On July 24, less than two weeks from now, the minimum wage will increase to $7.25 an hour from $6.55, an 11% jump. The WSJ explores the implications of the wage increase:
The national wage floor will have increased 41% since the three-step hike was approved by the Democratic Congress in May 2007. Then the economy was humming, with an overall jobless rate of 4.5% and many entry-level jobs paying more than the minimum. That’s a hard case to make now, with a 9.5% national jobless rate and thousands of employers facing razor-thin profit margins.
In a nutshell:
In a 2006 National Bureau of Economic Research paper, economists David Neumark of the University of California, Irvine, and William Wascher of the Federal Reserve Bank reviewed the voluminous literature over the past 30 years and came to two almost universally acknowledged conclusions.
First, “a sizable majority of the studies give a relatively consistent (though not always statistically significant) indication of negative employment effects.” Second, “studies that focus on the least-skilled groups [i.e., teens, and welfare moms] provide relatively overwhelming evidence of stronger disemployment effects.”
Basically, bad news for teens and young adults looking for extra money and, more significantly, for single mothers. Read the whole thing.
HT: Kiana Kwon