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Minimum Wages and Job Losses

The Washington Free Beacon's Ali Meyer reported this week on a study that shows "minimum wage hikes will lead to 1.8 million job losses."

According to Meyer:

"Minimum wage increases over the next several years will result in 1.8 million job losses, according to a report from the American Action Forum.

"By July of this year, 22 states and the District of Columbia will have implemented minimum wage increases. In just 2017 alone, wage increases will lead to 383,000 job losses.

"While the goal of increasing the minimum wage is to increase earnings for low-income individuals, the report finds that the additional earnings transferred from the job losers to the job keepers is minimal. For example, minimum wage hikes are projected to increase earnings by only $6,900, which would be split among all employees affected by the increase.

"While proposals to raise the minimum wage are well intended, it is important to consider the negative labor market consequences," the report states. "A 10 percent increase in the real minimum wage is associated with a 0.3 to 0.5 percentage-point decline in the net job growth rate."

"As a result, three years later employment becomes 0.7 percent lower than it would have been absent the minimum wage increase," the report states.

"In just 2017, minimum wage increases will lead to 1,000 eliminated jobs in Vermont to 109,000 job losses in New York. If all future minimum wage increases are taken into account, those job losses increase to 3,000 in Vermont and 433,000 in New York.

"The report notes that employers usually pay for wage increases by cutting their workforce, raising the price on products, slowing down their hiring, or replacing more productive workers with low-skilled workers.

"Unfortunately, it is the lowest-wage, least-skilled workers who pay the largest prices for these consequences," the report states. "While they need those experiences most to develop skills and find better paying jobs, they are the least likely to be able to keep their jobs or find a new one when the minimum wage rises."

"In Arizona, the minimum wage is expected to rise from $8.05 in 2016 to $10.00 in 2017. Critics of the hike there, known as Proposition 206, say it will hurt young people and small businesses."

Meyer concludes, writing:

"By making hiring more expensive, Proposition 206 harms young people, small businesses, and folks on the outside of the labor market trying to break in," said Lea Marquez Peterson, who is CEO of the Hispanic Chamber of Commerce in Tucson. "As a longtime advocate for southern Arizona's small businesses, I've seen firsthand the destructive effects of job-killing mandates on job creators."

She links to this American Action Forum study, by Ben Gitis and Curtis Arndt. Here is the report's executive summary, including the three bullet points:

"We examine the job and wage effects of the state minimum wage increases that are currently phasing-in. Focusing on the tradeoff between reduced job creation and increased wage earnings, we estimate how much total wage earnings rise with each job loss caused by the current minimum wage increases. Overall, we find that the minimum wages scheduled to rise over the next several years in 14 states and the District of Columbia will cost millions of jobs across the country and each lost job only leads to total wage earnings rising by a few thousand dollars. In particular, we find that:

  • In isolation, the minimum wage increases in 2017 will cost 383,000 jobs;
  • The entire minimum wage increases currently phasing-in will cost over 2.6 million jobs; and
  • Each job lost only leads to an extra $6,900 in total wage earnings across all workers."

We've growled frequently on the minimum wage, including quoting from a Richmond Times-Dispatch editorial almost exactly one-year ago.

For additional background information about the minimum wage, see this entry by Linda Gorman in the Concise Encyclopedia of Economics. Also see this entry for books, articles and related sources in the Library of Economics and Liberty.

Take a few minutes to write your member of Congress. Ask your members of Congress to oppose increases to the minimum wage, but rather support workforce training designed to increase productivity and increased wages. Contact information is available at the Library of Congress' Congress.gov. Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -- write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you.

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