On July 24 this year, the government raised the minimum wage to $7.25, which is another way of saying that unemployment is mandatory for anyone who is otherwise willing to work for less. You have no freedom to negotiate or lower the price for your service. You are either already valuable at this rate or you are out of the game.
These guys say labor law violations are hurting the economy, and that we'd be taking better care of the low skilled laborers if we vigorously enforced these labor laws.
http://www.nytimes.com/2009/09/02/us/02wage.html?_r=3&scp=1&sq=%22russell%20sage%22&st=cse
But their assumption is that these low skilled laborers would still have jobs if the laws were obeyed - and that's a big assumption. There's an immutable fact that if a business has to pay more for labor than the labor will generate in income, the business will not hire. That's how these labor laws hurt the unskilled. Of course, it also creates a market opening for illegal immigrants - because they are happy to work for less than the minimum wage and have a high incentive not to rat out their employers. In that sense, this is a double whammy for low skilled American workers - they are priced out of competition with more skilled labor by minimum wage, and unable to compete with illegal immigrants who can be employed for much less cost.
Says Dr. Boudreaux, www.cafehayek.com:
Fifteen years ago, David Card and Alan Krueger <http://press.princeton.edu/titles/5632.html> made headlines by purporting to show that a higher minimum-wage, contrary to economists’ conventional wisdom, doesn’t reduce employment of low-skilled workers. The RSF study casts significant doubt on Card-Krueger. First, because the minimum-wage itself is circumvented in practice, its negative effect on employment is muted, perhaps to the point of becoming statistically imperceptible. Second, employers’ and employees’ success at evading other employment regulations – such as mandatory overtime pay – counteracts the minimum-wage’s effect of pricing many low-skilled workers out of the job market.
Sincerely,
Donald J. Boudreaux
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