As an anti-poverty measure, the federal minimum-wage law has had a “small beneficial effect” on the nation’s workforce as a whole, but it has also reduced the demand for teen-age workers, according to a recent study by the National Chamber Foundation.
As the minimum wage increases, employers are forced to reduce costs in order to remain competitive, the report contends. Two approaches to reducing cost, according to the report, are to substitute higher-skilled workers for those who were being paid at a lower rate or replace certain low-skilled workers with machines.
On the other hand, the creation of a new sub-minimum wage--as proposed by the Reagan Administration--would increase employment opportunities for teen-agers, but their gain would be at the expense of adult workers, the foundation’s report contends. It urges instead that the current minimum wage be retained and that market forces be allowed to operate to raise the earnings of workers.
The report, “Minimum Wage Regulation in the United States,” is based on an analysis of existing studies; it was drafted by Belton M. Fleisher, a professor of economics at Ohio State University. The Chamber Foundation is a public-policy research organization affiliated with the Chamber of Commerce of the United States.
“The preponderance of evidence is that the economy-wide and industry-specific disemployment effects of minimum wages on all minimum-wage workers, as well as on youth, is to reduce average earnings, contrary to the intent of the law,” according to the report. “These adverse effects are particularly severe in the low-wage manufacturing, retail trade, and restaurant industries.”
Among the industries covered by the minimum-wage law, restaurant and retail businesses have been an important source of jobs for women and teen-agers, who typically receive relatively low wages, the report noted. It commented that one effect of the minimum wage on teen-agers has been to decrease the desirability of the work they are asked to perform when hired as minimum-wage employees.
The Congress’s extension of the minimum-wage legislation to previously uncovered low-wage industries during the 1960’s, the report’s author argued, “exacerbated the negative impact on the earning power of low-wage workers.”
The report recommends that the Congress not increase the minimum wage in the future and that the Administration abandon its sub-minimum-wage proposal.
“Adopting a lower wage for teen-agers would have a beneficial effect on their job prospects,” according to the report. “Unfortunately, this gain would occur at the cost of an unknown number of lost job opportunities for adult men and women.”
“Freezing the minimum wage at its current level for all workers is preferred to lowering the minimum for only teen-agers,” the report asserts.
If the Congress does nothing to increase the minimum wage, according to the report, “unregulated wage growth that can reasonably be expected to occur in our economy will eliminate most of the harmful effects of existing minimum wages over the next several years.”
