The Corner

Unemployment & The Minimum Wage

Steve Horwitz offers some interesting speculation:

Economic theory predicts that minimum wage laws will disproportionately harm lower-skill workers such as teenagers and non-whites (not, it is worth noting, because the latter are inherently less-skilled, but because they have not had the same educational opportunities or other ways to increase their human capital as have whites). This effect of the minimum wage is why higher-skill workers have long supported it as a way to shut out cheaper competition (e.g.,  US unions shutting out immigrants and blacks 60 years ago, white South Africans shutting out black natives 100 years ago, etc.).  It would seem that this prediction is born out by some of the facts in the latest US unemployment data.  It might also temper arguments that the May unemployment rate reflects “market” problems as opposed to the undesirable consequences of bad government policies.


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