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Timothy Noah of MSNBC recently informed us, “In theory, raising the minimum wage ought to increase unemployment, but in practice, economists (including a few at the not-exactly-left-leaning Goldman Sachs) have lately struggled to find any real-world evidence of that happening. Job creation is actually faster in the states that have raised the minimum wage.”
This was followed by the Chicago Tribune announcing in an Aug. 19 headline, “Vast majority of Chicago voters back $13 minimum wage.”
To which I ask: Why do so many supporters of plans to increase the minimum wage complain about the “offshoring” of jobs to countries with lower labor costs? They want us to believe higher wages don’t harm job growth—insisting instead they actually encourage job growth—and they also claim American businesses are to blame for moving jobs overseas to pay lower wages.
Those who are young, with little or no work experience or skills, make up the bulk of those who seek minimum wage jobs. This is one reason, as economics writer Ben Casselman noted earlier this year, “A substantial number of minimum-wage workers come from better-off families. Close to half a million minimum-wage earners are in households with six-figure incomes, and a million more are in those that earn at least $60,000. Any increase in the minimum wage would benefit those people, too—and that’s not the goal of an anti-poverty effort.”
Most minimum wage earners are supplementing incomes earned by others or are being supplemented themselves. The vast majority of minimum wage earners are not, however, the primary source of income for their family members.
How are young people doing in the labor market? The answer is in this Aug. 13 report by the U.S. Bureau of Labor Statistics: “The youth unemployment rate was 14.3 percent in July 2014, 2.0 percentage points less than a year before. Among the major demographic groups, July unemployment rates were lower than the prior year for young men (15.1 percent), young women (13.4 percent), whites (12.2 percent), and blacks (24.8 percent), while youth jobless rates changed little for Asians (10.9 percent), and Hispanics (16.5 percent).”
The youth unemployment rate in July was more than double the overall unemployment rate of 6.2 percent.
Furthermore, young blacks and Hispanics have unemployment rates substantially higher than the rate for young whites (more than twice as high for young blacks). Meanwhile, Asians have the lowest unemployment rate of any of the demographic groups, well below the average youth unemployment rate.
Could this be because employers believe Asians, who are known to work hard and excel in school, are likely to be the most productive of the youth demographic groups?
Productivity is the key, you see. If someone has enough productivity to cover his or her wage and all the other costs an employer must pay (additional payroll taxes, higher workers’ compensation and unemployment insurance premiums, etc.), that individual is more likely to be hired.
The federal minimum wage is $7.25 an hour, but some states and locales impose a higher minimum. In Illinois, where most Chicagoans apparently favor $13 an hour as a floor, the minimum wage is $8.25 an hour. Can proponents of a $13 minimum wage really believe a person who cannot get hired at $8.25 an hour will get hired at $13 an hour?
Additionally, those who are lucky to be employed, even at a low wage, in this difficult economic climate will face stiffer competition as a higher minimum wage attracts more people with better skills and experience.
And what’s magic about the current minimum wage? If an Illinois employer will pay $8.20 an hour, and a job seeker will accept $8.20 an hour, under Illinois law that person is forced to remain unemployed.
This gets us to what may be the most important point: Our life belongs to us, not to politicians and government bureaucrats who pretend to know what’s good for us. There should be no minimum wage. People should be free to work for whatever wage they’d like—or even for no wage, as the thousands of unpaid interns working in the White House, Congress, state legislatures, and city halls around the country have done.
Steve Stanek (email@example.com) is a research fellow at The Heartland Institute in Chicago.