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Commentary By Jared Meyer

Want to Increase Income Inequality? Raise the Minimum Wage

Economics, Economics Regulatory Policy, Employment

The article originally appeared in The Washington Examiner

Many Americans are worried about a perceived increase in income inequality and a decline in the quintessentially American dream of working hard to get ahead and enjoy a middle-class lifestyle.

While these concerns are shared by almost everyone, one proposal to reduce income inequality — increasing the minimum wage — would make it more difficult to achieve the American dream.

Though this push can be seen across the country at the federal, state, and local levels, the most recent change was in New York. After securing a gradual minimum wage increase in 2013 to $9.00 an hour, the legislature did not approve New York Gov. Andrew Cuomo's proposal to raise the wage again to $11.50 in New York City and $10.50 in the rest of the state. Undeterred, Cuomo turned to an unelected wage board to increase the minimum hourly wage for only fast food workers to $15.00. This increase will be fully phased in by 2018 for New York City and 2021 for the rest of the state.

Despite Cuomo's undemocratic and arbitrary tactics, it is no surprise that increasing the minimum wage is popular with the public. Anyone with a heart wants their fellow Americans to earn more. People also understand that supporting a family on $9.00 an hour is unbelievably difficult.

But supporting a family without a job is even harder. And, thankfully, poor families are not the norm when it comes to minimum wage workers. Over half of the 3 percent of American workers who earn the minimum wage are between 16 and 24 years old. Two-thirds work only part-time.

Minimum wage jobs are not careers. They provide critical work experience that school simply cannot teach for those who haven't worked before. If young people cannot get their first jobs, they cannot get their second or their third jobs.

While some workers will get a raise if the minimum wage is increased, this will come at the expense of cutting off opportunity for the young. Unsurprisingly, because the minimum wage makes it effectively illegal for employers to hire the least-skilled workers, the unemployment rates for teens in high-minimum wage states are higher than those in low-minimum wage states. The real minimum wage is $0 an hour, because employers always have the choice to let employees go, or not hire them at all.

Once the minimum wage increases in Seattle, San Francisco, Los Angeles, and New York are fully phased-in, their levels will be higher than any other country's minimum wage — meaning these cities are moving into uncharted territory. After adjusting for purchasing power, the highest international minimum wages are in France ($10.70) and Australia ($10.50). Instead of offering entry-level jobs, employers who can stay in business after they are forced to pay these wages will rely on increased automation or skilled workers.

While proponents of increasing the minimum wage believe that they are leveling the playing field, they are actually removing the first few rungs of the career ladder for young Americans. No matter how well-meaning the proponents of raising the minimum wage may be, constructive policy should be judged on results, not intent. And the results of decreased opportunities for those who need them the most would be crippling to America's future.

 

Jared Meyer is a fellow at the Manhattan Institute. He is the coauthor with Diana Furchtgott-Roth of Disinherited: How Washington Is Betraying America's Young. Follow Jared on Twitter here.

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