The headline should have said, “Reality Strikes Back,” because minimum wage laws having nothing to do with science. However, as with the outcome of certain scientific demonstrations, the outcomes of minimum wage laws are known before they’re enacted. From Paul Jacob at townhall.com:
It should shock no one: denying unskilled workers the opportunity to sell their labor for less ends up disadvantaging those unskilled workers against better-skilled ones.
That’s precisely what standard economic theory predicts. It’s what common sense should tell you.
And it’s what a major new study — with access to more data sets than ever before — says does happen. Minimum wage laws put workers at the lowest rung of the economic ladder out of work.
But, but . . . I hear the sputtering: minimum wage laws are nearly everywhere, and sure are popular.
Well, not every popular idea about policy is good. Or bad.
So how do we tell the difference?
One way is evidence.
The modern administrative state was promoted heavily by social scientists who thought that piecemeal social engineering should be tested. A few even thought that the older experiment in limited-government federal republicanism gave Americans a near-ideal testing ground: “the laboratoriesof democracy.”
Which is why the new study is so interesting. Activists and politicians have been pushing big increases in the minimum wage in cities around the country. Seattle, Washington, has been one of those, establishing an $11.00/hour legal minimum in April of 2015, then raising that minimum by two dollars in 2016. The City of Seattle commissioned a study of “the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance,” and it shows clear results.
While the first hike had somewhat ambiguous results, the second hike led to a 9 percent reduction in hours worked at wages below $19/hour. That is a major finding.
And there’s more.
After the increase to $13, there was a reduction of over $100 million per year in total payroll for low-wage jobs. But, as they say in advertising, there’s even more!
The total payroll losses average out to about $125 per job per month. That is a reduction in income for over a hundred bucks per month.
To continue reading: The Minimum Wage — Science Strikes Back