Harm of minimum-wage laws is neglected and poorly understood

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If our nation’s objective is to raise unemployment among the unskilled, less experienced, entry-level workers, we could not find a better means than an increase in the minimum wage.

And if we wish to target the self-esteem, the confidence of struggling youth, a direct bludgeon is to increase this wage rate.

And if, among our inexperienced, unskilled youth, one wants to delay their acquisition of work skills and the discipline required to hold a job, one would be hard pressed to locate a better choice than the imposition upon them of a minimum wage.

Work experience among our raw youth is one of the most effective, if not the most effectual, means to their work-skill development. Also, if one seeks to blunt the emergence of leadership talents among our most struggling youngsters, then increase the minimum wage. These minimum-wage outcomes – observable everywhere yet with causes difficult to trace because of the murkiness of the dynamic passing scene – nevertheless are linked fundamentally to minimum wage laws.

Contrary to the prevalent view, subjecting these hard-pressed youths to low wages and opportunities with limited long-run potential still is a fruitful application of their efforts. It is better than nothing, and superior to a career of idleness combined with welfare and food stamps. It is careless if not cruel to consign such citizens, even temporarily, to these limited outcomes.

THESE HARMFUL effects have been neglected for too long and deserve to be heard. They are important. Unemployed youths – especially among the inexperienced, the unskilled and the uneducated – suffer painful delays in overcoming these weaknesses and thus lag behind their peers in personal development. Thus, both the individual and society lose.

Simplest tasks of work discipline must be learned. Simplest values of reporting to places of employment on time and performing the assigned work need to be acquired. The reader may counter with the observation that this is the customary function of the family. Yes, but in far too many instances there is no traditional family.

MINIMUM-WAGE laws throw
functions previously performed by families on the backs of struggling, handicapped youth, to fend best for themselves. And many remain scarred for life, leaving broken, nontraditional families in their wake, with offspring prone to continue the unfortunate cycle.

Because these wage laws’ employment effects are controversial and difficult to quantify does not mean their strong theoretical negative influences on employment do not exist, or are less weak in their impact on society. These troubling effects have strong indirect empirical support. In fact, despite these controversial results, polls of professional economists find overwhelming support for the laws’ negative impact on employment.

And now let’s look at the crucial numbers. The Bureau of Labor Statistics has collected data on the proportion of people employed or looking for work (the labor-participation rate) by age groups since 1948. For February, it noted that this rate (32.9 percent) for 16- to 19-year-olds was the lowest since the bureau started recording such data. In April, this agency recorded the second-lowest participation rate (33.2
percent) followed by a rate of 33.3 percent in January, the third-lowest.

AS EXPECTED, THE 20- to 24-year-olds fare better, but still at a dismal rate. The participation rate was 69.7 percent for August 2012, its lowest since 1973, and 70.2 percent for this past April, the lowest rate since 1973. The recent month of May displayed a disappointing rate of 71 percent.

Indeed, minimum-wage laws have a crippling employment effect on our precious youth, the ones we should try to avoid hurting at all.

Finally to further complicate matters, minimum-wage laws are in apparent conflict with the U.S. civil rights statutes. It is well-established that a high proportion of the currently unemployed youth is black (see Richard Vedder and Lowell Gallaway, Out of Work: Unemployment and Government in 20th Century America, The Independent Institute, 1993). Advocates of these laws point out that if employment policy has a disparate impact on racial discrimination (a court ruling that relieves the prosecutor from having to prove intent to discriminate), then it is inconsistent with Title VII of the Civil Rights Act of 1964, a view that has received strong federal court support.

However, they look away, or totally ignore, the all-important empirical observation that a minimum-wage law results in having a tragic impact on minority youth employment (a disparate impact?), thus rendering minimum-wage laws apparently inconsistent with our Civil Rights Act of 1964.

(The writer is a professor emeritus of financial economics at the University of Georgia. He lives in Aiken, S.C.)

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deestafford
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deestafford 06/22/14 - 08:00 am
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Once again Dr. Beranek is right on point.....

Once again Dr. Beranek is right on point and made simple and obvious much more simplier and more obviouser. Even the ignorant and stupid should be able to see where the minimum wage is detrimental to the labor force and to individuals.

I have wondered why people don't see the argument as clearly as Dr. Beranek lays out. I have come to the conclusion that only the low-information and no-information sheeple don't see it. They are being led around by the nose by the activists who capitalize on their ignorance and/or stupidity.

Much of the big push on the MW is by the labor unions and the politicians whom they have in their back pockets. Most people don't know that many labor contracts have the wages tied to multiples of the minimum wage. When the minimum wage goes up, union wages go up.

The economists who support the MW always appear to look at it at the macro level. They fail to get down to the nuts and bolts level and see what harm it does at the worker and the small employer level.

No only that they fail to take into account that when the wages of the lowest level worker is increased, the wages of all above him are increased also because of a thing called "wage differential" which pays different levels of workers based on their skills in relation to other workers in the company. Social Security payments and other benefits must be factored in also.

