Home Economics Obvious Point About The Minimum Wage Is Obvious

Obvious Point About The Minimum Wage Is Obvious

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As newspapers left and right keep telling us there’s no harm to the minimum wage. It’s not true that people buy less of things that become more expensive, so there. Econ 101 is just too simple and we’re sophisticates we journalists are.

They never do go off and consider examples of places where the minimum wage is obviously too high. Say, South Africa, where for a black kid it’s near impossible to get a job in the formal economy. Sure, some set of hustles or side gigs in the informal economy can always be found. But that’s rather the point, isn’t it? Formal economy jobs have to pay the minimum wage. We get much the same but more in India where something like 80% of the entire workforce is in the informal economy and not all of them are peasants.

Then we have sensible people within economics who try to tell us that, you know, actually, there’s a problem here:

Our key conclusions are: (i) there is a clear preponderance of negative estimates in the literature; (ii) this evidence is stronger for teens and young adults as well as the less-educated; (iii) the evidence from studies of directly-affected workers points even more strongly to negative employment effects; and (iv) the evidence from studies of low-wage industries is less one-sided.

It’s point 11) that is obvious.

Minimum wages affect those at the bottom end of the labour market because minimum wages are paid at the bottom end of the labour market. Some divorce lawyer to the stars doesn’t give a toss about it because it’s simply not relevant to the £800 an hour she charges.

So, who are the people at the low end of the labour market? The less-educated, the teens and the young adults. So, that’s where we’ll see any effect of a minimum wage, obviously.

The effects of a minimum wage turn up first in the teenage unemployment rate. Something so obvious that even The Guardian should be able to grasp it although, to be fair, probably not Owen Jones.

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