The argument for a higher minimum wage is simple enough: The current minimum is not a “living wage,” it isn’t sufficient to support a family, inequality is a problem and social justice demands that we do something about it.

Raising the minimum is a popular solution because it appears to have no cost except to companies such as McDonald’s, which many social activists think make too much money anyway.

But some costs aren’t immediately obvious. Imposing higher labor costs on businesses while paying little attention to unintended consequences is another example of the attempt to achieve social goals by imposing layers of regulation on the private economy.

Europe has been at this for years with predictable results. The countries in Europe with the highest minimum wages also have the highest unemployment and the lowest rates of growth. A variety of factors affect economic growth, but the level of labor market regulation is one of the most important.

Good intentions aren’t sufficient for good policy, which depends as much on appropriate means as it does desirable ends. Raising the incomes of low-wage workers may be a desirable goal, but the minimum wage is an inefficient and harmful way to achieve it.

The policy is inefficient and poorly targeted because most minimum-wage workers live in families with incomes well above the poverty level. The single parent who is raising children on the minimum wage exists, but is a rarity. Nonetheless, businesses large and small have to pay the same minimum to every worker, including teenagers in affluent families.


Some recent research has concluded that job losses associated with higher minimum wages are small. If this is true, it may be largely because employers try to make other adjustments — higher prices, smaller wage increases for other employees, reductions in non-labor costs, reduced hours, etc. — to offset higher labor costs before they lay off workers.

These adjustments may reduce the number of job losses, but the greatest harm the minimum wage does is to block a lot of individuals from getting a job to begin with. These individuals are mostly young, often are poorly educated and have little experience and few skills.

Labor Department data tell this depressing story with incontrovertible clarity. The latest overall unemployment rate is 5.4 percent, but the rate for white teenagers is 15.7 percent, and for young black Americans, it is 25 percent.

There are other reasons why these individuals might be unemployed, but labor statistics show a distinct correlation between higher minimum wages and youth unemployment. These young people generally don’t show up at City Council meetings to confess that their contribution as employees may not be worth a higher minimum wage. They are the forgotten.

There used to be the idea in America that if you started on the bottom rung, with hard work and experience you could climb the ladder to a higher income and economic success. This vision is no longer realistic for many young people because the minimum wage has put the bottom rung beyond their reach.

Minimum-wage advocates should explain to individuals who would be willing to work for $6 or $7 an hour why they have to remain unemployed because their contribution isn’t worth $9 or more an hour.


It does no good to raise the incomes of relatively few workers if doing so creates an underclass of unemployed individuals whose experience and skills don’t justify a minimum wage. Advocates have no answer for this risk, and most don’t seem to realize the problem exists.

If raising the incomes of low-wage workers is a desirable public goal, then we should craft a policy targeted to those who need help, paid for by the public. Unfortunately, if the price of doing so were higher taxes, the enthusiasm for the goal would likely diminish significantly.

Instead, we impose higher costs on businesses large and small; those that are profitable and those barely making it; those that can adjust in some way to higher costs and those that, because of size or competitive conditions, have few options beyond shedding workers or going out of business.

If we were serious about creating jobs and generating economic growth, we would abolish the minimum wage and replace it with a minimum income policy. The alternative is to continue to ignore the harm that the current policy does to employers and to unemployed people whose skills don’t measure up to the minimum wage.

Martin Jones is a financial and economic analyst who lives in Freeport.

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