Minimum Wage, Maximum Unemployment: A Horror Story

This coming Tuesday, Nov. 5th, New Jersey voters will be asked to alter their state constitution to automatically raise the minimum wage every year.  The Minimum Wage amendment would be very similar to the federal COLA (Cost of Living Adjustment) requirements.  COLA was eventually abandoned because everyone got a raise, whether they deserved one or not, costing businesses millions in increased wages and decreased productivity.

Most studies find that, when the minimum wage goes up, employment goes down. A higher minimum wage prices many unskilled and inexperienced workers out of the job market. Researchers estimate that the recent increase in the federal minimum wage eliminated the jobs of 300,000 youth.

Raising the minimum wage reduces the availability of entry-level jobs. Until they gain basic employability skills, however, workers cannot climb higher. Researchers compared workers who were teenagers in states that raised their minimum wage to those in states that did not. A decade later these workers earned slightly less. Higher minimum wages saw off the bottom rung of many workers’ career ladders.

Unsurprisingly, the minimum wage does not reduce poverty. Study after study has examined poverty rates and minimum wages. Raising the minimum wage does nothing-nothing-to reduce the poverty rate. Like putting leeches on an asthmatic, it simply does not work.

Advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired.

When you turn from economic principles to hard facts, the case against minimum wage laws is even stronger. Countries with minimum wage laws almost invariably have higher rates of unemployment than countries without minimum wage laws.

In his post, “Minimum Wage:  Another Example of Good Intentions Gone Wrong,” blogger and columnist James Sherk likens raising the minimum wage to the medieval practice of treating patients with leeches. 

“Their intentions were good,” Sherk writes. “They believed bloodletting removed poisons from the body. Unfortunately, the treatment actually made their patients worse. The same holds true for many modern economic remedies, like the minimum wage.

“People of good will want to help low-income workers earn more. So why not just require employers to pay them more? This would give them more money which, when spent, would boost demand. What’s not to like?

“Unfortunately, it doesn’t work like that. The real minimum wage is $0; employers do not have to hire additional workers. No small business owner will pay $7.25 an hour to a worker whose efforts raise profits by just $5 an hour. At least, no small business owner that wants to stay in business.

“This can hurt these workers for years. The primary value of minimum wage jobs are the on-the-job training they provide. A minimum wage job teaches inexperienced workers valuable skills: the disciplines of going to work each day, taking directions from a supervisor, interacting with customers and co-workers.

“As workers gain these skills they become more productive and earn raises. Two-thirds of minimum wage workers get a raise within one year. Minimum wage positions provide the on-the-job-training and experience necessary to get ahead.

“Raising the minimum wage reduces the availability of entry-level jobs. Until they gain basic employability skills, however, workers cannot climb higher. Researchers compared workers who were teenagers in states that raised their minimum wage to those in states that did not. A decade later these workers earned slightly less. Higher minimum wages saw off the bottom rung of many workers’ career ladders.

“Unsurprisingly, the minimum wage does not reduce poverty. Study after study has examined poverty rates and minimum wages. Raising the minimum wage does nothing—nothing—to reduce the poverty rate. Like putting leeches on an asthmatic, it simply does not work.

“The evidence does not show raising the minimum wage significantly increases poverty rates either. But that is primarily because it directly covers so few workers. If Congress raised the minimum wage to $30 an hour it would cost millions of jobs.

“This effectively happened to American Samoa. When Congress last raised the federal minimum wage, it extended the provision to cover this territory. But American Samoa has a much lower cost of living than the continental U.S. and a much lower wage scale. The new, higher minimum covered virtually all the workers in the islands’ tuna canning industry. The result? Mass layoffs and sharply higher unemployment.

“Unlike bloodletting, raising the minimum wage feels good. But good intentions do not prevent he minimum wage from hurting the workers it is meant to help.”

Combine the leech-like treatment of regularly raising the minimum wage with the ravages of Obamacare, causing many small businesses to lay off workers and reduce hours to part-time (29 hours), you’ve got an economic disaster in a state that’s already seen too many disasters.

We’re the second-highest taxed state in the nation.  We’re one of the worst states in which to do business.  Companies are fleeing New Jersey as if it has the plague.  Blighted cities pock-mark the state.

Even supporters of the minimum wage, both Democrats and Republicans – agree that automatic wage hikes have no place in our constitution.  The constitution is intended to serve the public good.  Yet, this irresponsible political ploy directly affects no more than 2.5 percent of the population of New Jersey.

At risk are job opportunities for the state’s least-skilled workers, as well as the livelihood of small business owners, already struggling to rebuild after the Great Recession and Hurricane Sandy.

Automatic wage increases mean that small business’ labor costs will be forced higher regardless of the state of the economy, leading to a precipitous drop in New Jersey’s already forlorn competitiveness.

This amendment will lead to a significant job loss.  According to a recent economic study, an estimated 31,000 jobs would be lost over the next decade.

Nancy Pelosi opined about how people would be able to “follow their passions” with the end of the 40-hour work week.  Being paid more for fewer hours sounds like the Workers’ Paradise of Communism.  But it’s a fool’s paradise.

On this Halloween, think of the combination of part-time work and minimum wage increase as Dracula’s coffin.  From cradle to grave, you’ll be nailed into that coffin, with our Draculonian government sitting on top of it to make sure you don’t get out, laughing as they count their riches and wipe our blood, sweat and tears from their mouths.

On Nov. 5th, New Jersey, vote NO! on Proposition 2.

 

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Published in: on October 31, 2013 at 8:51 am  Comments (3)  

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3 CommentsLeave a comment

  1. We will pay you $40 for your yes vote.

    Politicians, speaking to a certain faction of voters numbering possibly over 200,000 told them that if they vote yes they will receive and extra $40 cash in their upcoming paychecks for their yes vote….and even promised $40 cash for every working week afterward.

    Sounds like a clear vote fraud to me.

  2. Great article that explains it beautifully. Now if only the masses can see this and understand!

  3. Hmm it appears like your website ate my first comment (it was super long) so I guess
    I’ll just sum it up what I submitted and say, I’m thoroughly enjoying your blog.

    I too am an aspiring blog writer but I’m still new to everything.

    Do you have any recommendations for beginner blog writers?
    I’d definitely appreciate it.


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