by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
Getting the economy going will require more than just creating a large number of low-wage positions, said Paul Osterman, economics professor at MIT. Raising the minimum wage to get more cash to the working poor is just as crucial, he said.
That’s just barking madness. The federal minimum wage has been increased by 41 percent since 2007, and the abysmal job prospects of the poor have been on the decline ever since (of course, they have also been harmed by other statist interferences with market corrections as the stimulus and Obamacare). Raising the minimum wage reduces a poor person’s chance of finding employment because, as most economists know, demand curves slope downwards.
Consumers (in this case, buyers of labor; i.e., employers) buy less of a good (labor) when its price (wages) increases, even if the price increase is mandated by law out of compassion — a compassion that, it is very important to realize, is entirely counterproductive to the end result earnestly wished for.
It’s not to say that increasing the minimum wage doesn’t benefit some working poor — the ones who are still employable at the higher wages obviously benefit. But the poorest and least employable are priced out of the job market, most offensively in the name of greater compassion for the poor. Tossing people out of work with higher minimum-wage laws doesn’t make you compassionate for the poor any more than smothering a baby with the softest blanket you could find makes you a good parent.