The research is in and it shows conclusively that a higher minimum wage kills jobs for young people and low-skilled workers.
Two economists reviewed more than 100 studies on the effects of the minimum wage and they demonstrate that it causes greater unemployment. They say: “the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries.”
Thus, when the minimum wage increased to $7.25 an hour in July, even more people lost their jobs than would have been the case due to the effects of just the recession. As it stands now, the unemployment rate for teenagers is nearly 26%, the highest it has been since WWII. Worse yet, black male teens have an unemployment rate of over 50%!
Unfortunately, when politicians claim they are going to help people by raising the minimum wage, what they are really going to do is cause the young and the low skilled to lose their jobs.
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"Racism is a doctrine of, by and for brutes. It is a barnyard or stock-farm version of collectivism, appropriate to a mentality that differentiates between various breeds of animals, but not between animals and men." - Ayn Rand.
Yea, I've posted about this in the past. This post is from another forum I post at, with a recent WSJ article.
Quote:
The claim is that minimum wage ostensibly allows for a higher 'living wage', but anyone who has a basic understanding of economics realizes that when you artificially raise the cost it takes to employ without an increase in productivity, the less likely the business owner is to hire more workers.
Minimum wage laws are almost unilaterally supported by Union bosses, because as they usually claim, they're 'for the little guy', but evidence shows the exact opposite. Union bosses love minimum wage laws because it gives Unions a floor to begin their 'collective bargaining' which is how they bring in more members; by paying their members more than they're worth, which increases Union revenues and makes that Union more attractive.
This WSJ article points out a few important things; it provides empirical evidence connecting higher minimum wage hikes invariably lead to more jobs being destroyed. Second, Only 1.1% of full-time (40 hours a week) jobs make the minimum wage, 98.9% of full-time jobs make OVER the minimum wage. 'Progressive' economics/social policy is solely the blame.
I know what you uneducated armchair economists are going to say, 'without minimum wage, we'll be making pennies an hours!'. Everything in this article points to opposite. As pointed out above, and in the article 98.9% of full-time workers make ABOVE the minimum wage. Let's also not forget that--if we use conventional wisdom here--people wouldn't work at a job that paid pennies, they have bills and living expenses, no one in their right mind would work for that wage. An employer has an interest in paying competitive wages because they want to attract good workers, therefore it's in their best interest to pay people a good wage.
Yesterday's September labor market report was lousy by any measure, with 263,000 lost jobs and the jobless rate climbing to 9.8%. But for one group of Americans it was especially awful: the least skilled, especially young workers. Washington will deny the reality, and the media won't make the connection, but one reason for these job losses is the rising minimum wage.
Earlier this year, economist David Neumark of the University of California, Irvine, wrote on these pages that the 70-cent-an-hour increase in the minimum wage would cost some 300,000 jobs. Sure enough, the mandated increase to $7.25 took effect in July, and right on cue the August and September jobless numbers confirm the rapid disappearance of jobs for teenagers.
The September teen unemployment rate hit 25.9%, the highest rate since World War II and up from 23.8% in July. Some 330,000 teen jobs have vanished in two months. Hardest hit of all: black male teens, whose unemployment rate shot up to a catastrophic 50.4%. It was merely a terrible 39.2% in July.
The biggest explanation is of course the bad economy. But it's precisely when the economy is down and businesses are slashing costs that raising the minimum wage is so destructive to job creation. Congress began raising the minimum wage from $5.15 an hour in July 2007, and there are now 691,000 fewer teens working.
As the minimum wage has risen, the gap between the overall unemployment rate and the teen rate has widened, as it did again last month. (See nearby chart.) The current Congress has spent billions of dollars—including $1.5 billion in the stimulus bill—on summer youth employment programs and job training. Yet the jobless numbers suggest that the minimum wage destroyed far more jobs than the government programs helped to create.
Congress and the Obama Administration simply ignore the economic consensus that has long linked higher minimum wages with higher unemployment. Two years ago Mr. Neumark and William Wascher, a Federal Reserve economist, reviewed more than 100 academic studies on the impact of the minimum wage. They found "overwhelming" evidence that the least skilled and the young suffer a loss of employment when the minimum wage is increased. Whatever happened to President Obama's pledge to follow the science? Democrats prefer to cite a few outlier studies known to be methodologically flawed.
