Stacy Innerst, Post-Gazette Dollars and sense Click illustration for larger image. Related content: Forum: Give working people a break

"The Right Minimum Wage: $0.00." So read an editorial headline in one of America's most respected newspapers. The editorial stated: "There's a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market." Can you guess the newspaper? The Wall Street Journal, perhaps? Right city; wrong paper. This editorial appeared in the Jan. 14, 1987, New York Times.

Unfortunately, a majority of voters in six states, and even the Times editors themselves, recently ignored the Times' earlier reasoning, voting for or advocating increases in the minimum wage.

Most people see the issue as a no-brainer. Wouldn't it be nice to raise the wages of the lowest-earning people? But economists tend to oppose the minimum wage. We understand that it will help only a subset of the people it is thought to help, and will help them only a little -- while hurting some of them a lot.

Why? Because in raising the minimum wage, the government doesn't guarantee jobs. It guarantees only that those who get jobs will be paid at least that minimum. But precisely by requiring this, the government destroys jobs. Someone to whom an employer was willing to pay only the current minimum wage of $5.15 might not produce enough to be worth paying, say, $7.25.

		David R. Henderson is a research fellow at the Hoover Institution and the co-author, with Charles L. Hooper, of "Making Great Decisions in Business and Life."

Economists' consensus estimate is that a 10 percent increase in the minimum wage would destroy 1 percent to 2 percent of youths' jobs. A federal increase to $7.25 would, therefore, destroy about 800,000 to 1.6 million youths' jobs. Some older low-skilled workers would also suffer. And the hurt to youths isn't just short-term, according to economists David Neumark of the University of California, Irvine, and Olena Nizalova of Michigan State University. In a 2004 National Bureau of Economic Research study, they found that the longer teenagers had been exposed to a high minimum wage, the lower their wages in their late 20s. They conclude that the minimum wage reduced their chance to get early work experience and training.

These adverse longer-run effects, they found, were stronger for black teenagers. Their finding recalls the famous line from liberal economist Paul Samuelson's 1970 textbook, "Economics," about a proposal to raise the minimum to $2: "What good does it do a black youth to know that an employer must pay him $2.00 an hour if the fact that he must be paid that amount is what keeps him from getting a job?"

But couldn't a job loss of 1 percent to 2 percent be worth it, if the remaining 98 percent to 99 percent get a wage increase? This isn't the trade-off, for two reasons. First, the majority of youths are already earning more than the higher minimum that is typically proposed. For instance, in a study of a proposed minimum-wage increase in California to $7.75 from $6.75, economist David A. Macpherson of Florida State University and Craig Garthwaite of the employer-funded Employment Policies Institute found that of 1.48 million California youths with jobs, 79 percent earned a wage higher than $7.75.

Second, because the minimum wage does not make employees automatically more productive, employers who must pay higher wages will look for other ways to compensate: by cutting non-wage benefits, by working the labor force harder, or by cutting training.

Interestingly, the Economic Policy Institute, a union-funded organization in Washington that pushes for higher minimum wages, implicitly admits the last two of these three. On its Web site, EPI states, "employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism and increased worker morale."

How would an employer get higher productivity and decreased absenteeism? By working the employees harder and firing those who miss work. Lower training costs? By training less.

Nor is the minimum wage a well-targeted policy for reducing poverty. The usual stereotype is of a minimum-wage parent with no other family members working. But that's a small segment of minimum-wage workers. That same EPI web site states that 14.9 million workers would benefit from an increase in the minimum wage to $7.25, 6.6 million of whom currently earn less than $7.25 -- they assume zero job loss -- and 8.3 million of whom earn more but, they claim, would get higher wages anyway. Yet EPI admits that only 1.4 million of the 14.9 million, less than 10 percent, are single parents with children.

The focused support for the minimum wage comes mainly from labor unions, all of whose members earn more than the minimum. This isn't benevolence. Their leaders understand that the minimum wage prices out their low-wage competition. If only most Americans understood.