Minimum Wage Means Maximum Unemployment

Michigan's May unemployment rate of 8.5% is the highest in the country, and it's not even close: The state with the next highest jobless rate is Rhode Island at 7.2%, more than a full percentage point below Michigan. Compared to South Dakota, the state with the lowest rate of 2.9%, Michigan's rate is a whopping 5.6% higher. And it's about to get even higher this summer.

The reason? The minimum wage for adults will increase to $7.40 per hour in a week, "a move that has Michigan businesses shuddering," according to The Flint Journal.

And those younger than 18 get a double increase when the state raises its minimum wage 21 cents to $6.29 on July 1 and then the federal minimum wage goes up to $6.55 on July 24.

Employers must pay the highest minimim [sic] wage for which employees are eligible, so the increase will put more money into many teens' pockets. And, in another year, the federal minimum wage jumps to $7.25 an hour for teens.

Some area businesses have felt the sting of the rising minimum wage and say they've had to make changes to maintain their profits. The rising labor costs mean local Dairy Queen owners Tom and Diane Baker are hiring fewer teens this summer, at a time when more Michigan teens than ever are looking for work.

"I have a stack of over 100 applications," Tom Baker said. "I've never had that in 20 years of being in business. People can't find jobs."

But the rising minimum wage means the Bakers are hiring at least two people fewer than in previous summers. They normally hire 14-16 summer employees, but this year it will be 12.

"It's hurting the business as far as profit and it's hurting the people who want jobs because you're hiring less," he said.

Legislation can artificially increase wages for unskilled workers, but the law cannot force employers to hire workers at those higher wages, and the evidence presented in the Flint Journal article suggests that local employers will now hire fewer workers this summer and in the future. We can hope that employers ignore the laws of economics, but experience tells us that they won’t. The thousands of unemployed, unskilled workers are the unfortunate victims of good intentions – their jobs have been destroyed by the minimum wage hike.

Look for Michigan's unemployment rate to rise above 8.5% this summer.

Comments

[icandoitdon]

what nonsense. let me educate you professor:

there have been many periods in recent history in which the minimum wage did not rise at all. to the extent the minimum wage rises disproportionally it is only because of a catch up factor. for example:

the mimimum wage did not increase between january 81 and april 90...it remained at $3.35 for that 9 year period.

between april 91 and october 96...it remained at $4.35 for that 5 year period.

between september 97 and july 07....it remained at $5.15 for that 10 year period. (that was george bush's gift to the working poor while giving billions in tax cuts to the working rich and throwing a few crumbs to the fat, dumb and happy middle class so they wouldn't get pissed and put the kibosh on the whole deal).

based on the new federal minimum wage of $6.55 effective next month, the 10 year compounded growth rate of the minimum wage is 2.43%. over a 40 year period it has risen at a compounded growth rate of 3.6%.

as far as michigan's rate of unemployment is concerned, maybe it has more to do with a terminally ill domestic auto industry than the meager wages of kids and the working poor. in fact, i bet if you ask one of your colleagues in the economics department whether there is a proven causal relationship between national unemployment rates and the minimum wage, he would laugh at you.

as far as the poor dairy queen owner is concerned, he chose the wrong business. any dummy who has taken even a cursory look at fast food franchises knows that dairy queen doesn't do the volume to support anything other than a modest living. mc donald's has never...not once...protested minimum wage laws and many of their franchises became wealthy while paying wages in excess of the minimum.

no offense, doc, but you need a remedial course in economics. whatever the problems of our country, the minimum wage is pretty damn far down the list.