The minimum wage increased yesterday in nineteen states across the U.S.: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Hawaii, Maine, Massachusetts, Michigan, Missouri, Montana, New Jersey, New York, Ohio, South Dakota, Vermont, and Washington. Increases in Oregon, Washington, D.C., and Maryland will also take effect later this year.
Will the increases help pull people out of poverty? Do they increase unemployment? Although the debate about this issue as raged since 1938, when President Franklin Delano Roosevelt introduced the first federal minimum wage, few Americans truly understand whether wage floors help or hurt workers.
To help you better understand the issue, here are ten points you should know about minimum wage laws:
On December 27, 2016, at the age of 86, Thomas Sowell published his last column. After publishing dozens of books and hundreds of columns, Dr. Sowell’s retirement may mark the beginning of the end of an era of black intellectuals who were champions of political and economic liberty. Other black scholars like Walter Williams, W.B. Allen, and Shelby Steele are all in the 70s or 80s and there does not seem to be a cadre of like-minded black scholars in their wake. (more…)
But alas, prices are not play things, and such measures are bound to reap a range of deleterious effects, from raised consumer prices to increased unemployment to reduced working hours to outright business closures. Contrary to the popular narrative, those consequences tend to hit small businesses and less-skilled workers first and hardest.
With the recent laws, the destruction has already begun. To illustrate the damage thus far, the Employment Policies Institute (EPI) is cataloging hundreds of stories on its Faces of $15 website, including a range of videos highlighting the frustrations and responses of business owners, employees, and faithful customers alike.
In the following 5 case studies, we see but a glimpse of the minimum wage’s cramping effect on human enterprise, creative service, and economic diversity.
1. Abbot’s Cellar
For Abbot’s Cellar, a newly founded restaurant in San Francisco, the recent wage hike made their start-up model unfeasible, even despite tremendous initial success. “How are businesses that have practically no margins as is – mom and pops, small businesses – how are they supposed to just absorb that?” asks Nat Cutler, one of the owners.
“San Francisco is a city that seems like it’s supposed to be built on a Bohemian, small-business, mom-and-pop-type vibe,” he continues. “That’s the culture of the city. I worry that the type of change that’s happening is going to take away from the great culture that was here…I wish a little more thought would be put into the long-term impact.” (more…)
the duty of the Christian statesman (or stateswoman) to the poor requires defending human rights, supplying urgent needs, reducing barriers to market entry, and guaranteeing access to the institutions of justice, seeking realistic, gradual reform as possible and prudent.
Of particular interest to readers of the PowerBlog, I dedicate substantial space to explaining and advocating for free markets:
In free markets, properly understood, these barriers are kept to a minimum, increasing competition and wealth creation. The more businesses there are looking for workers, the more demand there is for labor. Thus, not only will there be more jobs, but wages will be higher as well. It should be no surprise that the decline in American entrepreneurship has coincided with wage stagnation. Beyond wages, an additional benefit of increased competition is that it also drives down the price of consumer goods, thus lowering the cost of living for everyone as well. Free markets help the poor—and everyone else—in terms of production (labor), distribution (wages), and consumption (lower cost of living).
“No one in America should be working 40 hours a week and living below the poverty level,” said Joe Biden last year, “No one. No one.”
That’s a sentiment I share with the vice president. And the good news is that almost no one who works 40 hours a week lives below the poverty level.
That’s the finding of the latest report on income and poverty from the Census Bureau. For those aged 18 to 64 who work full time, year round the poverty rate is a mere 2.4 percent. Those who did not work full-time had a poverty rate that was more than ten times higher—31.8 percent.
But as Preston Cooper points out, the number of full-time workers in poverty may be even less since the definition of poverty used by the Census Bureau does not take into account taxes and transfers such as the Earned Income Tax Credit, which tops up the wages of low-income workers. (more…)
“We’re going to need to see your birth certificate,” the manager said, making a notation on my employment application, “But you’re hired. Show up a 10 a.m. on Thursday for training.”
I was too young and dumb to realize he was calling my bluff. I had to be 16 to take the job and I could barely pass for 14 (which I wouldn’t be for a another month). Yet instead of pointing out that I was lying about my age (which, obviously, I was), he figured he’d mark me down in the hired column and assume I’d be one of the dozen new people to not show up for the first day of work.
But I did show up, because I had nothing better to do. I was spending the summer with relatives in Houston, and to get me out of the house my aunt suggested I apply at McDonald’s. A new franchise had just opened and hiring almost anyone who applied. Fast-food outlets have a high worker turnover and new stores have any higher rates of attrition. The hiring manager knew he’d need to hire at least three times as many people they knew that most people wouldn’t last more than a week before getting quitting.
This past week, one of the rising political figures in the Democratic Party, Mayor Peter Buttigieg of South Bend, Indiana penned an op-ed for the South Bend Tribune arguing that raising the minimum wage is “the right thing to do.”
Mayor Buttigieg, cites three reasons why he believes raising the minimum-wage is the right thing to do: It’s good for business, good for the economy, and good for family. All these “goods” assume that raising the minimum-wage does not reduce employment.
So what do basic economic principles say about raising the minimum wage? Take a look at this graph.