Got a minute? Use it to understand the folly of minimum wage laws
In this video running just over one minute, Free to Choose Media editor and Cato Institute senior fellow Johan Norberg explains precisely why forced minimum wage hikes hurt workers.
Contemporary arguments that years of wage stagnation in low-skill employment fields merit government mandated minimum wage hikes are “dead wrong,” Norberg says.
And there’s plenty of supporting evidence for his claim.
A Congressional Budget Office report out last year warned that President Barack Obama’s plan to raise the Federal minimum wage to $10.10 an hour would cost the economy 500,000 jobs. And a studyfrom the University of California at San Diego around the same time showed that past minimum wage increases have already put low-skill workers at a disadvantage. Future hikes, the researchers theorized, could destroy around 1.4 million jobs.
Why? Because when the price of labor increases, employers look for ways to save money.
“Minimum wage laws actually force us to discriminate against people who have low skills,” Norberg contends.
If governments want to improve the lives of low-skill workers, Norberg advises that they’d be smarter to focus on training.
He also notes that picking an arbitrary number for a minimum wage hike defies logic from a market perspective.
“If you think that increasing the minimum wage to fifteen dollars an hour helps people,” he says. “Well, why don’t we increase it to thirty dollars an hour or one hundred dollars an hour.”
Large minimum wage increases, Norberg says, would bring about disastrous economic consequences and hurt most the people they are intended to help.
“Yes, making ends meet with minimum wage jobs is hard— but it’s even harder without one,” he concludes.
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