Minimum Wage Laws Harm the Poor

I would like to start by thanking my opponent for engaging in this debate. Minimum wage laws increase unemployment. The reasons for this are simple. Many workers simply do not have the job skills to add more than a few dollars of value to the business they work for per hour. A low skilled worker who can produce only $4 of value per hour will not be hired for $8 per hour. Thus, an increase in minimum wage often makes these workers a liability, creating an incentive for employers to cut jobs. Some economists counter that workers are human beings, and the human element of firing workers is powerful enough to discourage employers from doing so. This is often true, but it misses the real problematic effect that minimum wage has on unemployment. While a few workers do lose their jobs due to minimum wage increases, the vastly bigger problem is that many workers who otherwise could have found jobs cannot find them because the minimum wage is too high. Essentially, the issue is not so much the incentive to fire workers, but the DISINCENTIVE to hire workers in the FUTURE. The negative impact of raising the minimum wage is not nearly as dramatic as the negative effect of having a minimum wage in the first place. Economists are divided over the extent to which increases in minimum wage affect unemployment. Many left-leaning economists argue that the effect is very small. Unfortunately, the poor are disproportionately hurt by the minimum wage, meaning that even if the overall effect of minimum wage on unemployment were very small, the poor would still be significantly hurt. Data from the Statistical Abstract of the United States (up until the program was discontinued in 2011) and the Bureau of Labor Statistics show no correlation between minimum wage levels and unemployment among college graduates, but they do show a significant positive relationship between the two for workers who graduated from high school, but not college, and the relationship is even more dramatic among workers who did not graduate from high school. (i.e. years in which the minimum wage was higher there was higher unemployment) This makes sense, as college graduates are the most skilled workers and are thus very unlikely to be affected by minimum wage, while poor workers who generally have fewer marketable skills and cannot add as much value to their business, are at risk of losing, or not finding, a job due to minimum wage laws. As college graduates make up more than 30% of Americans, http://www.nytimes.com... this enormous number of high skilled workers makes unemployment statistics for the population as a whole significantly lower than they are for poor low skilled workers. Readers who are still unconvinced that minimum wage laws cause unemployment can consider a real life experience that we are all familiar with. From the perspective of the owner of a fast food restaurant, it makes sense to hire a low skilled high school worker for a few dollars per hour. But if the employer is required by law to pay at least $7 per hour, adults (who have more expenses than teenagers) will become interested in the job. This means that when hiring a new employee, the employer will be presented with the choice between a teenager (with little work experience) and an adult (who will almost certainly have more work experience). Very few sane employers will chose the lower skilled teenager over the higher skilled adult. A few decades ago, most jobs in the fast food industry were held by teenage high school students. Now, due to increases in minimum wage, very few are. There are now so many fast food workers with families that there is a growing movement in the industry to demand a wage high enough to raise a family on. This is a classic example of how low wage workers suffer from minimum wage laws. Teenagers are the usually the lowest skilled group in the labor market and are therefore severely affected by minimum wage. Analysis of all 50 states shows that on average, states with minimum wage levels higher than the federal minimum have significantly higher rates of teen unemployment than those at the federal minimum. http://consultingbyrpm.com... Many teenage workers come from middle and upper class households; this example only serves to illustrate how low skilled workers such as teenagers and poor people are negatively affected by minimum wage laws. However, it is worth noting that some of the teenage workers come from poor households. Taking away their chance of earning money and valuable work experience makes higher education, one of the best paths out of poverty, even more unattainable. To summarize, minimum wage laws harm the poor by increasing unemployment among poor people, discouraging future employment, especially among poor people, and forcing young people out of the workforce, thus decreasing social mobility. Many workers do keep their jobs and receive a higher salary (though many companies compensate by cutting benefits) due to minimum wage laws. However, even for them, the benefits are often not as dramatic as they are claimed to be. Rather than raising wages, minimum wage laws often merely get rid of industries in which labor is simply not worth $8 per hour. In twentieth century Spain for example, whole fish processing industries disappeared when the fishing companies were required to pay large salaries and benefits. The companies simply sold lower quality fish as consumers were unwilling to pay enough for processing, as it would have taken to pay the workers. More importantly, increases in minimum wage cause inflation. Every 10% increase in minimum wage is matched by a 4% increase in price level. http://ideas.repec.org... This means that even workers who keep their jobs and receive higher salaries are only 6% better off, not 10%. Those who lose their jobs, were already unemployed, or are retired are 4% WORSE off. Given that so many poor people are unemployed, this calls into question the efficacy of minimum wage laws as an anti poverty tactic. Undoubtedly, some poor people are benefited by minimum wage laws, but it is important to remember where these benefits come from. The general public believes that the benefit that a few workers receive from minimum wage laws comes from the business owners and patrons, (the middle and upper classes) While this is true to some extent, a very substantial part of those benefits come at cost to other poor people who are forced out of the labor market or are forced to pay higher prices. If we designed a policy that divided the poor into two groups, and took all of one group"s money to distribute it among the other group. This would help a lot of poor people, but it could hardly be considered a poverty alleviating program, even if a few dollars from other sources were thrown into the distribution. If minimum wage laws harm the poor, why did anyone create them in the first place? The answer, sadly, is that they were intended to hurt the poor. English labour politicians believed that forcing disabled and incompetent workers out of the work force would empower unions, by making it harder for employers to find scrubs to hire during strikes. In South Africa, white labor unions supported minimum wage laws expressly because they would force the generally low skilled black laborers out of work. Over time, the misinformed public came to believe that minimum wage laws are a gift to the poor. Minimum wage laws have set up a system in which people have jobs inappropriate to their skill level. Changing this system might cause temporary hardship, but it is important to remember the soviet woman in a breadline who turns to her friend and says, "You think this is bad. In capitalist countries, the government doesn"t provide any bread at all!"