Prior to the establishment of minimum wage laws in American we had several years on unemployment rates below 2% and many years of less than 3% unemployment. With the passage of minimum wage laws 5% has become the target rate for unemployment.
Prior to the establishment of minimum wage laws in American the unemployment rate for African Americans was lower than for White Americans. Within a few years of the law being enacted those number flipped. Currently the unemployment rate for young black males is 55%.
Williams: Minimum wage law hurts young black males most | Lubbock Online | Lubbock Avalanche-Journal
Who pays for the wage increase?
Let's look at fast food. Fast food employs a large number of minimum wage workers. If wage rates rise then McDonald's will raise prices to cover the cost or reduce the number of people employed. Let's say that demand for Big Macs is inelastic and McDonald's can raise the price of Big Macs to cover the cost. The consumers end up covering the cost of the wage increase and everyone (except consumers) wins. Sound great, but who are the consumers of Big Macs? Do you think Bill Gates, Warren Buffet, or Larry Ellison are big consumers of Big Macs? The primary consumers of Big Macs happen to be lower wage earners. Politician have created the illusion of helping the poor, but the poor are the ones absorbing the cost of the wage increase. This is one example, but when we look at low wage jobs we see they primarily provide goods and services to other lower wage segments of society. The burden of paying the cost of minimum wage is placed on people in lower income classes.
What about high school dropouts?
There are multiple studies that show that higher minimum wage rates encourage poor & boarder-line students to dropout. These kids come from poor families and they don't need a high school degree to make almost as much as their parent. We are providing incentive's for poor children to dropout of high school. Several people have proposed requiring a high school diploma to qualify for minimum wage to take away the incentive to dropout
California Journal of Politics and Policy, Vol. 3, No. 1, 2011. Once these kids dropout and work for a little while they find they can't advance in the work force and become frustrated and demand more money. They end up losing their jobs to the next wave of dropout who are willing to work for the minimum wage.
Who has benefited the most from minimum wage? The college age children of middle class white families have done very well. They have seen the most gains in employment with each increase in the minimum wage. The second group to have done very well is organized labor. By introducing a wage price floor they have effectively increased the cost of hiring non-skilled workers who they often compete with for contracts. Labor unions have been a driving force behind minimum wage laws even though none of their members work for the minimum wage. Politicians would be the third group who have benefited from promising to make people better off. A minimum wage increase is a great way for a politician to get more votes from the uneducated .
Prior to the implementation of minimum wage laws people with no job skills could get a low paying job and learn a trade. On the job training has all but disappeared in this country. Minimum wage has also raised the minimum skill level required to get a job. This has had the effect of locking unskilled people out of the job market and increasing unemployment among the demographic it was designed to help. The idea that minimum wage helps the poor is an illusion.