The Principal Costs of Minimum-Wage Legislation

(Don Boudreaux)

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Driving earlier today to meet Russ Roberts for lunch, I heard on WTOP news radio a report on an effort underway in Maryland’s legislature to deny to low-skilled workers the ability to compete for jobs by offering to work at hourly wages below $15 – that is, as this effort is more commonly (if misleadingly) described, to raise that state’s minimum wage to $15 per hour.

The reporter of course noted that proponents of this minimum-wage diktat insist that it will help low-skilled workers. When reporting on opposition to this minimum-wage diktat – including from Maryland’s governor, Larry Hogan – the report said that “opponents say it will be too costly for businesses.”

Gov. Hogan and other opponents of this minimum-wage diktat probably did indeed say that the reason to oppose this legislation is that it will be too costly for businesses. But however real, however costly, and however unjust are such legislated higher costs for businesses, the effects of minimum wages on businesses are not the principal reason for opposing such legislation. The principal reason to oppose minimum-wage legislation is the fact that it reduces the employment opportunities open to low-skilled workers. It’s minimum-wages’ negative effect on workers, not on businesses, that should be mentioned first and foremost when discussing reasons why such legislation should not only not be enacted, but repealed where it exists.

Nearly all popular-media reporting on minimum-wage legislation reports as this legislation’s only downside the fact that minimum wages raise costs incurred by businesses. Such reporting – by ignoring the main and most sympathetic victims of minimum-wage legislation, namely low-skilled workers – falsely portrays the issue as one in which workers are pitted against business owners. If the reporting were more accurate and complete – if the reporting consistently noted that the main damage inflicted by minimum-wage legislation is inflicted on low-skilled workers – the general public would better understand that minimum-wage legislation really pits workers against workers: workers whose incomes rises as a result, against other workers rendered unemployable or whose hours of employment fall.

In short, minimum-wage legislation isn’t so much anti-business as it is anti-lowest-skilled workers.