State lawmakers are also at fault. At least 10 states have raised their minimum wages above the federal level in the last decade, largely in response to union lobbying and in the name of helping the working poor. Four states with among the highest wage rates are California, Massachusetts, Michigan and New York. Studies have shown in each case that their wage policies killed jobs for teens. The Massachusetts teen employment rate sank by one-third when the minimum wage rose by 88% between 1995 and 2008.
According to new numbers from the Labor Department, in 2008 only 1.1% of Americans who work 40 hours a week or more even earned the minimum wage. In other words, 98.9% of 40-hour-a-week workers earn more than the minimum. The data also show that teenagers are five times more likely to earn the minimum wage than adults. Minimum wage jobs are nearly all first-time or part-time jobs, and an estimated two of every three minimum wage workers get a pay raise within a year on the job.
Study after study reveals that there are long-term career benefits to working as a teenager and that these benefits go well beyond the pay that these youths receive. A study by researchers at Stanford found that those who do not work as teenagers have lower long-term wages and employability even after 10 years. A high-wage society can only come by making workers more productive, and by destroying starter jobs the minimum wage may reduce long-term earnings.
Another recent study across 17 OECD nations, also by Messrs. Neumark and Wascher, found a highly negative association between higher minimum wages and youth employment rates. But it also concluded that having a starter wage, well below the minimum, counteracts much of this negative jobs impact. If Congress won't suspend its recent minimum wage hike, it should at least create a teenage wage of $4 or $5 an hour to help put hundreds of thousands of teens back to work. White House chief economic adviser Larry Summers has endorsed this in the past. Without this change, expect the teen unemployment to remain very high for a long time.
The wonder of it all is that liberals still call "progressive" a policy that has driven the wages of hundreds of thousands of the lowest skilled workers down to $0.00.
And here's my post I made the other month;
Quote:
Originally Posted by Furious Ge0rge
Why do people need the minimum wage? In other countries they just bargain for their wages. Minimum wage, much like most other charitable efforts of Gov't don't actually do what they're intended to do.
I can dig up more if you want, but the only real beneficiaries of minimum wage are labor unions (It isn't a coincidence that Labor Unions are commonly the biggest supporters of minimum wage reform). Labor unions maintain membership by providing the promise of higher wages. They maintain their higher-than-market wages by fixing the supply of workers available within a market. Simple economics, demand for work, low supply of workers, means you get paid. Union bosses already acknowledge this, minimum wage gives a baseboard for which they can get higher wages through collective bargaining. Like I said, it's no coincidence that Unions are usually rallying for minimum wage reform/raises, despite the fact they don't get paid minimum wage, minimum wage merely serves as the floor for where they can begin their beloved strategy of 'collective bargaining (*****ing)'.
Hong Kong has no minimum wage, but it is one of the most prosperous economies in the world. It is possibly the best example of free market capitalism in the world, is relatively free of regulation, and is ranked highest as the most free economy in the world. It has an unemployment rate of 4%, which is continually declining, and has a fairly large economy. Surely, in such a complex place, they'd suffer by not having a minimum wage, especially with a saturation of people per mile comparable to NJ, right?
It's sad how a policy that is supposed to benefit those that need jobs the most, is actually just a tool for unions to strengthen their numbers through market manipulation, and politicians to get more votes. Meanwhile the poorest workers are still suffering, and unable to find jobs because the Unions are fixing the labor markets to their advantage. Such is the way of Washington, a seemingly selfless and truly charitable purpose is scooped up by some entity and exploited purely for self-serving their own agenda, meanwhile the guy it was meant to help is arguably worse off. Shame on Unions (and the Democratic politicians that continue to push this lie).
Had to post this again since people keep perpetuating the same myths.
More--The context might be screwey because they were replies, but you get the point;
Quote:
Originally Posted by Furious Ge0rge
It's still a false dichotomy.
Basic logical reasoning skills (and the law of demand) rightly dictate that forcing business owners to pay low-skilled workers more than the market wage will decrease the numbers of workers hired, as long as productivity doesn't change in those workers (which it doesn't in low-skilled workers).
If there was no minimum wage, people wouldn't work if the wages were astronomically low, like $3 an hour. No one would work for that little. As I stated in my post above, Hong Kong, the worlds best example of free market capitalism, has no minimum wage, and is doing just fine. Workers bargain for their wages.
