March 13, 2012

How To Keep More Kids on the Streets

Donald J. Boudreaux

Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
Summary

If minimum-wage legislation only destroyed jobs for teenagers, it would be bad enough. But its long-term consequences are more dire.

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The following is an excerpt from an article that was originally published in The Wall Street Journal. Read the full text by subscription here. This article was co-authored by Walter E. Williams

"Economists have analyzed the minimum wage and its effect on employment more often than almost any other topic. And the result of all this study is clear: Raising the minimum wage hurts the very people—low-skilled workers—that champions of the raise intend to help, because it prices many such workers out of jobs. That's just what a bill now under consideration by New Jersey's legislature will do. By raising the state minimum wage to $8.50 from $7.25 an hour, politicians will guarantee that fewer people get work.

The reasoning here isn't rocket science. Put yourself in the place of an employer and ask: If I must pay $8.50 an hour to whomever I hire, does it pay me to hire a person who is so unfortunate as to possess skills that would only allow him to contribute $5 an hour to my bottom line? Most employers would view hiring such a person as a losing economic proposition. Therefore the effect of minimum-wage legislation is to discriminate against the employment of low-skilled persons, who are for the most part young, and mostly minority young, people."