Increase in Minimum Wage = Decrease in Hours
HUNTSVILLE (WATE) -- The federal minimum wage has gone up to $7.25 an hour and in a county that already has Tennessee's highest unemployment rate, a grocery store has to make some changes.
Scenic Foods sits just off of Highway 63 in Scott County. It's the kind of store where you can get a little bit of everything, including a down home feel. But owner Bruce Posey isn't exactly happy about the 70 cent minimum wage increase. "It is hard on a small business to absorb this."
Starting Monday, the 12 part time employees making minimum wage will have their hours cut. "If we don't cut hours, it could add as much as $400 to $500 per week to the pay roll," Posey explains.
MP: As I pointed out recently, increases in the minimum wage are guaranteed to have adverse effects on employees that will NOT necessarily be reflected in increases in the teenage unemployment rate. In the case above, none of the minimum wage workers at Scenic Foods have lost their jobs because of the minimum wage hike, but they have all had their hours reduced. These workers and thousands of others like them whose hours have been cut, will still be counted as being employed by the BLS, and the teenage unemployment rate won't necessarily change.
Bottom Line: The demand curve for unskilled workers, like all other demand curves, slopes downward. At higher wages, the number of hours demanded for unskilled labor decreases. Period. Unskilled workers are harmed by increases in the minimum wage, even those who manage to keep their jobs like the employees at Scenic Foods.