On his Thursday Fox Business show, John Stossel took aim at ten government policies that he claimed have unintended consequences and are causing more harm than good. Included in his top-ten list, which ranged from health care reform to parity for women’s sports, was the minimum wage. Stossel, a TV personality who probably brings in more in a week than a minimum wage earner does in an entire year, opined that our nation’s lowest-paid workers get paid too darn much — and that’s why unemployment is so darn high.
As Stossel tells it, he doesn’t oppose the minimum wage because he’s in the pocket of Wal-Mart, Pizza Hut and the other national chains that profit by keeping wages low. Instead, he cares deeply about workers who fill low-wage jobs, and wants what’s best for them. Home health aides, restaurant workers, and janitors may think they’d be better off if they got paid more. But Stossel explains that many of them will be out of work if the minimum wage goes up — and that therefore they’re better off working for lower pay and getting experience. His sympathetic guest, Russell Roberts, a professor at George Mason University delivers the Stossel message quite clearly: “What can be more cruel than to raise your wage artificially, and then have no wage?”
But even the most casual examination of Stossel’s critique reveals that it’s long on rhetoric but short on facts.
Myth Number 1: Minimum wage earners are mostly teens.
Minimum wage opponents like to claim that low-wage workers earning near the minimum wage are mostly teenagers working for pocket change. They therefore characterize low-wage jobs as valuable learning opportunities for kids — rather than a job that needs to deliver a fair paycheck. Says Stossel, “Low wage jobs used to be a way for kids and the unskilled to get into the labor force; to prove themselves.” He continues, “The construction industry used to be a place teens could get a foot in the door, learn the discipline of regular work. Minimum wage has left many teens without a job.”
Not counting the fact that construction is a relatively high-paying industry with few minimum wage jobs, there are two major problems with this argument. First of all, according to the Bureau of Labor Statistics, three quarters of minimum wage earners are 20 or older. In fact, many of the largest growth occupations in the low-wage economy, like home health aides, are generally worked by older adults, many of them in their forties and fifties. So when we’re talking about minimum wage jobs we are overwhelmingly talking about adults. Period.
And about those teens. While Stossel’s kids may not need the money, many of the small share of low-wage workers who are teens come from low and middle income families who rely on their wages to make ends meet and cover growing tuition bills.
In addition, the rationale perpetuated by Stossel that teens should be happy with any job — no matter how low paying — is deeply troubling. Stossel presents minimum wage jobs as almost a social service, repeating over and over again how minimum wage jobs provide critical work experience for youth. In this context, any pay for these jobs seems generous. But while they are gaining experience, minimum wage earners are carrying out critical jobs that keep businesses operating and profiting. When they serve food, watch a child or ring up a customer, they are doing valuable work that keeps businesses depend on to thrive.
Myth Number 2: Minimum wage increases kill jobs.
Stossel claims that low-paid workers are actually hurt by the minimum wage because businesses cut jobs when the minimum wage goes up. “Minimum wage left many teens without a job,” said Stossel. “No wonder teen unemployment is 26%.”
It’s true that teen unemployment is disturbingly high, and we need to work hard to bring that number down so that teens who are trying to help contribute to their families or pay for their education can get back into the labor market. But Stossel’s claim that minimum wage has created the crisis in teen unemployment is just not true.
Lest we forget, we are currently experiencing the highest unemployment since the Great Depression because of the wreckage caused by the bursting of the housing bubble and the financial crisis. Teens, who have less experience than their older coworkers, are generally the first fired and last to be rehired when jobs are scarce, and are therefore suffering from even greater joblesssness.
Furthermore, more than a decade and a half of academic research has shown that the minimum wage raises the incomes of the lowest paid workers without reducing employment. The effects of the minimum wage have been studied in the real world for years, and the most rigorous science on the subject shows that increases in the minimum wage don’t cut jobs.
The latest contribution to this body of work is a comprehensive new study recently published in the prestigious Review of Economics and Statistics. A team of economists from the University of Massachusetts, University of California and University of North Carolina compared every pair of neighboring counties in the United States that straddle a state border and had a different minimum wage at any time between 1990 and 2006. Their analysis of employment in over 500 counties across the nation found that minimum wage increases did not lead to job loss.
And another study, to be published in April in the journal Industrial Relations, specifically examines teen employment and finds that even during times of high unemployment, minimum wage increases have not lead to job loss.
While Stossel claims that the minimum wage cuts jobs, the real experience on the ground shows otherwise. That’s because while employers give their lowest-paid employees a little bump up in pay when the minimum wage increases, they also benefit from lower turnover and higher morale and productivity. Better-paid workers are better employees.
While Stossel’s recycled attacks on the minimum wage don’t hold water, expect to see these arguments for gutting the paychecks of the lowest paid workers gathering steam. Business interests are poised to take advantage of high unemployment and decreased worker bargaining power to try to shred decades-old worker protections.