Minimum wage harms those it is designed to help

The authors of a new US study titled "Unequal Harm: Racial Disparities in the Employment Consequences of Minimum Wage Increases" state that it would be easy to say the high employment levels for young adults is an unfortunate by-product of the recession, but you'd be wrong. The study demonstrates that increases in the minimum wage at both the state and federal level are partially to blame for the crisis in employment for minority young adults, says the Washington Examiner.

Their study focuses on 16-to-24-year-old male high school dropouts, understandably a relatively inexperienced group of labour market participants.

Among the white males, the authors find that "each 10 per cent increase in a state or federal minimum wage has decreased employment by 2.5 per cent; for Hispanic males, the figure is 1.2 per cent."

But for black males, "each 10 per cent increase in the minimum wage decreased employment by 6.5 per cent."

The authors compare the job loss caused by higher minimum wages with that caused by the recession and find between 2007 and 2010, employment for 16-to-24-year-old black males fell by approximately 34,300 as a result of the recession; over the same time period, approximately 26,400 lost their jobs as a result of increases in the minimum wage across the 50 states and at the federal level.

Why do young black males suffer unequal harm from minimum wage increases? The authors say that they're more likely to be employed in low-skilled jobs in eating and drinking establishments. These are businesses with narrow profit margins and are more adversely affected by increases in minimum wage.

Source: Walter Williams, Minimum Wage Harms Those It Is Designed to Help, Washington Examiner, May 9, 2011. William Even and David Macpherson, Unequal Harm: Racial Disparities in the Employment Consequences of Minimum Wage Increases, Employment Policies Institute, May 2011.

For text: http://washingtonexaminer.com/opinion/columnists/2011/05/minimum-wage-harms-those-it-designed-help

For study: http://epionline.org/studies/even_5-2011.pdf

For more on Economic Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=17

First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 17 May 2011