Who needs reading when we can just employ all the logical fallacies in the world? Care to debate the rest of my post where I correctly assert that minimum wage hikes have one beneficiary--Labor Unions. Seems CrazyLittle is avoiding touching my post, and seems you're repeating his folly, are these concepts that hard to realize?
Oh, and this has been going on for some years before the economic circumstances we're going through now. I'd list all the articles here, but there's so many. Google keyword: minimum wage job cuts [insert year before economic recession here]
-Just 5.3% minimum-wage workers come from families below the poverty line
-2.2 million, or just under 3$ of the 72.7 million workers who are hourly wage workers earned minimum wage (and 5.3% of them live below the poverty line, just over 115,000 out of 72.7 million workers)
-Vast majority of those earning minimum wage have two jobs, or are a dependent and are not the sole provider in a household
Quote:
Originally Posted by Furious Ge0rge
Here's another good article from our friend David Neumark from the University of California;
That's good news, the business leaders -- which drive most of the economic direction in Hong Kong, whereas the Government stays out (for the most part) -- don't like it, so it probably won't pass.
Good news to hear.
Also, I dug up a more conclusive study done by Neumark which concludes that as minimum wage increases, for every 10% it raises, teenage unemployment rises 1-2%.
from what I've the standard quantity theory for price floors doesn't actually produce any meaningful model of the real world and the effects of minimum wage on employment.
if there is a natural rate of unemployment the US has been operating above or around it for some time.
__________________ Abraham Lincoln- With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan — to do all which may achieve and cherish a just, and a lasting peace, among ourselves, and with all nations.
from what I've the standard quantity theory for price floors doesn't actually produce any meaningful model of the real world and the effects of minimum wage on employment.
if there is a natural rate of unemployment the US has been operating above or around it for some time.
And now we're clearly above it, so the minimum wage is killing jobs, just when people need them the most.
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A is A. It is what it is.
"Racism is a doctrine of, by and for brutes. It is a barnyard or stock-farm version of collectivism, appropriate to a mentality that differentiates between various breeds of animals, but not between animals and men." - Ayn Rand.
And now we're clearly above it, so the minimum wage is killing jobs, just when people need them the most.
Many countries are clearly above it, even those without a minimum wage.
Considering most employers will pay economic rent exceeding minim wage to retain good workers it seems a bit odd to suggest that minimum wage I'd the root cause of high unemployment.
Wages are sticky, as it is, and people are hard pressed to take nominal parky cuts because of the psychological effects. Unemployment went higher during the great depression and I don't believe there was any minimum wage.
__________________ Abraham Lincoln- With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan — to do all which may achieve and cherish a just, and a lasting peace, among ourselves, and with all nations.
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There is no need to suppose that human beings differ very much one from another: but it is true that the ones who come out on top are the ones who have been trained in the hardest school. - Thucydides
WE SHALL RAISE THE RATE OF WAGES WHICH, HOWEVER, WILL NOT BRING ANY ADVANTAGE TO THE WORKERS, FOR, AT THE SAME TIME, WE SHALL PRODUCE A RISE IN PRICES OF THE FIRST NECESSARIES OF LIFE, ALLEGING THAT IT ARISES FROM THE DECLINE OF AGRICULTURE AND CATTLE-BREEDING
i only read the OP but this is another thing that was left out (im in a rush so i dont feel like siting it) but higher minimum wage raises the cost of living so it creates a vicious circle of needing to raise the minimum, and catch up with raising cost of products that raise the cost of living.
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my econ teacher just went over this like 2 weeks ago. Really interesting stuff.
He showed us the theory related to it but i would still like to see some sold numbers as to what the floor/ceiling is. i just glanced at what you posted but ill look again after my classes today.
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Unemployment went higher during the great depression and I don't believe there was any minimum wage.
According to the OP's article, unemployment would have been higher than it was historically if there had been a minimum wage in place during the Great Depression. If I read it correctly, it's asserting that minimum wage exacerbates unemployment but doesn't cause it outright.
while there is no doubt that the minimum wage is especially bad for small businesses, especially the private business owners. I don't believe unemployment from this would be astronomically high as some seem to imply. The businesses that it would effect the most are the ones already with a few workers on the payroll. There is no doubt about this
$5.20 * 40hrs/week * 50 weeks = $10400 paid for each employee. If a store has just 2, thats $22800 for your two workers, but with a raise to $7.25, that goes to $14500 for each one, or $29000 for your two workers.
