Minimum Wage Effects

February 11, 2021

President Biden has proposed doubling the federal minimum wage from $7.25 an hour to $15 an hour. Democrats have pushed to include the increase in their $1.9 trillion relief bill being debated in Congress. But with millions of people unemployed and small businesses struggling, now would be an awful time to impose such a costly mandate. Fortunately, the president now suggests that a minimum wage increase may not be included in the current relief bill.

Yesterday, the CBO estimated that a minimum wage increase would eliminate 1.4 million jobs. Entry level workers would be hard hit. Milton Friedman noted that the “minimum wage law is most properly described as a law saying employers must discriminate against people who have low skills.

During the campaign, Biden promised that he would create jobs for young adults to “reach full employment as fast as possible.” He also promised, “Building back better means helping small businesses and entrepreneurs come out the other side of this crisis strong.” His minimum wage mandate would do exactly the opposite. It would eliminate jobs for young adults and damage small businesses, as I discuss here in The Hill.

Pointing to minimum wage laws, Friedman noted, “One of the great mistakes is to judge policies and programs by their intentions rather than their results … programs that are labeled as being for the poor, for the needy, almost always have effects exactly the opposite of those which their well‐intentioned sponsors intend them to have.”

I discuss minimum wages in my oped at The Hill here. Ryan Bourne summarizes academic evidence on minimum wages here, and the basic economics are explained here.


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