House Votes to Increase Unemployment

The U.S. House of Representatives voted 230-180 in favor of increased unemployment, especially among teenagers and the unskilled. While you won't see that in the headlines, that will be the net effect if the Senate goes along with the house's stupid plan to raise the $5.15-per-hour minimum wage in three 70-cent steps until it reaches $7.25 in mid-2009.

Some basic facts:

1. If you raise the price of something, including labor, people will use less of it. Even liberal economists admit that an increase in the minimum wage increases unemployment.
2. A minimum wage increase hits unskilled workers and teenagers especially hard. A 2004 study by the Bureau of Labor Statistics found that the vast majority of minimum wage earners lack high school diplomas. 1/2 of all minimum wage earners are younger than 25, with 25% of them aged 16-19. These young people can benefit greatly from on-the-job training. Yet an increase in the minimum wage makes such training cost prohibitive.
3. Few, if any, people are trying to raise a family on the minimum wage. The same study found that never married workers were much more likely than married workers to earn the minimum.
   
4. A minimum wage increase will make it harder on people that only want to work part-time. Part-time workers are much more likely to earn the minimum wage than full-time workers. Yet every mandatory increase in the cost of such part-time labor lessens the demand.
5. Such a move is unnecessary. Since 1979, the percentage of hourly workers earning the minimum wage has decreased from 13.4% to 2.7%. The odds are that the kid handing you your Big Mac is making a lot more than the minimum wage, without Congress's meddling.

With all the sound arguments against raising the minimum wage, who's for it?

1. Unions. At first glance, one wonders why union members, who earn way more than the minimum wage, would care. Simple. They know that their own bloated contracts make their employers inefficient. Raising the minimum wage is their way of trying to make the rest of American business equally inefficient. Combine that with the fact that some union contracts are pegged to the minimum wage and you can see why raising the minimum wage is Job #1 for union bosses.
2. Democrats. They do the bidding of the union bosses that funnel their member's dues into their campaigns. Their protests not withstanding, they care nothing about the average worker. If they did care, they would reduce the huge tax burden workers face.
3. Cowardly Republicans. The issue came to a vote because some Republicans are nervous about their chances in the upcoming election. While its hard for me to say, I think I'd almost prefer a Democratic majority in Congress over this budget-busting, cowardly bunch of Republicans we've got in Washington now.

The bill faces an uncertain future in the Senate, where only 1/3 of its members face reelection each year. We can only hope that the Republicans in the upper house will let this bill die the death it deserves.