Should Low-Skill Workers Eat Cake?

Yesterday, the governors of California and New York signed legislation to raise their states’ minimum wage over the next few years to $15 an hour throughout California and for much of New York. Similar proposals are percolating in other state and local governments, and Democratic presidential candidate Bernie Sanders has called for a national minimum wage of $15/hour. Predictably, critics of raising the minimum wage are arguing that the higher wage floor will hurt employment for low-skill workers, the very people the wage floor is intended to help. A worker will be employed only if the value of his output is greater than the cost of employing him—a cost that includes wages, employer payroll taxes (e.g., Social Security, Medicare, unemployment insurance), training and outfitting costs, the new health care mandate and other benefits, etc. According to these opponents, the higher wage floor will reduce employment for low-skill workers and encourage employers to find non-labor ways to accomplish low-skill tasks (e.g., ATM machines, self-serve gas pumps, vending machines, automated phone answering systems). Wage-increase supporters dismiss this concern, claiming there’s no proof that a higher wage floor hurts employment. A very large body of empirical research indicates otherwise, however, with the negative effects falling mainly on workers below age 24 (which isn’t surprising, as 77% of workers earning the federal minimum wage are below age 24, and they have few demonstra...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs