Monday, July 13, 2009

The detrimental effects on employment of raising the minimum wage

As discussed here, Dan Rutherford, State Senator (R-Pontiac) and Illinois 2010 State Treasurer Republican Primary candidate, today gave a very real world example of how Illinois' high minimum wage tends to cause jobs to go to states with lower state minimum wages. In a very timely piece, the Wall St. Journal editorial page discussed, this morning, the negative employment effects of the federal minimum wage and how the strongest disemployment effects of the minimum wage [scheduled to increase again in 11 days] falls on the least skilled groups [teens and welfare moms].

Of course, the above Wall St. Journal piece simply summarizes the empirical evidence that corroborates basic, price theory, which should be, but is usually not, learned in Econ 101. That is, if you place a floor on wages that is above the market clearing wage, the quantity of employees demanded will decrease from the market clearing amount and the quantity of employees supplied will increase from the market clearing amount, giving us a surplus of labor, also known as unemployed labor.

Sen. Dan Rutherford knows this, Jimmy John's knows this and the Wall St. Editorial Board know this. But, does President Obama know this? Does Obama's Council of Economic Advisers know this? And, if so, can they still really be big time supporters of higher minimum wages? Possibly. Could that be because unions want minimum wages as a way of protecting their members from competition from non-union labor? And, if so, does President Obama (and others who work for him) go along with the unions' wishes for a higher minimum wage because they find the hundreds of million of dollars of union contributions irresistible? Or, can they really believe that basic economic theory doesn't work? As Cong. Roskam (R-Wheaton,IL; 6th Cong. Dist.) might say, that would be a tall drink.
A sampling of shows and clips from those posted during the last seven months on the Public Affairs YouTube page include a show with Chicago Ald. Toni Preckwinkle, a candidate for Cook County Board President in the 2010 Democratic Primary, a show with economist Art Laffer [inventor of the Laffer Curve] and FNC's Steve Moore about their book, "The end of Prosperity," and the Obama Administration's economic policies; the fastest five minutes on the web- a New York Times video about Obama-Berkowitz, a show with State Rep. Jim Durkin (R-Western Springs), a show with Professor Stephen Presser, a Northwestern University Law School Professor, about Judge Sonia Sotomayor's nomination to the U. S. Supreme Court, , the second fastest five minutes on the web- a segment of Bill O'Reilly with Berkowitz discussing a clip of Obama from 2002 on Blagojevich and many more shows.