Minimum Wage Myths: Teens and Cost of Living

Pamela Villarreal, NCPA

Pamela Villarreal, Senior Fellow, NCPA

A new report finds that the trend of raising the minimum may create an economic backlash on the 16- to 24-year old age group that has now reached its highest unemployment rate on record.  Eight states raised their minimum wage on January 1st.

“A recession is the worst time to raise minimum wages,” said National Center for Policy Analysis (NCPA) Senior Fellow Pam Villarreal. “It’s pricing many young workers right out of the market.”

“If employers can’t absorb an increase in the cost of labor, they will hire fewer workers, hire more productive (educated) workers, lay off workers, or pass the costs on to consumers.  So, the stimulative effect on demand may be offset by reduced employment among potential consumers,” added Villarreal.

Minimum Wage Myths also identifies the value of minimum wages in the ten highest and lowest cost of living areas.  For example:

  • New York City’s $7.25 minimum wage has the buying power of a paltry $3.24 an hour in Manhattan — the lowest effective wage of any metropolitan area.
  • San Francisco’s $10.24-an-hour minimum wage buys only $6.35 worth of goods and services.
  • On the other hand, the $7.25 federal minimum wage in low-cost Harlingen, Texas, will buy $8.87 worth of goods and services.

“The minimum wage distorts the labor market and hurts the people it is meant to help,” said author Villarreal.  “And, as difficult as it is to find employment, the last thing that states and cities should be doing is raising the minimum wage,” said Villarreal.

Via the National Center for Policy AnalysisThe National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. We bring together the best and brightest minds to tackle the country’s most difficult public policy problems — in health care, taxes, retirement, small business, and the environment.

2 thoughts on “Minimum Wage Myths: Teens and Cost of Living

  1. Minimum wage laws are like so many other policies that while the intentions are great, the outcomes are horrible. Higher unemployment, inflation, and pricing younger inexperienced (often poor minorities, who the laws are supposed to help) workers out of jobs. This oughta to be common knowledge, but even some on our side argue with me about it.

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