The minimum wage controversy.

I do not favor a minimum wage. There are many reasons for this. But today I will share with you a study – R Street Institute Policy Study No. 75 published in November 2016. R Street Institute is a free market policy think tank that promotes limited government. So, from a “full disclosure” perspective, right up The Rugged Individualist’s alley.

The effect of a minimum wage hike is very different depending on where you live in the USA. Most Americans give little or no thought to the fact that federal policy means something different in Brownsville Texas, than it means in San Francisco.

The following is the executive summary of their findings.

  • A $15 hourly minimum wage is already legislated to become law in select, high-cost metropolitan areas and across the entire state of California. The Demo­crat Party officially made a $15 hourly federal mini­mum wage part of its platform in 2016. We examine the impact of regulating a $15 hourly federal mini­mum wage across distinct metropolitan areas and industries in the United States. Our analysis uses data on the wage distribution by metropolitan area and industry down to the occupation level.
  • The U.S. labor market is made up of a set of highly heterogeneous and spatially diffuse metropoli­tan areas. Each of these areas has a unique mix of industries, workers, wage levels and local policies. A $15 hourly minimum wage would interact differ­ently with each labor market to produce drastically different effects across areas and industries. The proposed policy would be binding for fully 62 percent of the employed population in Brownsville-Harlin­gen, Texas, but only for 22 percent of the employed population in San Francisco.
  • A $15 hourly minimum wage would represent a dra­matic increase in labor costs for many employers and the cost increase would be spread unevenly across industries, metropolitan areas and the wage distri­bution. In Dallas, employers of workers in the bot­tom percentile of the wage distribution would see a nearly 80 percent labor-cost increase imposed, while employers of workers in the 25th percentile would have a 40 percent labor-cost increase imposed. In Seattle, a $15 hourly minimum wage would represent a 40 percent labor-cost increase on nearly the entire bottom decile of the distribution.
  • Employment loss would result from the labor-cost increase under a $15 hourly minimum wage. We estimate the New York metropolitan alone would lose approximately 170,000 jobs, while Los Angeles, Chicago and Houston would each lose more than 100,000 jobs. Nationally, 1.7 million workers in the food preparation and serving industry—representing nearly 18 percent of all covered workers—would lose their jobs under a $15 hourly minimum wage. More than 900,000 workers in office and administrative support occupations would lose their jobs, totaling nearly 12 percent of all covered workers.
  • Job loss under a $15 hourly minimum wage would be concentrated among the very poorest workers in met­ropolitan areas. In Chicago, 28 percent of job losses would be concentrated among workers in the bottom decile of the wage distribution, while 38 percent of job losses in Boston would be concentrated among the poorest 10 percent of wage earners.

I would like to thank HP for sending this to me.

Roy Filly

About Roy Filly

Please read my first blog in which I describe myself and my goals.
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4 Responses to The minimum wage controversy.

  1. Starchild says:

    Completely agree with this post, but the term “minimum wage laws” is unfortunate, because it perpetuates the fiction that there is a minimum wage which the State can increase by legal fiat. In fact the real “minimum wage” is always zero, because that’s what you’ll be earning if you can’t get a job because government has regulated your value as an employee out of existence by demanding that employers not hire you at all unless they pay you more than the value they expect to get from your work. This is why I think it’s better to refer to these laws as “wage control laws”.

  2. David L. Wood says:

    Starchild has said it well, and such “wage control laws” affect young teen agers and black youths the most.

  3. Pingback: The “substitution effect.” | The Rugged Individualist

  4. Pingback: Thought you’d like to know. | The Rugged Individualist

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