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How does a minimum wage requirement impact an economy?

Dinesh D

If a minimum wage is set reasonably low it can be alright. It provides what could be described as a standard of comparison. The problem is that if you raise the minimum wage high enough, corporations may decide that it’s cheaper not to employ people or to employ fewer people, which means that it becomes difficult for new people to find a job. Certainly, you have younger people, for example, college students, who don’t have as much experience or knowledge and therefore have to price themselves lower in the market in order to be find employment. And so a minimum wage, in some ways helps the guys who are already employed, but hurts the guys who are looking for a job.

Author, Commentator and President of The King's College, Dinesh D'Souza

Ben Shapiro

A minimum wage requirement always impacts an economy horrifically. A minimum wage doesn’t work and always increases unemployment. It's just basic common sense that the minute you tell people that they have to pay more for labor, they're going to buy fewer units. If the price is raised on gasoline, people tend to buy less gasoline, if the price is raised on cereal, less cereal will be sold and if the price of labor is raised, people tend to buy less labor.

Syndicated columnist and author, Ben Shapiro

Grover Norquist

A minimum wage is a law that makes it illegal for two people to agree on a labor contract the government disapproves of. It violates the rights of the worker and the employer. Both would voluntarily sign a mutually beneficial contract but the government gets in the way.

Minimum wages were used in South Africa to keep less well trained black workers from competing with white labor in the mines. It plays the same role in keeping young and untrained teenagers out of the workplace in the United States.

President of Americans For Tax Reform, Grover Norquist

Peter Schiff

A minimum wage law hurts the poorest and least skilled the most because its deprives them of employment opportunities. If a young person, for example, doesn't have any skills to justify being paid the minimum wage rate, he or she will have a difficult time landing a first job. And when it is more difficult to find a first job it will be more difficult to find a second, third or fourth job, which traps a person in poverty.

Decades ago, young people were employed as pump jockeys by gas stations to pump gasoline, wash windows and check the air pressure of tires. Between performing these services for customers they would help mechanics to repair and service vehicles so that after a few years, those unskilled pump jockeys would be trained auto-mechanics without their ever needing to attend or pay for school. These skills were then used as a springboard to open new gas stations or body shops from which they would employ others.

A minimum wage law also hurts a society because it results in capable, able-bodied people sitting idle rather than working. The effect of the squandering of these labor resources can be seen, for example, in movie theaters. Because employing a person at a minimum wage rate to operate a concession stand cash register costs so much, fewer people can be employed which results in longer lines and higher prices to cover their wages. In fact, a vast number of jobs and conveniences no longer exist precisely because of minimum wage laws, ranging from hotel porters to gasoline pump attendants to movie theater ushers.

Economist, investment advisor, author and commentator, Peter Schiff

Star Parker

A minimum wage requirement increases unemployment because it simply means that people whose employment value isn’t worth the minimum wage won’t be employed. If a certain job isn’t worth the going minimum wage rate, then an established business simply won’t hire somebody to work. Unfortunately, those who most need low paying, low skilled jobs and are able and willing to work for less than the minimum wage - the young, uneducated and poor - are those who suffer the most.

The unemployment rate for those aged 16 to 21 years, especially in the African American community, is extremely high and when these young men who won’t go to school and hang out on street corners, are not able to walk into an established business and earn a decent wage and learn valuable skills which they were never taught in their broken homes, it increases their chances not only of a future of poverty, but a future in prison.

President of the Center for Urban Renewal and Education, Star Parker

Carrie Lukas

Minimum wage laws make hiring workers more expensive and price some workers out of employment. People misunderstand the labor market, worry about those who aren't making a living wage and therefore support high minimum wages. But overwhelmingly, those working for minimum wage are teenagers and those just entering the workforce. These first jobs may be low-paying, but they are critical for skill building. Raising the minimum wage makes it less likely that companies are going to hire those who really need that critical first job -- which is one of the reasons our teen unemployment rate is so high today. It's far worse to have no job than to have one that pays relatively little. The inability to get a first job and have that skill building experience will be a drag on the economy for years to come.

Independent Women's Forum director and Goldwater Institute senior fellow, Carrie Lukas

Tim Robinson

The standard economic treatment of this issue has it that minimum wages cause unemployment of low-skill workers. The argument is that if employers can’t get more from a worker than the minimum wage they’re required by the state to pay, then they won’t employ them. Strange then that virtually all developed nations have a minimum wage. An alternative to the standard economic view is that if there is a tendency for minimum wages to cause unemployment amongst the unskilled, then this provides a powerful incentive for them to seek to raise their skills through education (which is often facilitated by the state). Looked at from this perspective, minimum wages do not cause a rise in the unemployment rate. What is more, they have the advantage that they raise the skill levels and the earning capacity of previously unskilled workers. It has also been argued that minimum wages call forth more individuals to join the workforce and thus result in higher levels of national output.

Professor & Head of QUT's School of Economics and Finance, Tim Robinson

Mike Connolly

Minimum wage laws are good politics, but lousy economics. Forcing companies to raise the wages for workers at the bottom rung of the economic ladder only encourages them to cut the number of jobs for those workers. If a company employs three people at $4 per hour, and the government increases the minimum wage to $6 per hour, the employer will simply cut the number of jobs from three to two. That might make life better for two of the three, but it makes the third unemployed, and now an economic drain on society rather than an economic contributor to it.

In the absence of a minimum wage, young and unskilled workers have an incentive to educate themselves, work hard, improve their skills, and increase their value to their employers. An artificially high minimum wage discourages all of the above.

Communications Director, Club For Growth, Mike Connolly

Tad DeHaven

Anything that artificially raises the cost of hiring somebody helps foster unemployment, particularly amongst those with the least amount of skill, the more expendable. That's just Economics 101. If you raise the cost of labor , you've raised the cost of doing business, so businesses are going to hire fewer employees. Let's say you have a business which would be willing to hire an additional person at $6 per hour and there's somebody out there who's unemployed who would be happy to have that $6, because of the price control, that guy isn't getting a job and that job is not being offered. People are going to hire less and when they do hire they're going to take the best they can take for the money. They'll look at education, experience and things of that nature, and that tends to hurt the less educated, minorities, young folks.

Writer and Cato Institute Budget Analyst, Tad DeHaven

Steven Malanga

The impact that a minimum wage requirement has on an economy depends on how high it is set, but in general, while a minimum wage requirement might raise the wages of certain unskilled workers, because these requirements don’t come with any additional revenues for the businesses paying them, they also tend to destroy some jobs at the lower end of the economic spectrum.

While this negative relationship between a minimum wage requirement and employment is clearly established at both the federal and state level, a number of economists argue that the impact on wages is more important than the impact on jobs. So the debate is really over the trade off - whether it’s better to have fewer people employed at a higher rate or more people employed at a lower rate.

Contributing editor of City Journal and Manhattan Institute senior fellow, Steven Malanga

Pete Sepp

It costs jobs. Particularly for part time workers, or interns, the minimum wage reduces flexibility for businesses to hire. For further elaboration, see NTU's documents, Minimum Wage Hurts and
Open Letter to the Governor on the Effect of Minimum Wage Increase.

Vice President of the National Taxpayers Union, Pete Sepp

William Niskanen

For people who keep their jobs, they have higher wages, but they typically end up with lower benefits because the employers try to economize on having been required to pay higher wages by cutting the non-wage compensation of the people who stay employed. For the people who either can't stay employed or are not employed with a higher minimum wage - those are usually lower-level workers or new workers, new people in the labor force - in their case the unemployment rate is up. I can't find anything good to say about the higher minimum wage. It's an illusion to believe that we can significantly raise average wages by putting a minimum on them. But that's been the rational behind the minimum wage raise for a long period of time and it's just wrong.

Cato Institute Chairman Emeritus and Senior Economist, William Niskanen

Timothy Johnson

If it's fair and equitable, that's fine, but I think we still have to be very cognizant that from a small business perspective, if every time I hire an employee, I have to pay this amount of wages it can be a Catch 22. I want to be an entrepreneur and I want to employ people, but if you're telling me that I have to pay $10 an hour in order for that person to work for me and be above board by paying my taxes and the rest of the mandates which are imposed on a business owner, it can be a stranglehold on businesses and business owners. All they are trying to do is operate fairly and make a contribution to society and in the long run if I can't hire anybody at that price, then the minimum wage doesn't mean much.

Entrepreneur and Chairman of The Frederick Douglass Foundation, Timothy Johnson

Ira Stoll

As an undergraduate taking economics I learned that raising the minimum wage led to increased unemployment. However, David Card and Alan Krueger have done work showing that the minimum wage increase in the 1990s had no disemployment effects. Bruce Caldwell has a really excellent discussion of this issue on pages 385 top 386 of his book Hayek’s Challenge, which I recommend.

Editor of FutureOfCapitalism.com and author of "Samuel Adams: A Life", Ira Stoll

David Ranson

It creates unemployment among those whose labor has sub-minimum market value.

President of H. C. Wainwright and Company, Economics, David Ranson

 

The minimum wage is a useful way of assuring that prosperity is more widely shared. There are no reputable studies proving that the minimum wage harms either employment or economic growth.

Author, commentator and lead Bloomberg View columnist, Jonathan Alter

Steve Deace

How can a government know what the minimum wage should be? Can anyone even support a family on the minimum wage?

Here is the reality: real wages in this country have declined in relation to the rate of inflation/debt
since these sorts of government schemes to contrive equality began. Our wages nowadays do not have the buying power in a consumer-driven economy they once had, which is one of the reasons we carry so much debt. Just
about every major purchase a family makes these days is made on credit. These schemes are actually harming the very people they purport to help, because they're operating outside the natural laws of economics.

Talk radio host and author, Steve Deace

Rabbi Aryeh Spero

In itself a minimum wage is not bad, however, it often ends up depriving teenagers of jobs and makes it too difficult for small, family businesses to hire young people. It can get in the way of that necessary first job experience.

Columnist and commentator, Rabbi Aryeh Spero