$15 Minimum Wage Could Kill Up to 5 Million Jobs
Forward comrades to the unemployment lines and soup kitchens!
In my column, Minimum Wage and Magical Thinking, I reported on a couple of recent studies that tried to estimate what the effect of raising the minimum wage on employment would be. A 2014 study in the Journal of Labor Research calculated that raising the national minimum wage from $7.25 to $10.10 as promoted by President Obama would result in the loss of between 550,000 to 1.5 million jobs. A second National Bureau of Economic Research study estimated that as a consequence of raising the minimum wage from $5.15 to $7.25 the U.S. economy had up to 1.4 million fewer jobs than it would otherwise have had.
Earlier this year, the Democratic Party Platform adopted a plank in favor of mandating a $15 per hour national minimum wage.
In today's New York Times, Stony Brook University economist Peter Salins declares that this is a recipe to further impoverish the already poor. From his op/ed:
One of the more conservative estimates, issued by the Congressional Budget Office in 2014, projected that 500,000 jobs could be lost if the federal minimum wage were raised to $10.10 (the level then recommended by President Obama), though it acknowledged the losses could be lower. By my own estimation, based on a model of the national labor market developed by Jonathan Meer of Texas A&M University and Jeremy West of M.I.T., raising the minimum wage to $15 could reduce the total number of jobs nationally by three million to five million (emphasis added).
He further points out that the folks newly unemployed as a result of this kind of economic central planning will be ineligible for earned income tax credits (since they have no income). In addition, their unemployment benefits, which will be lower than what they were earning before being tossed out of their jobs, will run out in half a year or so. And since the new minimum wage is now too high to justify the hiring of low-skilled workers, their chances of getting at a new job are virtually non-existent. He concludes that proponents of the $15 minimum wage …
…are likely to visit grievous harm on some of the very individuals and families they claim to be helping. By blithely discounting the economic realities of the labor market in many parts of the country, the proponents of such increases risk putting millions of Americans in low-skill jobs out of work, thus making them ineligible for the tax credit and possibly in danger of destitution.
Absolutely right. Salins' alternative is an expansion the earned income credit; a topic for another time.