Vermont Senator Bernie Sanders didn’t win the Democratic Party nomination for president, but he certainly has won influence over the platform. The best evidence of that is the $15 per hour minimum wage plank.
Hillary Clinton argued for a $12 per hour minimum, a steep increase of 65% over the current federal minimum of $7.25 per hour. Yet Hillary caved in to the Sanders pressure and now they propose a 107% increase to $15 per hour.
Consequences of Raising the Minimum Wage
It is well known that raising the minimum wage kills jobs for entry-level workers. Back in 2014, President Obama proposed an increase from the current $7.25 per hour to $10.10 per hour. The nonpartisan Congressional Budget Office (CBO) analyzed the impact of that relatively modest increase (39%) and projected it would kill 500,000 jobs when fully implemented.
No one has done the analysis yet of the impact of a $15 per hour minimum wage on the country as a whole but the Seattle experience since 2015 is illustrative. Just in the first nine months from April to December, 2015, after the city implemented the higher minimum wage, the Bureau of Labor Statistics reported a loss of 11,037 jobs.
There are even more serious consequences as reported in The Wall Street Journal by authors Mark J. Perry and Michael Saltsman. Perry is a professor of economics at The University of Michigan and Saltsman is the research director at The Employment Policies Institute.
They call attention to the impact of jobless teenagers and young adults on our urban neighborhoods. In North Philadelphia, host city of the Democratic Convention, the unemployment rate for teenagers averages 42%, according to the most recently available data in 2014. Only one in seven (14%) teenagers in North Philadelphia has a job. (Nationwide statistics for the same age group are one in three.) Young adults ages 20 to 24 have an unemployment rate of 28%.
There is good evidence that unemployed teenagers and young adults are more likely to seek income elsewhere by committing crimes. A 2013 study by economists at Boston College analyzed increases in state and federal minimum wage levels between 1997 and 2010. They found that low-skill workers affected by minimum wage hikes are more likely to lose their jobs, become idle and commit crime.
North Philadelphia has some of the city’s highest rates of violent crime. In 2016 homicides in Philadelphia are up 10% over last year, a trend reported in other cities as well. A May report from the CBO says one in six young men nationwide is either unemployed or incarcerated. Among young black men this figure jumps to nearly one in three. The CBO report pointed to higher minimum wages as one possible cause of this crisis.
These alarming statistics are under the current federal minimum of $7.25 per hour. They argue the minimum wage should be lowered, not raised.
Tragically, the White House of President Obama is disseminating false information on the impact of raising the minimum wage. An April 2016 report from the Council of Economic Advisers estimated that embracing a minimum wage increase to $12 an hour would actually reduce crime rates by between 3% and 5%. But in the fine print the council acknowledged they made the assumption there would be no impact on employment . They conceded that if some jobs were lost, the crime reduction benefits would be somewhat lower.
Some Good News
This trend can be reversed. Perry and Saltsman point to a 2014 study published in the journal Science that analyzed the impact of a summer jobs program in Chicago on the criminal activity of more than 1,600 disadvantaged high schoolers. For those teens who participated in the jobs program, there was a remarkable 43% reduction in arrests for violent crimes during a period of more than one year after the program ended.
Politicians who call for increases in the minimum wage are pandering to the poor and uneducated masses – when those policies will harm the very same people. Higher minimum wages will lead to more unemployed teenagers and young adults -which will lead to more dependency on the government and more crime. The free market should be allowed to determine a fair wage at a price that guarantees the highest possible employment for all. This helps the economy, the people, and the crime rates.