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The Detectable and the Undetectable

Here’s a letter to the Washington Examiner:

Jason Russell nicely summarizes the much-discussed new study that finds that raising the minimum wage destroys jobs for many low-skilled workers (“New evidence that the minimum wage kills jobs,” Dec. 9).  Yet even this careful study underestimates the damage that minimum-wage legislation inflicts on the job prospects of the unskilled.

Employers in the U.S. have now had 76 years to adjust to the existence of this regulation that makes unprofitable the hiring of the lowest-skilled workers.  One result is that business and labor practices that would have employed legions of low-skilled workers in the absence of a minimum wage were either long ago snuffed out or never created.  Empirical studies today, therefore, can at best detect only changes in employment at existing firms that use existing business practices – firms and practices that, having evolved in an economic environment with a minimum wage, were never suited to employ as many low-skilled workers as would be employed by businesses that evolved in an environment without a minimum wage.

Raising the existing minimum wage does indeed destroy some jobs.  But even the most accurate measurements of today’s job destruction offer no clue to the full magnitude of the vast amount of economic opportunities that the minimum wage denies to the poor and unskilled.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030