It should be obvious to everyone that the minimum wage employers may legally pay workers is directly linked to the number of job openings companies will have at the unskilled end of the market. But evidently that bitter economic reality is lost on Democrats in Congress:
the recent act of Congress that has caused the most economic hardship goes to the May 2007 law raising the minimum wage in three stages to $7.25 an hour from $5.15. Rarely has a law hurt more vulnerable people more quickly.
A higher minimum wage has the biggest impact on those with the least experience or the fewest skills. That means in particular those looking for entry-level jobs, especially teenagers. And sure enough, as nearly all economic models predict, the higher minimum has wreaked havoc with teenage job seekers
Boo hoo, some might say. Teens don’t need to work, at least during the school year, and those who do simply compete with unskilled adult workers. There’s some truth to that argument; however, it’s not only teens who are displaced from jobs: Unskilled workers of all ages are less in demand now than they were a year ago in large part because of the higher minimum wage.
I worked at McDonalds, among other low-paying jobs, as a teenager and at the time their labor costs ran about 15% of sales, if memory recalls. If sales are $3M at a store, the owner has $450K to pay in salaries, period, if he’s going to stay in the business. If he’s forced to pay a higher wage, only two things can happen and neither of them is pleasant.
First, the owner could fire or demote one or more of his salaried managers. Not a good decision, for someone has to run the store and it’s not going to be done effectively in the absence of a qualified – read “skilled” – supervisor.
The second possibility – and that one that actually occurs in the real world – is that the owner will tell the managers to reduce the number of hours worked by the low-end workers to the point at which he’s making satisfactory profits again.
Sure, those with jobs are making more money. But those without are 100% unemployed and most of these people have few, if any, of the skills needed to open their own businesses or otherwise create a job for themselves.
That’s the result of Democrats’ ludicrously misplaced compassion for the poor. And the cycle continues.