So simple even Nancy Pelosi could understand:
Classical economics teaches that for a given job, there is a market-clearing price — the price at which both someone is willing to do it and someone else is willing to pay them to do it. If you raise the legal minimum above that price, you may get more people willing to perform the job, but you’ll probably also get less people (employers) willing to pay the new, higher price to get the job done.
To picture how this works, think about the grocery bagger in the supermarket, a classic low-wage service job. Supermarkets hire grocery baggers for the minimum wage, or close to it, because it’s a perk that makes their customers’ experience a bit nicer and helps move the lines along, possibly requiring fewer cashiers, who cost more to hire than grocery baggers.
Now, if you pass a law saying everyone, including grocery baggers, has to be paid $10 an hour, what happens? The supermarket probably hires fewer baggers, or has them work fewer hours. Perhaps they decide they only need baggers between 4 p.m. and 7 p.m. If you put the minimum wage up to $20 an hour, shoppers bag their own groceries. This is so clear that it’s taken some time for the defenders of an ever-rising minimum wage to come up with an adequate theory to obscure it.
Most jobs do not involve bagging groceries. But most jobs don’t pay the minimum wage. The Bureau of Labor Statistics puts the number of minimum-wage earners at 2% of the work force. The majority of these are under 25 years old and single….
It is implicit in the logic behind raising the minimum wage that if we squeeze employers just a little, they won’t even notice. Another argument, this one made explicitly, is that jobs are destroyed, but the wage gains more than make up for the reduced number of jobs. But this is only true if it’s not your job that is destroyed. If you are a young black male, you are slightly more likely than the general population to be paid minimum wage, but you are almost 10 times as likely not to have a job at all. And if you’re unemployed, raising the minimum wage not only doesn’t help you find a job; it probably hurts. Welcome to Speaker Pelosi’s idea of progress.
The full article can be found here.