The solution is simple and posed by such greatly respected economists such as Milton Friedman, Thomas Sowell, and Walter E. Williams. There should be no federal minimum wage. There should be no MW at all, but if there is one let it be at the state level. Then businesses can vote with their feet and capital and go to the states where the business climate is most friendly.

There ain't no such thing as a free lunch and the money for an increase in the MW will have to come from somewhere.

Shortcomment
1158
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Shortcomment 06/22/14 - 09:50 am
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All figures aside

As wages increase, so are they are quickly nullified and absorbed by the increased cost to produce the goods and items.

The best way to break the cycle is to acquire additional higher marketable skills and advance in to another wage class.

It is called Education.

hoptoad
3167
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hoptoad 06/22/14 - 10:23 am
6
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I agree

I agree wholeheartedly with Dee and Short. There are those who cannot see that a business that is forced to pay more has to raise the price of their product/service or reduce the worker bees. So in the end the person receiving the raise has to pay more for everything and ends up with approximately the same percentage of discretionary funds as he or she had before. Our educational system certainly did a good job teaching math and economics.

Pond Life
16839
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Pond Life 06/22/14 - 10:33 am
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2
Here's a challenge for those

Here's a challenge for those who support raising the minimum wage. Where do you "think" the extra money will come from?

Riverman1
79476
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Riverman1 06/22/14 - 11:35 am
6
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No Brainer

It's a no brainer unless you are a low information type. Every dollar you force someone to pay comes from somewhere.

t3bledsoe
14223
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t3bledsoe 06/22/14 - 04:42 pm
1
5
PL @ 10:33

"Here's a challenge for those who support raising the minimum wage. Where do you "think" the extra money will come from?"

The money will come from the customers. A very small price to pay for knowing the "little people" will finally get a "living wage"!!

t3bledsoe
14223
Points
t3bledsoe 06/22/14 - 04:45 pm
1
8
One other thing

These much under-paid legal and illegal Mexicans need to be paid with a smile and a hand-shake for doing ALL OF THE GRUNT WORK!!

Pond Life
16839
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Pond Life 06/22/14 - 05:06 pm
5
1
T3....Those customers are

T3....Those customers are also the minimum wage earners, so the increase in ALL prices will affect them as well......their purchasing power remains unchanged, while all those NOT making minimum wage have LESS purchasing power. Don't you understand that?

The end result to raising the minimum wage is that the standard of living of minimum wage workers stays the same (due to the resulting inflation) and everyone else's standard of living goes down. How is that a good thing?

Pond Life
16839
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Pond Life 06/22/14 - 04:56 pm
4
2
Why not increase minimum wage

Why not increase minimum wage to $50 an hour? More is better, right?

Airman
3499
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Airman 06/22/14 - 08:38 pm
3
0
I agree with Pondlife, it

I agree with Pondlife, it does not matter how much we raise minimum wage, it will never be enough, Lets say it is 10$ now and next week we make i t 20$ this week. Last week a loaf of bread was 3$ now this week it is 8$ when you factor in the labor raises to the baker, the trucker, the delivery man, shelf stocker, cashier and the bag boy. See your wage doubled, but so did everyone elses. Cost of production doubled, cost of fuel goes up, so six months from now you want to raise it again, and you will probably have more tax witheld for that higher bracket

itsanotherday1
40250
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itsanotherday1 06/22/14 - 09:00 pm
3
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T3, did you not comprehend

T3, did you not comprehend ANYTHING the writer said? Please take the time to rebut any of his assertions about the net losses of a minimum wage. I am eager to hear any cogent argument.

The emotional "living wage" argument results in two things, and two things only in an economy like ours. Higher unemployment; and/or inflation that negates any wage increases. It is just simple math really.

Darby
23604
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Darby 06/23/14 - 12:45 am
3
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"The money will come from the customers.

A very small price to pay for knowing the "little people" will finally get a "living wage"!!"

T3 - Just when it looked like you were beginning to understand! The "little people" WON'T be getting a living wage. When there wages are forced up artificially by government interference in the marketplace, everyone else's wages will be forced upward as well.

The the cost of all goods and services will be forced up as well leaving the little people (who are also customers and consumers) as bad or worse off than they were before.

The entire concept of forcing the economy for tolerate that which it will not and cannot do is just short sighted and dumb!

T3 - My friend... there are only two ways for the "little people" to move up the economic ladder.

1) Work hard and earn their way the way others have always done.

2) Quit a job where they believe they aren't getting a fair shake and find someone who will pay them better. It's called job mobility. Only free countries have it.

.
Just as suicide is a permanent solution to a temporary problem. The concept of a government imposed minimum wage is a phony solution to a nonexistent problem.

The only people EVER to benefit from a minimum wage law are socialist politicians.

Airman
3499
Points
Airman 06/23/14 - 03:13 am
3
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Darby

Nice job, very good post

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