The Job-killing impact of Minimum wage laws!

Posted on June 14, 2010 by


The effect of minimum wage laws should be clear even to the least versed in economic theory among us. Minimum wage laws are a mandatory increase in the cost of filling new positions. When the cost of filling a job opening exceeds the value from filling that position, assuming rational behavior, businesses will choose not to post or fill new job openings. Businesses are not charities; they only create and fill jobs when the total revenue generated by new workers will exceed the cost of employing those workers. Why would any firm engage in non-profit maximizing behavior by raising their cost of production without an equal or larger increase in their output? It is easy to understand why workers who don’t have many skills or who are simply less productive will be left out of a labor market where minimum wage laws are enforced therefore contributing to higher unemployment rates.

This new video describes the negative impact of the last minimum wage increase in 2009, particularly on youth and minority employment.