≡ Menu

Don’t Minimize the Negative Effects of Minimum Wages

In my latest column for the Pittsburgh Tribune-Review, I review some of minimum-wage’s negative consequences – for low-skilled workers – beyond (or, often, instead of) unemployment. A slice:

When government raises the minimum wage, employers can reduce the amount of nonwage benefits paid to employees. And so even workers who keep their jobs at the higher minimum wage might nevertheless be made worse off because of reductions in the value of their nonwage benefits.

A similar dynamic operates on the requirements side of jobs. Employers, obviously, expect their employees to produce enough to make their employment worthwhile for employers. And so if the minimum wage is raised, employers can work their employees harder.

Employers can become more strict in demanding that workers arrive on time and in punishing workers who leave work a few minutes early, or cracking down on personal texting, telephoning and emailing during work hours. This intensified strictness enables employers to get more output per hour from each worker.

In short, employers can respond to hikes in the minimum wage by employing fewer workers, cutting the value of workers’ fringe benefits or working employees harder. Most employers will use some combination of these three options. And to the extent that employers either cut the value of fringe benefits or work their employees harder, they will have less incentive to reduce the size of their workforce.

But make no mistake: Employers will adjust in one or more of these three ways — each of which makes workers worse off.