Minimum Wage’s Unintended Consequences

As was discussed in this UCN post, minimum wage arguments are often laden with good intentions. Of course everyone believes in a fair wage for an honest day’s work. However, what’s generally lacking in the push for a minimum wage is an understanding of the broader consequences of the well-intentioned policies.

For instance, recently there have been groups organizing walkouts (and media coverage) over fast food worker pay. These groups argue for a $15-per-hour minimum wage for fast food workers, which would be almost double the current federal minimum wage. The argument goes that you can’t live on $7.25 an hour, and you certainly can’t raise a family on such low wages. These arguments very well may be true, but they ignore the fact that the great majority of people working minimum wage jobs aren’t raising families. In fact, most of the time they’re the ones being raised. A Heritage Foundation analysis of BLS and Census Bureau data found that the face of the typical worker in a minimum wage job is a young high school or college student, working part time, who hails from a family with a $65,900 household income.

Understanding who is really affected by the minimum wage may take some wind out of the sails of the push for raising the rate. However, there’s an even greater reason to resist these calls for further wage floors. Studies have shown that raising the minimum wage contributes to a rise in the high school dropout rate. Take the fast food worker groups’ call to mandate a $15-per-hour wage. There are many 16-year-olds for whom earning more than $2,000 a month would easily beat out sitting in algebra class. Especially troubling is that leaving school to take these jobs prevents young people from acquiring the education and skills required to meet the goal of the wage floor advocates: providing for one’s self and family. High school dropouts are much more likely to be unemployed, live in poverty, and be incarcerated than those with even a high school diploma.

Minimum wage laws are another case of a well-intentioned government “safety net” serving as a poverty trap for those caught in its web.

Dig Deeper:

Study: Who Earns the Minimum Wage

Article: Minimum Wage Strikers

Website: The Minimum Wage

Blog: Fast Food Strike = Economic Ignorance

Policy Paper: Minimum Wages & School Enrollment

Research Paper: Minimum Wage Effects in the Longer Run

Video: Dropout Nation

Article: Low-Income Workers: Raising The Minimum Wage Ruined Our Lives

Article: How the Minimum Wage Destroyed 1.4 Million Jobs