Tuesday, September 10, 2013

Slowly it turned...step by step...

The minimum wage isn't a job destroyer, it's a job growth slower-downer, say Jonathan Meer and Jeremy West of Texas A&M;
...we found that, although only about 3.3% of all employees are paid the minimum wage, nearly 12% of those who enter the workforce are paid that amount. Indeed, nearly a third of minimum-wage workers are recent workforce entrants. Minimum-wage workers are also likely to transition to higher pay quickly: of those who remain employed after one year, about 60% are paid in excess of the minimum wage the following year. As such, it seems likely that any effects of the minimum wage are more likely to be reflected among new workers and in new job openings than on the existing stock of employment.
And that effect is negative;
Our findings are unequivocal: higher minimum wages lead to lower rates of job growth. Indeed, a ten percent increase in the minimum wage causes roughly half a percentage point reduction in the rate of job growth, a very large effect..... employers respond to the minimum wage by growing more slowly. 
And they have a handy example;
The District of Columbia City Council recently passed an ordinance that would raise the District’s minimum wage to $12.50 per hour, but that would apply only to large retailers. In response, Wal-Mart announced that it would no longer build three of the stores it had planned to open in the city. This sort of response is precisely the type of effect that we found in our study: a reduction of job creation, not a loss of existing jobs. Minimum-wage policies may not cause an immediate shock to employment, as is often feared, but a reduction in the rate of net job growth. This effect is all the more insidious for being difficult to detect. Employment growth is slowed, but more importantly, the long-run prospects for individuals are damaged, as they are delayed in the opportunity to develop skills and work experience – to grasp that crucial first rung on the career ladder.
Thus denying the unskilled opportunities to remedy their condition. Could we call it the cost of compassion?

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