In response to Vice President Joe Biden’s visit to Las Vegas where he argued on behalf of raising the minimum wage, NPRI released the following statement from its Director of Research and Legislative Affairs Geoffrey Lawrence.
The minimum wage is an illusion by which we are led to believe that a government price control on labor will lead to prosperity. In reality, markets have never reacted favorably to any form of price control.
Price controls, such as the minimum wage, that make low-skilled or entry-level labor more expensive, lead to fewer jobs. Instead, business owners tend to find ways to mechanize these jobs rather than paying wages they cannot afford. This is why the Congressional Budget Office has estimated that raising the minimum wage to $10.10 an hour would cost 500,000 jobs.
Of course, few business owners want to lay off existing employees and so the full effects of minimum wage laws aren’t always immediately visible.Frequently, business owners will allow entry-level jobs to disappear through attrition, and so there are clear winners and losers from a minimum wage hike: Current employees who remain in their jobs might experience slightly higher wages in the short-term, but future job seekers will find it even harder to do so as entry-level opportunities dry up. When workers cannot secure entry-level employment, their entire career progression may be thwarted because they cannot get their foot in the door.
Most observers have now forgotten that the idea for a minimum wage law was originally developed by the early Progressives in the late 19th Century as a massive social engineering project designed to price minorities out of the labor force. At the time, proponents believed that a minimum wage law would prevent minorities from being able to sustain their families and, thus, result in a racially whiter population. While that is no longer the explicit goal, the historical legacy of minimum wage laws is still evident in its demographic effects. That’s why Nobel Laureate Milton Friedman called the federal minimum wage law “one of the most, if not the most, anti-black laws on the statute books."