Monday, December 18, 2006

Minimum Wage = Maximum Unemployment

Minimum wage floors price out the low-skilled workers they are meant to help, according to the Institute for Research on the Economics of Taxation.

According to the Labor Department, as of 2004:
  • Fewer than 3% of hourly wage workers were paid at or below the federal minimum wage.
  • About half were under 25, and about a quarter are teenagers.
  • Fewer than 2 percent of workers 25 or older get the minimum wage or less.
  • About 60 percent of these low-wage workers were in the leisure and hospitality industry, primarily food services and drinking places, where wages are supplemented by tips.

History shows that raising minimum wage levels only hurt (often intentionally) low income workers, says IRET:

  • The 1931 Davis-Bacon Act, requiring "prevailing" wages on federally assisted construction projects, was supported by the idea that it would keep contractors from using "cheap colored labor" to underbid contractors using white labor.
  • Apartheid South Africa enacted a minimum wage to price low-skilled black workers out of selected trades.
  • In the 1950s, New England textile manufacturers supported Sen. John F. Kennedy's efforts to increase the federal minimum wage to prevent competing mills from starting up in the low-wage South.

Today, the biggest backers of the minimum wage are unions. One reason: they seek to block low-wage workers from competing with higher-skilled, higher-priced, union members.

Source: "Minimum Wage = Minimum Employment," Institute for Research on the Economics of Taxation, November 2006.


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