But look at many places that hire teenagers, which is a major part of the OP's argument. The typical place is a large deptartment style store or a fast food joint, with serious pockets from which to draw from. If I had my way, if a company had over a certain amount of profits, they would have to follow the wage hike, but for smaller businesses, they wouldn't.
Sure it doesn't seem fair to the real successful businesses with large pockets, but there's no doubt that they can easily take having to pay out wages, especially if they are so successful that they keep bringing in record profits year after year.
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i only read the OP but this is another thing that was left out (im in a rush so i dont feel like siting it) but higher minimum wage raises the cost of living so it creates a vicious circle of needing to raise the minimum, and catch up with raising cost of products that raise the cost of living.
you know it's an interesting theory - that nominal minimum wage increases will have no real effect on purchasing power. However, there is a logically incoherent argument because Squmquat is probably someone who would argue the Phillips curve doesn't exist (i.e. that higher unemployment leads to lower inflation and higher inflation leads to lower unemployment).
My argument is thus - that buyers in the market of labor are price setters. There is asymmetric information in the labor market. Buyers of labor (firms) have more information on wages than sellers (people). Thus they have leverage. Without a minimum wage you would have a sub-market clearing wage price that maximizes firm profit but will not clear the market. Therefore a union and minimum wage work to increase information and negate the market power of large buyers of labor.
However, if there was perfect information, simple game theory negates the minimum wage either way, as most workers will get paid above minimum wage in terms of economic rent which, for most professions, it does.
Quote:
Originally Posted by Danegerous
my econ teacher just went over this like 2 weeks ago. Really interesting stuff.
He showed us the theory related to it but i would still like to see some sold numbers as to what the floor/ceiling is. i just glanced at what you posted but ill look again after my classes today.
As I said before, there is empirical evidence that employment doesn't follow the traditional supply/demand equilibrium model.
__________________ Abraham Lincoln- With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan — to do all which may achieve and cherish a just, and a lasting peace, among ourselves, and with all nations.
i only read the OP but this is another thing that was left out (im in a rush so i dont feel like siting it) but higher minimum wage raises the cost of living so it creates a vicious circle of needing to raise the minimum, and catch up with raising cost of products that raise the cost of living.
WE SHALL RAISE THE RATE OF WAGES WHICH, HOWEVER, WILL NOT BRING ANY ADVANTAGE TO THE WORKERS, FOR, AT THE SAME TIME, WE SHALL PRODUCE A RISE IN PRICES OF THE FIRST NECESSARIES OF LIFE, ALLEGING THAT IT ARISES FROM THE DECLINE OF AGRICULTURE AND CATTLE-BREEDING
you are seriously quoting the protocols of the elders of zion. Why should anyone respond?
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you know it's an interesting theory - that nominal minimum wage increases will have no real effect on purchasing power. However, there is a logically incoherent argument because Squmquat is probably someone who would argue the Phillips curve doesn't exist (i.e. that higher unemployment leads to lower inflation and higher inflation leads to lower unemployment).
My argument is thus - that buyers in the market of labor are price setters. There is asymmetric information in the labor market. Buyers of labor (firms) have more information on wages than sellers (people). Thus they have leverage. Without a minimum wage you would have a sub-market clearing wage price that maximizes firm profit but will not clear the market. Therefore a union and minimum wage work to increase information and negate the market power of large buyers of labor.
However, if there was perfect information, simple game theory negates the minimum wage either way, as most workers will get paid above minimum wage in terms of economic rent which, for most professions, it does.
As I said before, there is empirical evidence that employment doesn't follow the traditional supply/demand equilibrium model.
We had a nice little discussion on this like 2 months ago. If you haven't already read it, i'd recommend General Theory of Employment, Interest and Money; its real interesting.
We had a nice little discussion on this like 2 months ago. If you haven't already read it, i'd recommend General Theory of Employment, Interest and Money; its real interesting.
I need to. I've read interspersed parts of it but I am so busy at work with 1 million different things and other reading.
BTW: for the inquiring mind - Great read, if you have the time and enjoy financial markets - Benoit Mandelbrot, The (Mis)Behavior of Markets: A Fractal View of Financial Turbulence.
Really enjoyed it. reading up on his working paper on the Multifractal Model of Asset Returns.
I'm not an applied math guy though. Wish I was better at it.
__________________ Abraham Lincoln- With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan — to do all which may achieve and cherish a just, and a lasting peace, among ourselves, and with all nations.
