Minimum Wage Hikes Don’t Help The Unskilled

Posted on December 20, 2009

It’s ironic that the San Francisco city government is concerned about the harmful effects higher labor costs could have on small businesses, as reported Dec. 17 by The Examiner (“City’s minimum wage staying the same”).

A recent statement from the San Francisco Office of Labor Standards Enforcement said “small businesses in difficult financial situations will know their labor costs can remain constant in the coming year.” Yet in 2007 when the San Francisco minimum wage rose above $9 an hour, this same office praised the wage’s effect on businesses, saying “jobs paying a decent wage … invigorate neighborhood businesses.”

San Francisco can’t have it both ways — either a higher minimum wage will “invigorate” employers, or it will hinder them from hiring. Decades of economic research show that employers respond to higher labor costs by cutting jobs or hiring applicants with more experience.

This effectively shuts out unskilled workers from the labor market, hurting the very people that a minimum wage increase is supposed to help.

Kristen Lopez Eastlick, Employment Policies Institute, Washington, D.C.