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Unintended but inevitable outcome

Annual increases in the federal minimum wage may have cost 550,000 part-time jobs in 2008 and 2009, a Ball State University economist estimates in a report released Monday.

Michael J. Hicks, director of the university's Center for Business and Economic Research, notes the terrible collision of a rising minimum wage and a declining economy: "until 2008, the United States had gone for two generations with the minimum wage largely trailing the hourly compensation of unskilled-entry level workers. By the summer of 2009, the increases in the minimum wage pushed ahead of that which many employers were willing to pay for unskilled workers. As a consequence, the number of part-time workers declined by more than a half million, with teenagers comprising two-thirds of these workers."

Hicks recommends the introduction of a lower "student minimum wage," which would help teens gain employment experience and earn some money, which would be better than nothing.

(Tip to Jon Sanders at The Locker Room.)

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Posted by Doug Clark on Tuesday, February 9, 2010 at 2:19 pm

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jonfire

February 9, 2010 - 9:52 pm EST

Your title is at least half right, the inevitable part, The folks who passed the Minimum Wage increase may say that the loss of jobs was unintended, but they would be lying. That job losses will occur is an economic fact (as pointed out in the Jon Sanders article you noted) that is almost universally accepted by economists. The politicians who always support this type of policy are either genuine fools, or pathological liars. The minimum wage argument is one in the long list of of "appealing" sounding socialistic principles that simply don't make economic sense. Excuse me, I mispoke above. Probably not all those in favor of the MW increase were lying. The ones that weren't were the genuine fools. Most have a D behind their name.

Doug

February 10, 2010 - 8:15 am EST

I'll concede it's not easy to discern the intent of lawmakers who put forward any sort of policy proposal, but asserting that the engineers of higher minimum wages really want to increase unemployment strikes me as a bit of a stretch. Should they know this will be the result? Hard to say based on the history. The author of the Ball State report says that, previous to the current economic downturn, minimum wage hikes really didn't have much impact on employment because so few workers were actually earning the minimum wage. Entry-level pay scales were higher already. During this recession, however, employers couldn't afford to pay the higher rates.

Doug Johnson

February 10, 2010 - 4:02 am EST

Why would they not expect it?
It happens ever time!
Most everyone in America is watching her spending, now if we could get the federal government, and the Raleigh Mafia , to do the same!

jonfire

February 10, 2010 - 10:54 am EST

I didn't mean that supporters of minimum wage increases necessarily intended for unemployment to rise as a result, but that most all past data points to the fact that as minimum wage goes up entry level unemployment rises also.
Minimum wage has almost no effect on the rest of the economy, as employers have to pay "market value" for skilled and knowledgable employees. After initial employment, job performance and competence are the greatest determining factors in compensation levels.
The enacting of such legislation is predicated on the political gambit of "Look what I did for you". I stand by my comment that if the supporters actually think that they are helping they are liars, stupid, or both. They have chosen to bank on the ignorance of their voter base. Minimum wage is the darling of the left, a platitude spouted in election years, but basically nothing but fluff. At this point in time the greatest force in driving down wages in this country is the exporting of our manufacturing base to SE Asia, and the importing of cheap labor from Mexico etal.

Doug

February 10, 2010 - 11:04 am EST

Some people are helped by an increase in the minimum wage. Some of those who are hurt by it may not understand why they can't get a job.

tonymo

February 10, 2010 - 11:16 am EST

Yeah, the one who voted for Obama. Don't worry, they'll all soon be government employees where aveage pay is 75% higher than the private sector, and where you can watch porn all day on your (our) computer and not be fired!