Labor activists have continued to press for a nationwide minimum wage of 15 dollars, and in a surprisingly economically-literate article at ABC news, commentators recognized that the higher a minimum wage is pushed, the more it will increase unemployment:

“It seems to me very probable that the employment losses would be quite a bit larger under a $15 federal minimum than under a $12 minimum,” Burtless said. “And I am speaking as a labor economist who strongly supports the president's call for an increase in the federal minimum wage to $10.10 an hour. I can even be persuaded that a hike in the minimum wage to $12, if phased in over a long enough period, could be a good idea, depending on the condition of the economy and the rate of increase in U.S. median wages.”

“If we want low-skilled people to still get or keep jobs, $12 is a stretch for many, while $15 might be impossible. Think of someone earning $10 right now,” Holzer said. “They probably get hired or kept at $12 but not $15. And those earning $8 right now might be priced out the market at both wages.”

In other words, if you set the minimum wage at a point where it won't affect that many workers, and you won't end up with noticeably higher unemployment rates on your hands.

Make no mistake: as a result of any increase in the minimum wage, fewer new hires of low-skilled workers will take place, and some may even be laid off (ceteris paribus). But proponents believe that the workers who are priced out of a job are just the price “we” pay for raising the wage of those lucky enough to keep their jobs.

At $12 per hour — this way of thinking goes — some people will simply be unlucky and lose their jobs. At $15 per hour, though, an even larger number will lose their jobs.

This fact is hard to deny, and it's why no one advocates for an increase in the minimum wage to $50 dollars per hour. Virtually everyone instinctively knows that no one will hire low-skilled workers at that wage. Nevertheless, there remains an idea that the downside can be minimized by raising the minimum wage incrementally.

That's just wishful thinking, but it is true that raising the minimum wage incrementally is better than raising it $10 or $20 all at once. That would throw the labor markets into complete disarray.

Minimum Wages : Keep it Local

Another less-bad way of dealing with minimum wage increases is to make sure that they are done only at the local level. A nationwide minimum wage is one of the more damaging ways of implementing a minimum wage, and this also brings us back to what the economist Holzer was saying in the opening quotation.

Holzer correctly notes that the more you try to push the rate above the current market rate, the more unemployment will result.

This …read more

Source: A Nationwide Minimum Wage Is Even Worse Than State-Imposed Wages

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