Minimum Wage Hypocrisy

By Betsy McCaughey

January 23, 2013 5 min read

Battles are brewing in New York, California, Minnesota and the nation's capitol over hiking minimum wages. In all three state legislatures and in Congress, Democrats have the votes to ram the hikes through.

These politicians are claiming the moral high ground, saying it will help the poorest in our communities. Don't be fooled. Hiking the minimum wage hurts — not helps — the lowest paid workers, especially young black men. A 10 percent hike in the minimum wage causes a 2.5 percent drop in employment among young white men without a high school diploma and a staggering 6.5 percent drop among young black men without that degree. Young black males get clobbered three times as hard because they tend to work in the fast food and restaurant industries, where any increase in labor costs produces layoffs.

The first federal minimum wage was enacted in 1938 and set at 25 cents an hour.

It has gradually increased to $7.25 an hour. What has also increased steadily is the evidence that raising minimum wages benefits some workers but harms the least employable jobseekers. Sadly, politicians ignore that evidence and bamboozle the public with oversimplified claims that raising the wage minimum is doing good.

In his Jan. 9 State of the State address, New York's Governor Andrew Cuomo climbed atop his moral pedestal to announce that raising the state's minimum wage was the right thing to do. You can't take care of a family on $14,600 a year (the yearly income equivalent of minimum wage) in a state where childcare costs $10,000 a year, he lectured. But Cuomo's pitch was misleading. He left out that the typical minimum wage employee is young, with few skills and little or no job experience. Half are under age 25, and a quarter haven't completed high school. 59 percent are working part-time, according to the U.S. Bureau of Labor Statistics.

Only 5 percent of American workers earn the federal minimum according to the latest government data, compared with 13 percent in 1979. Minimum wage workers are largely first-time workers. They are learning what all of us learn on our first job — to be prompt, dress appropriately, do what the boss asks and be reliable. First-time workers face the biggest risk of being priced out of the job market by a minimum wage hike. They aren't worth much to an employer when they start working. They don't have the skills.

When the government increases the minimum wage, it's more expensive to hire first-timers. According to David Neumark and J.M. Salas, University of California economists and William Wascher of the Federal Reserve Board, "minimum wages tend to reduce employment among teenagers." Tell Governor Cuomo that New York needs that like a hole in the head. Teen unemployment in New York City hit a stunning 35.6 percent last August, compared with 23.7 percent nationwide.

All teens are harmed, but black male teenagers are hit hardest by minimum wage hikes, according to a 2011 study by labor economists David Macpherson and William Evans. Unemployment among young black males is currently at 29 percent, double the rate for young white males. McPherson and Evans found the reason is that one out of three young black men without a high school diploma works in the restaurant/fast food industry, where profit margins are thin. Any labor cost hikes compels these businesses to cut their workforce.

On top of the threatened minimum wage hikes, businesses now face the certainty of Obamacare, which will impose the largest government mandated labor cost hike in history. In 2014,employers with 50 or more full-time workers will be required to provide a package of "essential health benefits" or pay a penalty. This government mandated package will add a whopping $1.79 an hour to the cost of hiring an employee. Maybe that's affordable when you're hiring lawyers or bankers, but not for hiring unskilled, first-time workers.

Pressing for state and federal minimum wage hikes now, on top of the Obamacare labor cost hike, is unwise. No — worse than that. It's cruel to the very people the politicians claim to be helping. What else is new — politicians saying whatever they want to get the votes.

Betsy McCaughey is a former Lt. Governor of New York State and author of the new book, "Beating Obamacare."

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