The Locker Room

Demand curves slope downwards, even though raising the minimum wage is "compassionate"

Posted by Jon Sanders at 11:22 AM

Last July I finished a post on the minimum wage with the following summary:

So in two years, the federal minimum wage has been increased by nearly 41 percent. Such a massive increase in the price of low-skilled labor will lead to much fewer jobs for low-skill workers, the poorest among us. Demand curves slope downwards.

I revisited that post late last month to cite the US Census Bureau's finding of record low employment levels of American teenagers, with black youths and youths from low-income families the most adversely affected.

I revisit it today on the occasion of a new Ball State study:

Increasing the minimum wage was meant to raise the living standards of millions of Americans holding unskilled, entry level positions. But it may have led to the elimination of 550,000 jobs ...

"Minimum wage legislation has long been popular precisely because it holds the promise of helping low wage workers without an associated cost," Hicks said in a news release. "The truth has largely been that it has not helped workers because the United States had gone for two generations with the minimum wage largely trailing the hourly compensation of unskilled, entry level workers.

Edited to add: As Harvard economist Greg Mankiw showed, the proposition that "A minimum wage increases unemployment among young and unskilled workers" is one of the ideas upon which there is overwhelming agree among economists.

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