Freeman here.
From the 2008 election, perhaps you remember Andrew Meyer, a University of Florida journalism student that went on an unintelligible rant at a John Kerry event, had his mic cut off, got arrested, and famously pleaded "Don't tase me, bro!" as the police proceeded to tase him and drag him out of the event. Poor guy. He just wanted to ask a question...
Tasers can be harmful for young adults, but even more harmful are price floors.
A "price floor" is simply a state-imposed bottom limit on the amount that can be charged for something such as minimum wage. With the intent of helping the poor and helpless, governments here and abroad impose price floors on labor and price ceilings on "necessary goods and services" such as rent, home insurance and food (see "abroad"). Then they feel good about themselves, go home to dinner, and believe they have done something nice for the common man. Thanks.
A clear unintended consequence of Congress' 2007-2009 minimum wage increase (up to $7.25/hr) has been higher unemployment among young adults. One year after its effect, the Wall Street Journal opined this week about the negative consequences of the federally-mandated minimum wage hike in an aptly named article "The Young and Jobless." These minimum wage increases were meant to help low-wage earners, but instead they are frequently out of work.
Hurting those you intend to help = unintended consequence.
The post-hike numbers are startling. The federal legislation was implemented in 3 phases from 2007-2009. Some states were unaffected because they already had strong minimum wage laws (i.e. Massachusetts), but in the 19 affected states there was "a 6.9% decline in employment" for persons age 16- 19 with an estimate "that the hikes reduced employment by 12.4%."- equating to 98,000 fewer teens working. The measures more heavily affect minorities- in June the teen unemployment rate was "25.7%, versus 39.9% for black teens." I doubt this was the goal of the legislation.
If minimum wage rules carry no consequences other than bettering the lives of the poor, why not raise minimum wage to $20, $50 or even $500/hr? The higher the better, right?
As much as Congress wants to ignore the fundamental laws of economics, the fact remains that scarcity of capital exists, legitimate pricing signals are important to the labor market, and price floors negatively affect the demand for labor.
A message to Congress- don't (artificially) fix my wage, bro.
haha I read this article in WSJ. Interesting take.
ReplyDeleteIt is a tough problem. I don't think gov't should raise the price floor for wages indefinitely or that often, but there are negative societal consequences if there is no minimum wage at all. Like everything else in life it's a balance. I wish I got paid 7.25 to work my crappy job at DQ in high school.
ReplyDeleteI understand what you are saying, Taylor Wolfe, however you might not have had that job at all had the floor been set at $7.25/hr.
ReplyDeleteSo that's the rub- A) less employment overall and higher wages for some, or B) more employment overall and the market works out the details on the appropriate wage.