Minimum Wage Laws: Helpful or Hurtful?

It's hard to argue that any law that can potentially elevate people from poverty or substandard living conditions is bad. Such, however, is the case with the minimum wage laws of our nation, which began in 1938 with the Fair Labor Standards Act (FLSA) and have now taken root not only in state legislatures but in city halls as well.

The effectiveness of these laws is--seven decades later--fair game for debate. Some argue that minimum wage laws have no adverse effect on employment of certain groups of people (such as the unskilled and the young), while others maintain that minimum wages reduce employment at the fringes.

A lot of it depends on one's political perspective and/or business involvement (owner, manager, et al.).

Now comes a book by a professor of economics at UC Irvine and an associate director of research for the Federal Reserve, which argues that minimum wage laws indeed lower employment and reduce (not raise) wages overall.

In Minimum Wages, David Neumark and William Wascher argue that their two decades of research reveal that these laws do not achieve their goals. Instead, they reduce employment opportunities for less-skilled workers and tend to reduce their earnings; they are not an effective means of reducing poverty; and they appear to have adverse longer-term effects on wages and earnings, in part by reducing the acquisition of human capital.

Still, there's no stopping the political will power to raise the minimum wage. The federal rate will go up to $7.25 next July 24, while states and even municipalities are beating that figure and that onset date with minimum wage laws' taking effect on New Year's Day. Washington is the highest of the states at $8.55 an hour, while San Francisco--at $9.79--and Santa Fe--at $9.92--are highest overall.

I've certainly seen many anecdotal news videos in which business owners say they've already laid someone (or someones) off in anticipation of the new minimum wages, spreading their work around or doing it themselves, to lead me to believe that minimum wage laws can indeed backfire.

However, politics is politics, and the minimum wage phenomenon is here to stay.

Up next--the minimum wage as living wage?