higher wage.
Because these people often have more skills,
they squeeze out immigrants
and those from disadvantaged backgrounds
who are likely more desperate for the jobs,
and certainly more desperate to gain job experience.
The third reason is that minimum wage hikes aren’t necessary
to give deserving workers raises.
96% of American workers today earn wages
higher than the current minimum wage,
which proves that employers don’t just pay
the minimum that they are obliged to pay by law.
Employers respond to the value that each employee adds
so they can retain the best talent.
It’s expensive to train new employees,
and businesses don’t want to lose good workers to their competitors,
so they raise worker pay voluntarily
as employees gain more skills and experience.
But when government imposes such raises by hiking the minimum wage,
some of the least experienced workers
will not only lose their current jobs,
they’ll find it incredibly hard to find other jobs.
In essence, the minimum wage
cuts off the first rung on the employment ladder.
And it’s that first, lowest paying rung
that provides the skills and experience workers need
to reach the next rung
and to continue climbing their way to a better life.
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