by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor, John Locke Foundation
The editors of the Greensboro News & Record think the state’s minimum wage should be raised higher than the federal minimum wage. Their argument is based on several things:
One thing their argument is not based on, however, is mainstream economics. It’s a rather glaring oversight. Here’s why.
The negative impacts of the minimum wage is one of the items about which economists are in greatest agreement. The knowledge that there are net negative effects is clearly within the mainstream of economic thinking on the minimum wage.
The minimum wage debate is very much one of being vs. seeming. The N&R editors are arguing for what seems the best policy for the poorest, least skilled, and hardest to employ. But as I argue in a recent Spotlight report, “Minimum Wage Hikes Hurt The Very People They’re Supposed to Help.”
So let us look at their reasons.
Fortune 500 CEO pay is a non sequitur. Remember that 98 percent of employers in North Carolina are small businesses. Can Mom & Pop handle a spike in business cost? Can all Mom & Pops? And are they going to be as likely to expand, or more likely to contract?
Earning more would definitely help the working poor in many ways. Minimum wage workers who remain employed after a minimum wage increase certainly benefit. The others — and future would-be workers — who get priced out of the labor market are definitely harmed. Editorials like the N&R’s irresponsibly gloss over their fate.
Would it benefit society overall? That would be open to debate, and part of it would depend on how many benefit, how many lose, and how people choose to weigh it all. It is unwise to expect to see unquestionable net economic benefits to society from a policy decidedly outside of mainstream economics, however.
As for crime, recent research finds that the disemployment effects of minimum wage hikes leads to more crime. This finding makes intuitive sense.
As for the disemployment and other negative effects, those would depend upon how large the hike in the minimum wage would be. But they would necessarily be, so long as demand curves slope downwards.
On that score I commend a recent piece in Regulation discussing the particular importance of a recent University of Washington study. That study (discussed here) estimated the effects of the second part of Seattle’s phase-in of its plan to hike the city minimum wage to $15/hour:
That cannot be what the N&R editors actually want replicated in North Carolina.