It makes good sense to believe that a minimum wage law destroys jobs. Common sense will point out to you that, if a company is struggling, its revenue cannot increase if they are forced to pay more for employees. For example, what would happen to McDonald’s, which is already struggling, if every employee was paid double?
And now there is more evidence. Breitbart.com reports: “Study Claims Minimum Wage Increase Cost Americans 1.4 Million U.S. Jobs.”
A new study by researchers Jeffrey Clemens and Michael Wither from the University of California San Diego found that low-skilled workers were the most adversely affected by minimum wage increases, despite the fact that this was the group that such legislation sought to help.
The study shows that between July 23, 2007 and July 24, 2009, the federal minimum wage rose from $5.15 to $7.25 per hour. During this period, the employment-to-population ratio declined substantially—by 4 percentage points among adults aged 25 to 54, and by 8 percentage points among those aged 15 to 24.
Up to now, economists have disagreed as to the part that the federal minimum wage increases played in unemployment, but the new methodology employed carefully delineated control groups to isolate the variable of minimum wage in order to determine its precise effects.
For example, the researchers were able to compare the effects of the wage hikes in states directly affected by hikes and compare them to what happened in states whose minimum wage was already higher than the federal level, and thus were unaffected by the change.
The scholars also compared data between low-skilled workers whose wages were directly targeted by the new federal minimum and those whose wages were moderately above. They investigated the effects of recent federal minimum wage increases on both the employment and income trajectories of low-skilled workers.
This probably helps explain the popularity of minimum wage laws. The people who get hurt by the law are the least skilled workers. Others benefit at their expense.