Editorial: Higher minimum wage means fewer jobs
Last week, New Jersey Gov. Chris Christie vetoed a bill to hike the state’s minimum wage by nearly 80 percent over five years, from $8.38 per hour to $15 per hour. It was the right move because minimum-wage laws hurt the people they purport to help.
Fight for $15, a national group advocating higher wages, lost in New Jersey. But the “living wage” folks are active in Michigan and have a Detroit chapter, mostly focusing on fast-food jobs in the city.
According to the U.S. Department of Labor’s Bureau of Labor Statistics, employees earning the minimum wage “tend to be young.” Roughly 48 percent of all employees earning the federal minimum wage, $7.25 an hour, are between the ages of 16 and 24.
Instead of benefiting these younger individuals entering the job world, minimum-wage hikes benefit older, more established workers. Mandated higher wagers serve as a barrier to these entry-level positions.
By raising the cost of an employee, forced wage hikes make it more expensive to hire less experienced workers.
Most businesses are not altruistic. A company’s owner does not hire an employee because the employee needs a job. Rather, business owners have specific positions to fill and are best suited to determine the value of that work.
Minimum wages require businesses to pay more for employees than they are “worth” in the marketplace. If the cost of hiring employees increases, business owners will be incentivized to hire only employees with longer employment records and more credentials, discouraging employers from hiring younger individuals with fewer skills and shorter resumes.
Making entry-level work more expensive prevents young people from learning good work habits necessary for advancing their careers, such as punctuality and workplace etiquette.
What’s more, pricing new workers out of the system by increasing the minimum wage disproportionately impacts other disadvantaged groups, such as people of color. Nearly three out of every 10 African-American teens are jobless, according to BLS. White teens are unemployed at about half that rate.
Raising the minimum wage might make a small portion of the workforce happy in the short-term, but few of them will be smiling once businesses are forced to reduce hours or lay off employees to maintain their current costs.
Consider Seattle’s experiment to raise the minimum wage to $15 per hour and the repercussions that have followed. Workers were scheduled for fewer hours and many lost their jobs. When Chicago’s minimum wages for both non-tipped and tipped employees went up this summer, restaurants began to close. Expect similar results in Detroit if the wage is hiked here.
If the lowest-level worker must be paid more because of laws, not economic forces, then everyone else will expect a pay increase as well. Eventually, prices of consumer goods will rise, reducing quality of life back to its current level.
The government should not try to legislate economic growth or force employers to give their employees a better life. There will always be negative consequences tied to such government intervention.