Nearly every juvenile and adult American has heard of the minimum wage, and almost all members of the work force have a strong opinion on the topic, whether they are for a higher minimum wage or against it. According to Milton Friedman in an article by Mark J Perry (February 13, 2013), raising the minimum wage increases unemployment. Although designed to benefit workers who earn low hourly wages, minimum wage instead destroys jobs for low-skilled teenagers, cuts jobs that are not worth the higher minimum wage, and strips away the number of employers willing to provide job training.
What is a minimum wage?
First of all, what is a minimum wage? In a textbook by N. Gregory Mankiw (2014) a minimum wage is defined as the lowest price for labor that any employer may pay (p 117). The United States’ federal minimum wage came into being on June 25, 1938 with Franklin Roosevelt’s Fair Labor Standards Act (FLSA), with a required minimum salary of twenty-five cents per hour for factory production workers (Wilson). As years passed, more classes of workers campaigned for minimum wages and raises. As of 2012, the FLSA covers approximately 85% of the labor force, with its beneficiaries ranging from laborers to government and nonprofit employees (Wilson).
The current federally mandated minimum wage is $7.25, but some states have imposed higher minimum wages that are specific to their states. An article by Dane Huffman (April 2, 2015) noted that workers across the country are campaigning for a higher minimum wage. While being interviewed by Huffman, Mike Walden, an economist at North Carolina State University, was quick to repeat Friedman’s theory that a “drastic increase” in the minimum wage would severely cut into the number of jobs available.
Proponents of the minimum wage bring up many reasons for raising the minimum wage, most notably raising the quality of life for those who work for a minimum wage salary. However, they fail to acknowledge the side-effects of any plan introduced to raise the minimum wage. While raising the minimum wage pay improve life for a few people, it will introduce new hardships to the lives of most minimum wage workers.
Higher minimum wages have their most noticeable effect on teenagers and young adults (Mankiw p 118-119). The average American teenager has little to no marketable skills, which puts them at an extreme disadvantage in the job market. In an interview with Jay Wooten, a former local business owner, he stated that it was a fairly regular experience for him to have a teenaged worker come into his store asking for a job. These teenagers asked him for a job at any salary, saying that they would work for a few dollars an hour in exchange for much-needed work experience. He thought it was a reasonable trade-off,as most did not have skills that would justify paying the minimum wage. Many could not even carry on simple conversations, which are an essential, albeit neglected, customer service skill. However, minimum wage laws forced him to turn them away, as it is illegal for him to allow them to work for him at a wage of less than $7.25 per hour.
In an overview of several studies cited in Mankiw’s textbook (p 119), it states that a 10% increase in the minimum wage can increase teenage unemployment by as much as three percent. The study analyzed both changes in the minimum wage and teenage employment, finding a strong connection between the two. Also, it should be noted that the said 10% increase in the minimum wage will not increase the average teenage wage by a corresponding 10%. A higher minimum wage will have no immediate effects on teenagers who are already earning a wage higher than the new minimum wage.
In addition to manipulating the number of jobs offered, a higher minimum wage also increases the desirability of jobs to teenagers. A teenager who was unwilling to work for a wage of $7.25 per hour may be more eager to seek employment if he knows that he will be compensated at a higher rate. The additional number of laborers seeking employment increases the competition for individual jobs.
A higher minimum wage would also cut jobs in professions where labor does not just does not justify the salary. A worker whom is not making more money for his or her employer than it costs to employer the worker is unprofitable. If a worker is making the employer $5 per hour, but the employer is required by law to pay the worker a salary of $7.25 per hour, then continuing to employ the worker would require the employer to engage in charity. To summarize the words of Perry (2013, February 13), charity is not a bad thing; most employers, however, are simply not in a position to extend charity to a large number of employees.
To illustrate a call for a higher minimum wage from workers who would be affected by this specific consequence, one needs only to turn on the news. In cities all across the country, minimum wage workers are protesting the current minimum wage law, which they believe sets unreasonably low minimum wage. They are adamant in their campaigns to more than double the current minimum wage, calling for a minimum wage of no less than $15 per hour.
How would a higher minimum wage directly impact their professions? The readers need only look at professions that have already felt the effects of a minimum wage, some of which have disappeared completely. Referring back to Wooten’s comments, he referenced several jobs that have disappeared almost completely as a result of higher minimum wages. No longer will you find an attendant at a gas stations waiting to pump your gas or an usher at the movie theatre ready to show you to your seat. These services were not worth the cost of providing them, and thereby fell to the wayside.
As the cost of hiring an employee rises, employers will expect more skills in exchange for the higher wage. Many employers have ceased or greatly reduced the amount of on the job training that they are willing to provide, instead requiring job applicants to have prior experience, especially in areas such as sales and customer service. According to Mark Wilson (2012, September 1), this will increase unemployment as fewer and fewer job applicants will meet the job experience requirements necessary to obtain the position.
In the author’s personal experience as an employee at Injoy Thrift Store, a popular local volunteering spot, many workers are already in need of sources for acquiring work experience. One such inexperienced worker came to volunteer at Injoy Thrift Store. She was nearly eligible for a position as a cashier at Target, but she did not have any experience working at a cash register or interacting with customers. Target was reluctant to hire an inexperienced worker, so she had to work for several months without pay in order to have any chance at receiving the job she wanted. While she may have benefited emotionally or in some other way, her time spent working at the thrift store was a time without financial compensation, a time where she could not provide for her basic needs. Her future employer’s higher cost of employing her increased reluctance to hire her, as the company would not be receiving the benefits of prior job training.
While some workers may benefit from a higher minimum wage, many more would suffer as a result of it. Freedman’s theory that raising the minimum wage increases unemployment is one that is supported by knowledgeable sources ranging from economics professors and theorists to small business owners. A few workers may see a rise in salary, but at what cost? How many people will lose their jobs in order for a few workers to earn a higher wage?
Huffman, D. (2015, April 2). Economist: Raising minimum wage could impact jobs. Retrieved
November 2, 2016, from http://wncn.com/2015/04/02/economist-raising-minimum-wage-could-impact-jobs/
Mankiw, N. G. (2014). Principles of macroeconomics (7th ed.). Boston, MA: Cengage Learning.
Perry, M. J. (2013, February 13). Milton friedman responds to president obama’s proposal to raise the minimum wage, the most ‘anti-black law in the land’. Retrieved November 10, 2016, from https://www.aei.org/publication/milton-friedman-responds-to-president-obamas-proposal-to-raise-the-minimum-wage-the-most-anti-black-law-in-the-land/
Wilson, M. (2012, September 1). The negative effects of minimum wage laws. Retrieved
November 10, 2016, from https://www.downsizinggovernment.org/labor/negative-effects-minimum-wage-laws
Wooten, Jay. Personal Communication. Nov 3, 2016