We have lots of data and anecdotes to review, so let’s begin with some scholarly research from Europe.
Here are some results from a study in Denmark, where the minimum wage increases when workers reach age 18, at which point many of them lose their jobs (h/t: Marginal Revolution).
This paper estimates the long-run impact of youth minimum wages on youth employment by exploiting a large discontinuity in Danish minimum wage rules at age 18 and using monthly payroll records for the Danish population. …On average, the hourly wage rate jumps up by 40 percent when individuals turn eighteen years old. Employment (extensive margin) falls by 33 percent and total labor input (extensive and intensive margin) decreases by around 45 percent, leaving the aggregate wage payment nearly unchanged. Data on flows into and out of employment show that the drop in employment is driven almost entirely by job loss when individuals turn 18 years old.
While economists are famous for their disagreements (and their incompetent forecasts), there is universal consensus in the profession that demand curves slope downward. That may be meaningless
jargon to non-economists, but it simply means that people buy less of something when it becomes more expensive.
And this is why it makes no senseto impose minimum wage requirements, or to increase mandated wages where such laws already exist.
If you don’t understand this, just do a thought experiment and imagine what would happen if the minimum wage was $100 per hour. The answer is terrible unemployment, of course, which means it’s a very bad idea.
So why, then, is it okay to throw a “modest” number of people into the unemployment line with a “small” increase in the minimum wage?
The big problem for Republicans is not what they believe. Their problem is that anti-Republican reporters are asking the questions. As Jonah Goldberg complains:
“Why does the Left get to pick which issues are the benchmarks for “science”?
Why can’t the measure of being pro-science be the question of heritability of intelligence? Or the existence of fetal pain? Or the distribution of cognitive abilities among the sexes at the extreme right tail of the bell curve? Or if that’s too upsetting, how about dividing the line between those who are pro- and anti-science along the lines of support for geoengineering? Or — coming soon — the role cosmic rays play in cloud formation? Why not make it about support for nuclear power? Or Yucca Mountain? Why not deride the idiots who oppose genetically modified crops, even when they might prevent blindness in children?’
Economic is the science of incentives. Yet most of the delegates in the national Democratic Convention don’t believe in incentives. They believe if a price is too high (think housing rents), the government can push it down and nothing bad will happen. They believe if a price is too low (think wages), government can push it up and nothing bad will happened. They believe that a plan formed by people at the top will work (think Obamacare) even if everyone at the bottom has a self-interest in defeating it.
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