Minimum wage increases harm young people

Advocates of a minimum wage increases ignore the evidence that it increases unemployment among the least productive workers: unskilled young people whose employment opportunities are limited. This is unfortunate, because low wage jobs are the first rung on the economic ladder of success for workers entering the labour force, says Bruce Bartlett, a senior fellow with the National Centre for Policy Analysis.

How Do Minimum Wage Increases Affect Minority Groups?

From 1948 to 1955, unemployment of young black and white males was essentially the same, 11.3 per cent and 11.6 per cent, respectively.

However, after the minimum wage was raised from 75 cents to $1 in 1956, unemployment rose significantly for both black and white teenage males, with blacks bearing more of the burden.

By 1969, the unemployment rate was 22.7 per cent for young black males and 14.6 per cent for young white males.

Moreover:

Economists Donald Deere, Kevin Murphy and Finis Welch found that minimum wage increases totalling 27 per cent in 1990 and 1991 reduced employment for all young people by 7.3 per cent and for young blacks by 10 per cent.

A study of the 1996 and 1997 increases by economists Richard Burkhauser, Kenneth Couch and David Wittenburg also found a 2 to 6 per cent decline in employment for each 10 per cent increase in the minimum wage.

In a study published by the Federal Reserve Bank of San Francisco, Couch translated these conclusions into raw numbers:

At the low end, he estimated at least 90,000 teenage jobs were lost in 1996 and another 63,000 in 1997.

At the high end, job losses may have equalled 268,000 in 1996 and 189,000 in 1997.

Source: Bruce Bartlett, The Minimum Wage Is Bad Policy, Brief Analysis No. 499, National Centre for Policy Analysis, February 4, 2005; Donald Deere, Kevin Murphy and Finis Welch, Employment and the 1990-1991 Minimum Wage Hike, American Economic Review, May 1995; Richard V. Burkhauser, Kenneth A. Couch and David Wittenburg, Putting the Minimum Wage Debate in a Historical Context: Card and Krueger Meet George Stigler, Centre for Policy Research, June 1995; and Kenneth A. Couch in Federal Reserve Bank of San Francisco, Economic Letter 99-06; February 19, 1999.

For NCPA text: http://www.ncpa.org/pub/ba/ba499/

For Deere, Murphy and Welch study (subscription required): http://ideas.repec.org/a/aea/aecrev/v85y1995i2p232-37.html

For Burkhauser, Couch and Wittenburg text (subscription required): http://www-cpr.maxwell.syr.edu/incomsec/abstr10.htm