Raising minimum wage bad idea

Many, if not most, laws passed by Congress have had unintended, negative consequences, and raising the minimum wage has been one of them.

Perhaps no other so-called economic reform has been studied more than the impact of the minimum wage on poor-to-low income, unskilled, undereducated, unemployed Americans. The preponderance of these studies has shown time and again that raising the minimum wage does not live up to its promises.

It doesn’t create employment for those it is supposed to help; it reduces employment. It doesn’t help the most vulnerable Americans, especially poor minorities; it worsens their plight.

The Employment Policies Institute, a nonprofit research organization, released a recent study of these unintended consequences here this week. It found that for every 10 percent increase:

? Unemployment among minorities rose 3.9 percent.

? Joblessness among Hispanics jumped 4.9 percent.

? Teenage minority unemployment increased 6.6 percent.

? Unemployment among African-American teens climbed 8.4 percent.

? Low-skilled unemployment (among high-school dropouts) grew by 8 percent.

Another recent study by James Sherk, a labor-policy analyst at the Heritage Foundation, found that “Raising the minimum wage reduces many workers’ job opportunities and working hours.”

As the federal minimum wage has risen, the number of entry-level jobs for young, unskilled workers has fallen because the “wage hikes cause businesses to reduce the number of workers they hire and the hours they ask their employers to work.”

Economists estimate that “each 10 percent increase in the minimum wage reduces employment in affected groups of workers by roughly 2 percent,” Sherk said. Thus, raising the minimum to $7.25, as the Democrats propose, “would cost at least 8 percent of affected workers their jobs.”

The Hoover Institution said that 20 percent — or 1.6 million workers — could lose their jobs if there are no offsetting tax cuts for small businesses that would be hit by $5 billion to $7 billion in higher employment costs.

But if people don’t or won’t believe the studies, the evidence they point to is all around us. Employers have found increasing ways to eliminate jobs as the minimum wage has risen with little or no effect on the services they offer. Gas stations have replaced workers with computerized, self-service pumps. Supermarkets have replaced cashiers with price scanners and self-service checkout systems. Department stores have shrunk their sales forces and consolidated cash-register checkouts, too.

There are other reasons to question the value of raising the minimum wage, which has become increasingly irrelevant and misdirected in today’s economy. Relatively few workers earning the minimum wage “come from poor households,” Sherk’s study found. Most are workers between the ages of 16 and 24 and “over three-fifths of minimum wage earners work part time.

The Democrats’ idea of raising the minimum wage is still popular among voters, as the 2006 elections showed, but it is not targeted at the truly poor and most of those who benefit are not poor. This is an old post-Depression-era idea that will destroy entry-level jobs for people who need them most.

What we really need is a clean tax-cut bill for all small businesses that will accelerate their growth and the higher-paying jobs they will create for all Americans.

Donald Lambro is a syndicated columnist.