How the Minimum Wage Hurts Young Workers

MoneyHandThere is an old story, where an economics professor walks into a classroom and begins his lecture on the minimum wage. He will go through wage floors and basic supply and demand of the labor market and will show his students that minimum wage laws result in higher unemployment. He draws a horizontal line above the equilibrium point where supply meets demand and helps students visualize how minimum wage adversely affects the labor market. It appears that with a set minimum wage the supply of labor exceeds the demand resulting in a surplus, which in other words is referred to as unemployment. Soon after, he poses a simple question to the class: “How many of you still support the minimum wage?” and a majority of the hands go up in the room. The professor even hesitates to condemn this intervention himself despite the graph on the board behind him clearly showing its drawbacks.

The conclusion the professor and his students came to in the story above, regardless of what mainstream economic models and evidence may suggest, is not uncommon in today’s society. Senator Bernie Sanders from Vermont released a press statement this week saying “We need to raise the minimum wage in this country.” He continued his speech by congratulating the workers in St. Louis and Kansas City for picketing McDonald’s and Taco Bell in an effort to force them to double their wages from 7.50 an hour to $15.

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