Minimum wage laws penalize those with sub-minimum skills

Posted by Marc Hodak on July 25, 2010 under Unintended consequences | Be the First to Comment

Everyone knows the economic theory, right?  Price floors reduce demand for the artificially expensive item.   If the New York Times were forced to raise its subscription price, it would expect to see a reduction in the volume of subscriptions.  If the young, who tend to have minimal work skills or experience, were forced to significantly raise the wage at which they must be hired, we would expect to see a reduction in youth employment.  Over time, that is exactly what we see.

Well, apparently everyone doesn’t know the economic theory.  And even those that do are willing to argue that, just in the case of labor markets, it doesn’t really apply.

But the results keep coming in.

In fairness to math, the WSJ link is the weakest since correlation does not equal causation.  But when one compares the drop in employment among adults versus teens (instead of the increase in unemployment, which suffers from a serious base-rate bias), then one would more clearly see how we are eating our young with this silly policy.