Minimum Wage Laws And The High Unemployment Rates Right Now

See Minimum Wage: The Missing Explanation by David Henderson at EconLog. Excerpt:

"So the unemployment rate among relatively unskilled workers is high--16 percent--and it's hard to explain why they can't find jobs "for less pay?" No, it's not, at least for some of them. The missing explanation is the minimum wage. On July 24, 2009, it increased by 70 cents an hour to $7.25 an hour. Given that there was deflation that year, the real increase was about 12 percent.

Economists have estimated that a 10 percent increase in the minimum wage causes a 1 to 3 percent drop in the number of jobs held by youths (defined as people age 16 to 24.) (That does not imply a -0.1 to -0.3 elasticity, as many people think, for the simple reason that most youths in jobs prior to a minimum wage increase are making well above the minimum wage.)

A 10 percent increase in the minimum wage would, therefore, cause a loss in youth jobs (starting from about 16 million employed) of about 160,000 to 480,000. A 12 percent increase would cause a loss of about 190,000 to about 570,000 jobs. And that's due just to the increase in the minimum wage. The minimum wage, itself, therefore, is responsible for more than those 190,000 to 570,000 missing jobs.

This estimate is in the ballpark of that estimated by labor economist and minimum-wage expert David Neumark. In an article in the Wall Street Journal, "Delay the Minimum Wage Hike," June 12, 2009, he wrote:


The best estimates from studies since the early 1990s suggest that the 11% minimum wage increase scheduled for this summer will lead to the loss of an additional 300,000 jobs among teens and young adults."