It’s been a while since a new argument has been introduced in the minimum wage debate. Until now, disagreement over a mandated wage has largely centered around its effects on employment.
Liberals may like to pretend the argument that there’s an inverse relationship between the minimum wage and unemployment is a “Republican position,” but it’s one held by the overwhelming majority of economists. According to Harvard economist Greg Mankiw, eight in ten economists agree with the statement: “A minimum wage increases unemployment among young and unskilled workers.”
Meanwhile, the non-partisan Congressional Budget Office confirmed as much when former President Barack Obama was pushing for a higher minimum wage. A 2014 CBO study found that a $10.10 minimum wage would cost between 500,000 and 1,000,000 jobs. Tim Worstall at Forbes estimated that 6.6 million jobs would be lost from a $15 minimum wage using the same model the CBO used.
Another angle commonly debated is the effect that the minimum wage has on prices. According to some calculations of mine, a minimum wage hike to $10.10 an hour would raise prices for the poor on net balance more than it would increase their wages. Remember, most poor people are unemployed, so minimum wages don’t boost their wages. Rather, they only lower their purchasing power by raising prices. In conclusion, I found that a hike to $10.10 would deliver $5 billion in benefit to the poor in the form of increased wages, but between $8.771 billion-$14.204 billion in costs (in the form of higher prices, and lost wages from higher unemployment rates. *See the math here*).
And now there’s a consequence of minimum wage hikes that I can’t say I’ve ever pondered: safety.
According to The Daily Signal, “recently released study on the impact of minimum wage increases in Seattle showed a corresponding uptick in the number of health violations by restaurants in the area as the minimum wage went up. The paper found that just a $0.10 jump in the minimum wage ‘increased hygiene violation scores by 11.45 percent.'”
One of the study’s authors told NPR that overall, a one dollar increase in the minimum wage translated to a 6.4% increase in total health violations, and a 15.3 percent increase in less severe violations.
Now of course, correlation is not causation, and we need an explanation for why a minimum wage hike would contribute to a decrease in safety standards. The authors of the study have a theory: Employers must cut other costs in order to pay a higher price for labor. For one, they could raise prices and pass costs on consumers. Or they could cut hours and fire workers. In addition to those options, they could also consolidate roles within the company, which would duplicate roles for current employees. Stretching employees far too thin would logically lead to an increase in health violations, among other consequences. Additionally, they could also cut back on the time to get employees properly up to speed with dangerous procedures, seeing as how labor is much more expensive.
I’ve never thought about the minimum wage like this before. Have you?
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