At minimum, a bad deal

Many, if not most, laws passed by Congress have had unintended, negative consequences. Raising the minimum wage has been one that has.

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.

David Neumark, a University of California-Irvine economist, who conducted the study, said his findings supported “earlier research which found minimum wages have the largest negative effects on low-skilled employees, such as teens and minority teens.”

Nothing is more important to the economic advancement of minority youths than access to entry-level jobs, where they can develop good work habits and learn skills that can prepare them for other career opportunities during their working life.

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

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

Mr. Sherk cited an earlier 2004 study by Mr. Neumark that found “workers who initially earn near the minimum wage experience wage gains. But their hours and employment decline, and the combined effect of these changes on earned income suggest net adverse consequences for low-wage workers.”

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

This is a very conservative estimate of its ultimate cost to some of the most vulnerable Americans. The Hoover Institution said 20 percent — or 1.6 million workers — could lose their jobs if there are no offsetting tax cuts for small businesses hit by $5 billion to $7 billion in higher employment costs.

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