Tuesday, September 8, 2015

Minimum-Wage Hangover

Minimum wage increases in Los Angeles, San Francisco and Seattle have cost thousands of jobs. Andy Puzder. WSJ, an excerpt . . .

Mark Perry of the American Enterprise Institute, Adam Ozimek of Moody’s Analytics and Stephen Bronars of Edgewood Economics reported last month that the restaurant and hotel industries have lost jobs in all three numbers and discovered that the “first wave of minimum wage increases appears to have led to the loss of over 1,100 food service jobs in the Seattle metro division and over 2,500 restaurant jobs in the San Francisco metro division.” That is a conservative estimate, he notes, as the data include areas outside city limits, where the minimum wage didn’t increase.  
This comes as no surprise. In 2014 the Congressional Budget Office found that increasing the minimum wage to $10.10 an hour would result in employment falling by 500,000 jobs nationally. By the way, less than 20% of the earning benefits would flow to people living below the poverty line, as University of California-Irvine economist David Neumark has pointed out. . .  
If government makes something more expensive, businesses will use less of it. Hourly wage mandates continue to drift higher than what consumers can absorb through increased prices. Entry-level jobs will become increasingly scarce as businesses use labor more efficiently and, in some cases, turn to automation.
In particular distress is the youth population. In July, labor-force participation for those ages 16 to 19 stood at 33.5%, the fifth-lowest level since the Bureau of Labor Statistics began compiling the data in 1948. Four of these lows have occurred in the past 18 months. 
So what’s the solution? The first step is realizing that income inequality is a symptom of a larger problem. Raising the minimum wage to reduce inequality is like giving an aspirin to someone who has a brain tumor. It may appear sympathetic and for a moment alleviate the headache, but it won’t cure what is ailing the patient.
The real problem is that more than six years of progressive economic policies—higher taxes, more regulation, ObamaCare, Dodd-Frank and more—have eliminated opportunities. The poverty rate remains at levels generally observed during recessions. Child poverty is at its highest point in 20 years. The U.S. Census Bureau reports that for the first time since it began compiling the data, business closures each year have been exceeding new business startups. . .  
There is only one thing that will decrease poverty and increase opportunity: economic growth. And history has clearly shown that there is only one system that can produce economic growth sufficient to meaningfully reduce poverty and increase opportunity: free enterprise. The best development for workers would be a thriving economy in which growing companies have to compete for their services. 
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