The Wall Street Journal (subscription required) reminds us of the folly of minimum wages.
A higher minimum wage has the biggest impact on those with the least experience or the fewest skills. That means in particular those looking for entry-level jobs, especially teenagers. And sure enough, as nearly all economic models predict, the higher minimum has wreaked havoc with teenage job seekers, well beyond what you would expect even in a recession.
They provide a graph to illustrate their argument, but this graph from MJ Perry is even better.
Some respect here Sinclair. It’s for their own good.
Semi Regular Libertarian
6 Mar 10 at 7:57 pm
There is frequent mention of the impact of the minimal wage on workers with marginal skills. However what I think is often over looked is the impact on workers in marginal economies. Our current minimum wage may hurt the job prospects of a low skill worker living in Sydney but in a remote Aboriginal community it means that pretty much no formal job market can exist at all. If we must have a minimum wage then it should be varied according to the economic specifics of various regions.
TerjeP (say tay-a)
6 Mar 10 at 8:51 pm
but in a remote Aboriginal community it means that pretty much no formal job market can exist at all.
Whereas you think they could find jobs even at 5 bucks an hour 300 miles either side of Ayers Rock? Honest question.
I don’t see any job prospects of isolated communities in any way. They need to be motivated to get the hell out of there by giving them a forward date when entitlements run out.
JC
6 Mar 10 at 8:58 pm
JC – We are shipping jobs to China in part because people there will work for low wages. I don’t see why we wouldn’t ship some jobs to NT if the wage differencial was signficant enough. I do agree however that the economic prospects for really remote communities would still be pretty dire and being remote isn’t their only challenge.
TerjeP (say tay-a)
6 Mar 10 at 9:22 pm
You think you’re going to see a car plant in 300 miles due north of Ayers Rock, Terje.
Those communities need to close down. If they still want to remain there all transfer payments should be cut a few years down the track. You could even roll up the forward payments and pay them to leave.
I’m for closing down the minimum wage racket but realistically the future of those people ought to be in the bigger towns as no industry is going to go there.
JC
6 Mar 10 at 9:46 pm
Not car plants no.
TerjeP (say tay-a)
6 Mar 10 at 10:48 pm
Whilst I don’t deny that there is a relationship between unemployment and minimum wages, I note that the sharp increase in unemployment in the graph also coincides with the Global Financial Crisis, which hit the US particularly hard in 2008 and 2009.
So it would be wrong to conclude that rises in the minimum wage produce such dramatic increases in teenage unemployment.
Leon Bertrand
7 Mar 10 at 12:28 pm
“I’m for closing down the minimum wage racket but realistically the future of those people ought to be in the bigger towns as no industry is going to go there.”
Picking losers is just the flip side of picking winners JC.
I reckon the problems of the minimum wage are overstated, though not as much as the benefits, but I would rather see a low minimum wage and a negative tax benefit.
pedro
9 Mar 10 at 9:26 am
Pedro
it’s not picking losers to simply cut out the funding that perversely has people living in the middle of nowhere stewing in their own crime. These remote communities are nothing more than the soft-apartheid of the left.
jtfsoon
9 Mar 10 at 9:38 am
Few people would disagree that high minimum wages causes unemployment.
Asutralia unfortunately has quite high minimum wages compared to other counties in the OECD which John Howard strangely boasted about in the last election campaign.
As the 5 economists pointed out it costs a lot of money to slowly reduce this via the tax system.
We need to get to a UK/NZ world where minimum wages are relatively low that studies are not to sure about their impact.
We do need to get to a world where people have to leave a community to get a job and not stay there on welfare withing far too much time on their hands
Butterfield, Bloomfield & Bishop
9 Mar 10 at 9:52 am
I am not arguing that there is no effect but the graph is totally unconvincing given that overall unemployment looks more or less identical and is largely caused by the GFC. We could scale minimum wage rises to that graph as well.
Perhaps some kind of relative measure with change in teenage versus adult employment and comparing with the 2002 recession might actually be convincing.
Steve Edney
9 Mar 10 at 4:05 pm