Nov 24, 2015

Show These Charts To Anyone Who Thinks Minimum Wage Doesn’t Cost Jobs


By on Tuesday, November 24, 2015

Liberals forget all economic logic when it comes to the issue of the minimum wage.
Liberals tax pollution because they want less pollution. They tax cigarettes and alcohol so people use less cigarettes and alcohol. And the logic here is correct – when you make the price of something expensive, people buy less of it.
But labor is just yet another price – the price employers pay for labor. Its fantasy to think that increasing the cost of labor won’t reduce the demand for it. More specifically, since the minimum wage effects those at the bottom of the economic ladder, we should expect the minimum wage to reduce employment among the young and unskilled (but obviously not among those who already earn above the minimum wage).

But don’t take my word for it, let the charts to the talking. The first is provided by Antony Davies at the Mercatus Center:

The X axis depicts the minimum wage as a percentage of the average wage in the country, while the Y axis looks at the unemployment rate by education level.
As is expected, the higher the minimum wage, the higher the unemployment among those with only a high school education – though the effect is especially pronounced on those with no high school education, the most on those without a high school education under age 25.

The only group unaffected if college graduates – most of whom are earning more than the minimum wage already.
Here’s two more charts, both from Mark Perry of the American Enterprise Institute:

Some of the effects are masked.
Remember that if people give up working and leave the labor force they’re no longer counted as “unemployed.” And a higher minimum wage does make it harder for unskilled workers to find work, leading them to drop out of the labor force entirely.

Consider this chart looking at minimum wage hikes and youth labor force participation. The black dots indicate a  year when the minimum wage was raised:


If charts aren’t enough for you, rest assured, the belief that the minimum wage causes unemployment truly is the economic consensus. Harvard Economist Greg Mankiw reports that 79% of economists agree with the statement “A minimum wage increases unemployment among young and unskilled workers.”



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