Minimum Wage Increase Means Fewer Jobs

From Cato's daily email:

“The minimum wage rises 70 cents to $5.85 an hour today, the first increase in a decade," reports The New York Times. "It ends the longest period without an increase since the federal minimum wage was enacted in 1938. The last previous increase came in September 1997. Legislation signed in May increases the wage 70 cents each summer until 2009, when it will reach $7.25 an hour. Government figures show about 1.7 million people earned $5.15 or less per hour in 2006. A person working 40 hours a week at the current minimum wage of $5.15 makes about $10,700 a year. A raise to $5.85 an hour would increase that to $12,168 a year before taxes. An increase to $7.25 would raise that to just over $15,000 a year."

James A. Dorn, editor of the Cato Journal, writes: "Arbitrarily increasing the legal minimum wage simply increases the price of labor without changing a worker's skill level or other conditions that lead to low wages. Congress cannot repeal the law of demand by a stroke of the legislative pen. When the real (inflation-adjusted) minimum wage rises above the prevailing market wage for unskilled workers, employers will cut back on hours, reduce benefits, and introduce labor-saving methods of production. This is common sense. "Government interventions such as the minimum wage destroy opportunities for the least skilled members of society. The government promises low-skilled workers higher wage rates, but their incomes will be zero if they lose their jobs. Contrary to popular opinion, a minimum wage law is not 'progressive' legislation. Rather, it prevents progress by limiting the options of poor people."