Higher minimum wage depresses employment

In a move to create a "living wage," San Francisco recently decided to raise its minimum wage to $8.50, a pay hike that also affects waitresses and waiters. Other major cities have made similar strides in boosting minimum wages. However, a report by the Reason Foundation argues that these policies just end up hurting the people they are meant to protect – workers.

Small businesses, particularly restaurants, have been hard hit. The report says:

Restaurants are already overly burdened by regulation, ranging from licensing restrictions to menu label laws to tax targets for tip income, making employment as a waiter significantly more difficult.

Minimum wage laws have a tendency to cause employers to freeze hiring, lay off existing workers, and cut back on benefits in order to offset the new expense.

Unfortunately, the study remarks, the proponents of these minimum wage hikes cite the same discredited study of Card-Krueger which had found, based on skewed and false data, that minimum wage laws have no ill-effects on low-skill employment.

Source: Tim Cavanaugh, Sin of Wages, Reason Foundation, February 2004.

For text http://www.reason.com/0402/ci.tc.sin.shtml

For more on Minimum Wage http://www.ncpa.org/iss/min/

FMF Policy Bulletin\2 March 2004