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Meer on Some Hidden Costs of Minimum Wages

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Thanks to David Henderson for publishing at EconLog this excellent op-ed by Jonathan Meer on minimum wages [2]. Here’s a slice, but do read the whole thing:

And then there are those who would definitely lose because they can’t find work, and they aren’t likely to be picked at random. The minimum wage is a blunt instrument. It doesn’t distinguish between types of workers and the households they come from. The teenage children of well-off families, earning money to buy video games, are treated the same as single moms struggling to get by. When wages are set at an artificially high rate, why should an employer take a risk on the single mother who needs the occasional shift off to take her kids to the doctor? The kid from a disadvantaged background who needs some direction on how to treat customers appropriately? Or the recently released felon trying to work his way back into the community? Why should employers bother with them when there are plenty of lower-risk people who are willing to work at those artificially high wages?

Recent evidence [3]from Seattle’s minimum wage increases show that it’s precisely the most inexperienced workers who struggle the most in the face of high minimum wages. And another line of my own research [4]finds that minimum wage increases cause employers shift towards workers with more credentials.

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The ECON 101 case against minimum wages – and the ECON 301 (Intermediate Microeconomics) case against minimum wages, which identifies effects beyond the number of jobs – is each quite powerful. In a rational world, establishing a positive case for minimum-wage legislation would require much more than a handful of empirical studies that find that minimum-wage hikes cause no job losses. Likewise, no such positive case would be established by fantastical claims that markets for low-skilled workers in America are infected with monopsony power. (In the DC area, some major radio stations have recently been running ads by a junk-removal company [5] trying to entice people to come to work for it as junk haulers.)

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