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JANUARY 17, 2011 | Policy Report by COMMONWEALTH FOUNDATION
80 Ideas for a Prosperous Pennsylvania
A Blueprint for Transforming the Commonwealth
Pennsylvania must undergo a rapid transformation to reverse the poor policy decisions that have eroded economic freedoms and brought the state to its present condition. To provide a roadmap for success in this critical endeavor, the Commonwealth Foundation has compiled a list of 80 policy recommendations for Gov. Corbett and state legi
JUNE 9, 2008 | Commentary by NATHAN BENEFIELD
The Nanny State Mentality
Anyone who has observed politics for long would see that too many politicians believe nothing positive would happen unless they pass a law requiring it. They think that the American people are dependent on them for their wealth, safety, and happiness.
AUGUST 22, 2007 | Commentary by NATHAN BENEFIELD
Minimum Wage COLAs: Overstated Benefits & Hidden Costs
Support for minimum wage increases is based on the idea that a higher minimum wage will “help the poor” by increasing their pay and lifting them out of poverty. However, this perception is far from the reality. Minimum wage increases do not target the poor, they do not improve the lives and income of low-skill workers
Recent Blog Posts
JANUARY 27, 2011
Minimum Wage Insanity
Let's start with sanity, some logic.
Theorem: A firm cannot pay workers more than the value that they add to the firm and remain in business.
Corollary 1: Imposing a minimum wage will determine who can get a job and who cannot.
Corollary 2: A minimum wage does not impact the salaries of workers who add more value than the minimum if wages are set in a market environment.
Corollary 3: Eliminating the minimum wage will create employment opportunities for those who add value less than the prevailing minimum and will not result in reductions in wages for workers who add value in excess of the prevailing minimum.
GM is an example of a firm that was compelled to pay more than the value workers added and it failed as predicted a decade ago. Only huge contributions of capital by those stock and bond holders who lost their investment and taxpayers who bailed it out have made today's GM possible. Whether it can survive on its own is still unknown.
OK, makes sense, workers must "pay their own way" or the firm loses money hiring them. The minimum wage sets this hurdle - a worker must bring at least 2,000 hours x minimum wage to the firm to be employed. The higher the minimum wage, the higher the hurdle the worker must surmount. Thus, setting the minimum wage determines who can get a job and who cannot.
Here's a recent "real world" example.
In the first half of 2009, the economy shrank at an alarming -4%, part of the worst recession since the Depression. In the first half, teen employment fell by 270,000. This is reasonable, a much weaker economy requires fewer workers to take care of customers.
According to the NBER, the recession ended in June, 2009 and sure enough, the economy grew at a hot 4% rate in the second half. This should have produced an end to teen job loss at a minimum or maybe an increase in jobs. Teen employment fell by 580,000 jobs. Why? Well one BIG reason is that Congress raised the minimum wage in July, 2009 by 10.7%. In a lousy economy, Congress compelled owners to give a huge raise to unskilled workers OR NOT HIRE THEM. Hello!!
Job growth has been very slow in the recovery, and Congress has passed much legislation allegedly to encourage hiring. Yet the White House is now talking about raising the minimum wage to $9. All this will do is relegate more youth to the street corner economy, not just when it happens but forever since the minimum wage sets the hurdle to be beaten every year from the time it is passed. Are these people connected at all to reality? Not exactly "pro-jobs" policy, and it has even worse long term implications as those displaced by the higher minimum will not get the "on the job" training that we all experienced and needed to develop into productive workers.
William Dunkelberg, PhD is an Economics Professor at Temple University and a Commonwealth Foundation Board Member
posted by WILLIAM DUNKELBERG | 10:19 AM | 0 comment
JUNE 24, 2010
Video: How Minimum Wage Laws Kill Jobs
The Center for Freedom and Prosperity has a new video out explaining how minimum wage laws kill jobs.
From 2006 to 2009 the minimum wage rate increased over 40%. Recent research from Ball State University found a 10% increase in the minimum wage results in an increase in unemployment, affecting youth and the poor the most severely. You can read more about the affects of minimum wage rates here.
posted by KATRINA CURRIE | 09:10 AM | 0 comment
MARCH 10, 2010
Is Minimum Wage the Panacea or the Disease
A new report by the Bureau of Business Research at Ball State University found that the recent minimum wage increases account for 550,000 fewer part-time jobs. According to the analysis of Bureau of Labor Statistics data, most these losses are among workers between the age of 16 and 19. (HT: Americans for Tax Reform)
The minimum wage hike during a downturn had a significant impact, especially on part-time workers, because it as business could no longer afford the additional costs. As a result, jobs losses among younger workers were especially pronounced.
Federal and state governments legislate minimum wage to help the poor and unskilled. Yet, studies and consensus among economists have found that minimum wage laws have a negative effect on employment. Indeed countless studies of minimum wage laws have found that they reduce employment, primarily among the low-skill workers and disproportionately affect the young.
posted by ABHILASH SAMUEL | 10:38 AM | 0 comment
