July 22, 2004
By Paul Kersey
Sen. John Kerry counts himself among those who have concluded
that millions of low-wage, mostly young or unskilled workers
deserve a raise. A pretty hefty one, too: He's called for an
increase in the federal minimum wage from $5.15 to $7 per
The sentiments behind this may be admirable, but the economics are
faulty. Compensation for unskilled, low-wage workers tends to rise
quite rapidly without any government intervention. And any increase
in the minimum wage would decrease the number of jobs available to
unskilled workers. Good intentions don't cut it. Congress should
reject a minimum-wage hike.
Behind calls for a minimum-wage hike lies the assumption that it's
up to government to increase wages for unskilled and inexperienced
workers -- that wages will not naturally increase in a market
economy even as these workers gain experience and skills. The
supporters of an increased minimum wage tend to see low-wage work
as a "dead-end" where promotions, raises and new opportunities
simply don't exist. In this worldview, pay increases not ordered by
government never occur.
But the dead-end job is largely a myth. Minimum-wage earners
typically receive raises and promotions or find more lucrative work
without any governmental help. According to economists William Even
and David Macpherson, in a report for the Employment Policy
Institute, between 1998 and 2002 typical minimum-wage workers saw
their wages climb by 10.4 percent within a year of beginning work
-- and this during a period in which the minimum wage didn't
Moreover, recent Census data shows that only 15 percent of workers
earning within $1.50 of the minimum wage belong to poor families,
while 20 percent belong to families whose total earnings exceed
$80,000 per year. The average low-wage worker had a total family
income of more than $40,000. Concern for the working poor may
motivate many supporters of minimum-wage increases, but the working
poor make up only a small portion of those who would benefit from a
higher minimum wage.
Nonetheless, minimum-wage jobs play a valuable role in the economy,
and their value to workers goes beyond the modest monetary
compensation. In many cases these jobs provide a valuable
introduction to the working world for teens and young adults who
still live with their families. Most of these workers will reduce
their hours or leave their jobs as needed for classes and move out
of minimum-wage work shortly after completing their education. But
even those who must work full-time at minimum-wage jobs gain
experience and a work record they can parley into raises,
promotions or more lucrative jobs.
Nobody wants to work for minimum wage any longer than necessary,
but that's no reason to adopt a policy likely to reduce the number
of low-wage jobs available. And in fact, most economists contend
that increases in the minimum wage lead to at least a modest
reduction in job openings available to unskilled and inexperienced
Increases in the minimum wage in 1990 and '91 led to a 12 percent
decrease in employment opportunities for teens, according to
calculations based on Bureau of Labor Statistics data. Minimum-wage
hikes in 1996 and '97 led to less-dramatic but still substantial
decreases in opportunities for teens.
But teens aren't the only ones who lose out. Minimum-wage increases
also have been linked to increases in welfare caseloads.
So although Sen. Kerry, along with nearly all Americans, may
sympathize with minimum-wage workers, we should resist calls to
raise their wages by government decree. Government can't force
employers to pay higher wages without making jobs scarcer for
unskilled workers. The good news is it doesn't have to.
Compensation for minimum-wage workers will rise naturally along
with their experience and skills.
All we need to do is stay out of the way.
Paul Kersey is a policy analyst who specializes in labor issues
at The Heritage Foundation (heritage.org), a Washington-based
public policy research institute.
Distributed nationally on the Knight-Ridder Tribune wire
Sen. John Kerry counts himself among those who have concluded that millions of low-wage, mostly young or unskilled workers deserve a raise. A pretty hefty one, too: He's called for an increase in the federal minimum wage from $5.15 to $7 per hour.
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