Saturday, February 10, 2007

Minimum Wage Destroys Jobs; Creates Unintended Beneficiaries?

Wow. A minimum wage increase:

  1. causes employers to lay off workers;
  2. those workers are mostly teens and other new entrants to the workforce; and,
  3. salaries for non-minimum wage workers rise as employers maintain pay scales.
Who would ever have predicted that?

On a more serious note, one wonders if fact number three above might be a motivation for some to support minimum wage increases. After all, opponents endlessly made the argument that a minimum wage increase would benefit - and hurt - teens almost entirely. After all, they comprise most minimum wage employees. However, I don't recall hearing anyone assert that raising the minimum wage would force employers to raise wages for more experienced employees as well, to maintain a gap between those sets of workers.

New wage boost puts squeeze on teenage workers across Arizona
Employers are cutting back hours, laying off young staffers

...Some Valley employers, especially those in the food industry, say payroll budgets have risen so much that they're cutting hours, instituting hiring freezes and laying off employees.

And teens are among the first workers to go.

Companies maintain the new wage was raised to $6.75 per hour from $5.15 per hour to help the breadwinners in working-poor families. Teens typically have other means of support.

Mark Messner, owner of Pepi's Pizza in south Phoenix, estimates he has employed more than 2,000 high school students since 1990. But he plans to lay off three teenage workers and decrease hours worked by others. Of his 25-person workforce, roughly 75 percent are in high school.

"I've had to go to some of my kids and say, 'Look, my payroll just increased 13 percent,' " he said. " 'Sorry, I don't have any hours for you...'

The Employment Policies Institute in Washington, which opposed the recent increases, cited 2003 data by Federal Reserve economists showing a 10 percent increase caused a 2 percent to 3 percent decrease in employment.

It also cited comments by noted economist Milton Friedman, who maintained that high teen unemployment rates were largely the result of minimum-wage laws.

"After a wage hike, employers seek to take fewer chances on individuals with little education or experience," one institute researcher told lawmakers in 2004.

Tom Kelly, owner of Mary Coyle Ol' Fashion Ice Cream Parlor in Phoenix, voted for the minimum-wage increase. But he said, "The new law has impacted us quite a bit."

It added about $2,000 per month in expenses. The store, which employs mostly teen workers, has cut back on hours and has not replaced a couple of workers who quit.

Kelly raised the wages of workers who already made above minimum wage to ensure pay scales stayed even. As a result, "we have to be a lot more efficient" and must increase menu prices, he said...


Opponents, however, said there was little talk about teenage workers. "Everyone wanted to focus on the other aspects of the minimum-wage campaign," said Michelle Bolton, Arizona state director of the National Federation of Independent Business.

An Employment Policies Institute study determined that 30.1 percent of affected workers in Arizona fell between the ages of 16 and 19.

"Workers affected by the minimum-wage increase are less likely to be supporting a family than the typical Arizona worker," it stated. "For example, 30.4 percent of the workers are living with their parent or parents, while only 7.6 percent of all Arizona workers are in this category..."

1 comment:

Joe said...

Dude, I'm thinking that the NYPD will start paying it's employees minimum wage soon. I'm certain they'd like the raise.