Pink slips for the poor
Today (July 24, 2008) a new federally mandated minimum wage took effect, jumping from $5.85 to $6.55 per hour. The $0.70 jump represents more than an 11 percent increase over last year.
This comes at a bad time for many Americans as they are already finding these economic times to be quite difficult.
Worse yet, increasing the minimum wage doesn't even help the poor. America’s poorest workers may find themselves unemployed (or unemployable) if Americans aren’t willing to pay even more for the same quality of work. Economists like Milton Friedman and Thomas Sowell, and many, many others, have stated that for every 10 percent increase in the minimum wage there is about a 2-4 percent increase in unemployment among unskilled workers. The increase in unemployment is even worse for unskilled minorities and teenagers.
In the very best case scenario, the new $6.55 minimum wage has been set at, or near, the “equilibrium point” (meaning the market has already been paying this wage for most unskilled labor) and the harmful effects of the hike are limited to reducing the number of new jobs created rather than destroying existing jobs and throwing currently employed people back out on the street.