And although it’s nearly 19 years old – but not quite as old as the 1994 American Economic Review article by David Card and Alan Krueger – this paper by Richard Vedder and Lowell Gallaway on the damage done by minimum-wage legislation is also worth reading.
For instance, look at the fast food industry, which employs a lot of lower-skilled, lower-paid employees. Since 1987, output per hour in all non-farm businesses has risen by around 71%, according to the Bureau of Labor Statistics, an annual rate of 2.19%. The Times’ logic says wages in the fast food industry should have risen by a like amount. But BLS data show that productivity at self-serve restaurants has risen only by 0.45% annually since 1987, for total growth of 12%.
The simple fact is that if fast food restaurants increased wages by 71% over a period in which their own labor productivity rose by only 12%, they’d be out of business. Ask yourself: do shuttered businesses pay higher wages than firms that remain in business? If not, you might want to think twice about that $15 minimum wage.
And now for the damage done by minimum-wage legislation combined with Obamacare, check out this essay in yesterday’s Investor’s Business Daily. (HT W.E. Heasley) Its headline says it all:
$10 Minimum Wage + ObamaCare = 70% Labor Cost Hike