February 21, 2013

Another View: Editorial, president wrong about raising minimum wage

Paying more per hour might benefit some workers, but it limits opportunity for others.

By Martin Jones

The Press Herald thinks President Obama's proposal to raise the federal minimum wage from $7.25 to $9 an hour is a great idea ("Our View: Minimum wage hike would boost economy," Feb. 14).

On the contrary, raising the minimum wage benefits those who receive the higher pay, but it also has less visible, unintended consequences that do more harm than good. A few studies argue that raising minimum pay doesn't affect the number of jobs offered, or the number of hours worked, but they are in the minority.

In a comprehensive survey of research, economists David Neumark and William Wascher found a strong preponderance of evidence that raising the minimum wage has a negative impact on families below the poverty line. But arguments to leave the minimum wage alone go beyond the pick-your-study variety.

With the general unemployment rate at 7.9 percent, the teenage rate at 23 percent and the black teenage rate at 38 percent, can anyone argue seriously that these rates will go down if the cost of labor goes up, unless there are corresponding increases in productivity and output?

The government can't magically increase aggregate incomes, or create wealth, or make the economy grow faster by simply redistributing income or by imposing a form of price controls on wages. Raising the minimum wage is mostly a feel-good policy that ignores the sources of other income, like the earned income tax credit, whose expansion would be of more help to low-income workers and less harmful to small businesses.

It is also a textbook example of the observation that good intentions don't always translate into good policy.

Martin Jones is a resident of Freeport.


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