Anthony Bradley explains the relationship between the government-imposed minimum wage laws and unemployment in this piece. Excerpt:
When revenues decline, companies cannot afford to pay workers wages that are artificially set above their productivity and demand for their skills. Additionally, laying off capable workers is not preferable in the long-run because unemployed workers are not continuing to develop the skills and experience that enables them to increase their productivity or move beyond low-skilled and entry level jobs to those of higher pay.
Only economic history can provide the definitive narrative regarding the additional role the recent increase in the minimum wage is playing in the current surge in joblessness. Back in 2007, Congress voted to increase the minimum wage to $6.55 per hour effective July 24, 2008 and $7.25 per hour effective July 24, 2009.
The U.S. Chamber of Commerce opposed a minimum wage increase because it destroys entry-level jobs, stunts new job growth, and harms small businesses. In a 2007 survey, the Chamber found that 60 percent of small business owners would not be able to off-set the cost of the minimum wage increase. That, in turn, would lead businesses to make tough decisions like slashing benefits, raising prices, and laying off workers.
Although many industrialized countries have minimum wage laws there are many exceptions, including Norway, Sweden, Finland, Denmark, Switzerland, Germany, Austria, Italy, and Cyprus. Switzerland has no minimum-wage laws and one of the lowest unemployment rates in the world. The latest numbers are 2.6 percent.
He ends by calling upon Congress and the incoming Obama administration to unshackle the private sector from these artificial regulations. That's a purely academic exercise 'cause it ain't gonna happen. Instead, if unemployment continues to rise, I'd be on the lookout for a new Pelosi dog-n-pony show whereby businesses are further regulated disallowing lay-offs, or mandating a longer notification period before laying off or suchlike. These actions would, of course, have the effect of scaring companies from hiring people without straight A's in gradeschool and 750+ credit scores. In other words, look for government intrusiveness to jack the unemployment rate up even higher.
