If government control of wages helps eliminate poverty, the Baltimore should be a utopia by now. Hal Snarr explains the true cost of regulating minimum wages in Mises Daily. Moreover, Snarr notes a new argument making the rounds. Namely, the claim that raising the minimum wage a little at a time is fundamentally different from making larger increases:
6:40 pm on July 2, 2015Recognizing the consequences of a sharp increase in the minimum wage, former President Clinton argued for a phased-in increase last fall on John Stewart’s The Daily Show. In Clinton’s segment, he told the show’s millions of viewers that “If you [raise it] in a phased way, it always creates jobs. Why? Because people who make the minimum wage or near it are struggling to get by, they spend every penny they make, they turn it over in the economy, they create jobs, they create opportunity, and they take better care of their children. It’s just the right thing to do, but it’s also very good economics.”
Increasing the minimum wage, whether it is a sharp or modest change, is not the right thing to do, nor is it good economics. Those who disagree will point to the fact that modest phased-in increases to the minimum wage have not been associated with a sharp rise in unemployment. This argument, however, glosses over the fact that the minimum wage is generally raised during economic expansions, when low-skilled wages are higher than the legislated minimum. If true, the consequences of hiking the minimum wage are not felt until after the economy has entered a recession.
