Bolstered by recent election results, Gov. John Bel Edwards and his liberal allies have returned to stumping for a minimum-wage increase in Louisiana. Recent data confirm that’s still a bad idea.
Last month, neighboring Arkansas voted to start next year a gradual increase in the wage, which should have set off celebrations in Louisiana hamlets like Ida, Junction City and Kilbourne. These and other municipalities bordering the Natural State will become the biggest economic beneficiaries as increased labor costs will push Arkansas prices higher, enticing Louisiana residents to buy at home and Arkansans to shop in Louisiana.
According to research done on cities that have increased local minimum wage rates dramatically in the past few years, Louisiana employers on the Arkansas border should receive a labor bonus as well. Analysis showed phased-in and dramatic minimum wage increases cut hours for everybody, but while workers at the lower range hardly made out better as a result, more experienced employees saw larger take-home pay in part because they found other lower-paying work in surrounding areas not mandated to raise their minimum wages.
Worse for the place with a higher pay rate, mandated increases in wages froze out from employment less experienced and unemployed individuals. This confirms the fact that in general — although not always the case because of unusual characteristics in specific labor markets or industries — hiking the minimum wage costs jobs.
The best use of resources occurs when labor pay matches the work’s contribution to society, as determined by the free market. When politicians place an artificial floor on pay, the market is forced to overpay for some labor and produces less efficiently, decreasing society’s overall wealth, although a handful of low-income households might benefit from minimum wage hikes.
But it's a very small handful. Only about 4 percent of workers receive pay at or below the federal minimum wage (the rate paid in Louisiana), including those jobs that pay the base wage plus tips. Of these workers, those under age 25 make up more than half. The vast majority of such young workers are trying to gain entry-level experience or to earn money while in school while living in households with an average income three times the poverty level.
Even among the 25-and-older workers, their households typically earn about twice the poverty level. Overall, roughly two-thirds work part time while only one-sixth are sole breadwinners with dependents. That's only about one in every 300 households of the working 25-and-older group.
Say what you will about Louisiana Gov. John Bel Edwards, this much is true, he knows how to get stuff done. He single handily created 500,000 …
Minimum wage jobs aren’t intended to provide a career, but to serve as a learning opportunity and to act as an incentive for the earner to evolve into a more productive individual for society, creating opportunities to earn higher wages. People with extremely limited abilities whose best efforts would produce labor valued at or below the minimum wage can rely upon generous government assistance. In Louisiana, a single female head-of-household with two children who qualifies for seven common welfare programs receives benefits on a per-hour basis about $3.50 more than if she worked at minimum wage.
Raising the minimum wage also kills jobs in another way, by spurring automation. A recent study calculated that, across all kinds of low-skill jobs that can be automated, every dollar increase in the minimum wage contracts that workforce by 0.43 percent.
If anything, the latest research demonstrates a minimum-wage increase hurts the very people its advocates argue it would help.