Minimum wage harms the economy

In the Sept. 14 issue of The Hatchet, an op-ed entitled “Fighting so that no one is left behind” was published. The piece’s author calls on students to support a proposed increase in the minimum wage from $5.15 an hour to $5.65 an hour. While increasing the minimum wage often is politically popular, it is one of the most economically unsound and morally backward ideas to come out of Washington. Often thought to increase the income of the poor, the true effect of the minimum wage is not to raise income, but to destroy jobs.

While the author correctly cites the fact that overall employment has risen since the 1996-’97 minimum wage increases, this statistic is misleading. In looking at the impact of the minimum wage, we must look specifically at those people it affects, not simply at the economy as a whole. It is common to track teenage employment, as most teenagers are low-skilled workers employed at or near the minimum wage. A study by the Employment Policies Institute found that as a direct result of the 1996 minimum wage increase, 215,000 teenage jobs (3.5 percent) were destroyed. It can be assumed that this level of job loss is roughly representative of the trend among all low-skilled workers. Though it is too early to analyze the effects of the 1997 minimum wage increase, it undoubtedly has had a similar impact.

With the economics of raising the minimum wage long established, it is pure economic ignorance to assert such an increase will not harm the employment of low-skilled workers. While economists rarely agree on anything, 77 percent of the 22,000 members of the American Economics Association believe a higher minimum wage reduces employment. That is because it is a basic case of supply and demand: If you raise the price of a good (labor), demand for that good will decrease (employers will hire fewer workers).

Instead of helping the poor, the minimum wage cuts off the bottom rung of the economic ladder. By forbidding low-skilled workers whose labor is worth less than $5.65 an hour from selling their labor at market value, the minimum wage condemns these workers to unemployment. They either have to wait for inflation to devalue the current minimum wage, or they have to gain the skills necessary to be worth $5.65 an hour to an employer. Unfortunately, these skills usually are obtained by doing the job. Thus, the minimum wage leaves low-skilled workers waiting for inflation to give them the chance to work.

Raising the minimum wage does nothing to help the poor. In fact, out of a workforce of about 120 million Americans, just 22,000 men and 191,00 women support families on minimum wage incomes. A full two-thirds of minimum wage earners work part time and 37 percent are teenagers, most of whom live at home.

Yet, the idea is a perennial favorite among politicians. Why? Because it is easy. It requires no taxes or government spending and its costs are invisible to all but the economists. Labor unions love it because it stifles competition from cheaper, low-skilled workers. The public loves it because it looks compassionate.

Unfortunately, nothing could be less compassionate. By interfering in the individual’s right to sell his own labor at whatever price he sees fit, the government prevents low-skilled workers from obtaining entry-level jobs. In the name of social justice, we cut the poor off at the knees and congratulate ourselves for “doing something.”

We should not only refuse to raise the minimum wage, but repeal it altogether. We would be allowing the least skilled workers to get hold of that elusive lowest rung, enabling them to pull themselves out of poverty.

-The writer is vice president of GW College Libertarians.

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