- General post (802)
- April 3, 2008: Armchair Economist gets a much-needed update
- April 3, 2008: Ghost of Herbert Hoover
- April 3, 2008: Are you smarter than a high-schooler?
- April 3, 2008: Katrina hero: Wal-Mart
- April 2, 2008: No Child Left Behind
- April 2, 2008: The poverty hype
- April 2, 2008: Oil profits
- April 2, 2008: Don's response
- April 2, 2008: Oil refinements
- April 1, 2008: My profile
Minimum wage and unemployment
There, government officials and labor experts alike have been scratching their heads over the precipitous 33% drop in teen employment over the past eight years.
“The collapse of the teen labor market has affected all demographic and socioeconomic groups,” noted labor economists Andrew Sum and Don Gillis in a Boston Globe op-ed last week.
Sounds serious, and it is.
Sum and Gillis say Massachusetts’ teen-job woes can be ended by more spending and bigger government. Following are a few of the “strategies” they say would do the trick:
• Passing Sen. Edward Kennedy’s $1.5 billion youth employment program.
• Creating more “One-Stop Career Centers” in Massachusetts.
• Subsidizing funds to create jobs for teens in the private sector.
• Funding “School to Career Connecting Activities” programs “that support local work force boards to develop year-round and summer intern jobs for high school teens.”
With big-government thinking like this, it’s no wonder Massachusetts has a teen unemployment problem.
We have a better idea. One that will cost neither Massachusetts nor the U.S. a penny: cut the Bay State’s minimum wage, now at $8 an hour and the highest in the nation. Better yet, abolish it entirely.
Read it all here.
March 17, 2008 at 8:47 pm
Actually, Washington State has the nation’s highest minimum wage, at $8.07/hour in 2008, though in real dollar terms it is still lower than it was in 1968.
It’s interesting to note that since Washington’s minimum wage law was passed by initiative (approved by a majority of voters in every county in the state), it hasn’t done much to hurt Washington economically. In fact, the New York Times noted last year it’s actually improved it:
—
We’re paying the highest wage we’ve ever had to pay, and our business is still up more than 11 percent over last year,” said Tom Singleton, who manages a Papa Murphy’s takeout pizza store here, with 13 employees.
New workers make the Washington minimum, $7.93 an hour, but veteran employees make more. To compensate for the required annual increase in the minimum wage, Mr. Fazzari said he raises prices slightly. But he said most customers barely notice.
“He sells more pizza, he said, because he has a better product, and because his customers are loyal.
“We used to have a coupon, $3 off on any family-size pizza, and we changed that to $2 off,” said Mr. Singleton. “I haven’t heard a single complaint.”
(http://www.nytimes.com/2007/01/11/us/11minimum.html)
—
Washington’s job growth is far out-pacing the national average. Over the last year, jobs in Washington increased more than three times faster than in the nation as a whole. Jobs rose in both retail and restaurants, the two largest employers of minimum wage workers.
Not exactly a job-killer, anyway.
Even more interesting to note that even with the passage of I-688, Washington’s minimum wage initiative, minimum wage has not kept pace with inflation.
A 2004 study by Marilyn Watkins of the Economic Opportunity Institute (http://www.eoionline.org) noted that in 1968 Washington’s minimum wage was $1.80/hour. In 2004 when Washington State’s minimum wage was $7.16, if it had kept pace with inflation since 1968, it should have been $8.40. Based on the inflation increase between 2004 and 2008, Washington State’s 2008 minimum wage would have to be $9.47 instead of $8.07 if we had kept pace with the minimum wage in 1968.
March 18, 2008 at 5:29 pm
As for job growth increasing in Washington, most economists reply that this is entirely possible, even with increasing minimum wages. Why? Because those making the minimum wage only account for around 2% of wage earners. Furthermore, a minimum wage that is not much above the equilibrium wage will not significantly increase unemployment for those earning the minimum wage.
The important question to ask is: How has this minimum wage (assuming it is much above the market-clearing wage) increased unemployment for the least-skilled, least-experienced workers who only account for less than 2% of wage earners? I suspect, if indeed the minimum wage in Washington is much above the market-clearing wage, many of these lesser-skilled people are out of a job as a result.
If you can, find the employment data for minimum-wage earners in Washington and plot them against the increases in the minimum wage. If the unemployment rates are increasing for these people, maybe it’s a result of wages being set above the market-clearing wage.
If one truely believes a minimum wage does not adversely impact unemployment for the least-skilled workers, why not advacate a significant increase in the minimum wage, say $100 or $200 per hour? When things are put in less marginal terms, such as above, the logic behind minimum wage increases creating unemployment is a little clearer.