Wages vs. jobs

Posted on July 29, 2012

The Inquirer, editorializing in favor of raising New Jersey’s minimum wage, cited a study by the labor-backed Economic Policy Institute that promised job creation following a wage hike (“Still time to raise N.J. minimum wage,” Monday). Here in the real world, the actual effects of such a mandate are quite the opposite.

Businesses that hire entry-level employees and pay them minimum wage — think restaurants or grocery stores — keep a few cents in profit from each sales dollar, and can’t just absorb the cost of a mandated wage hike. When they can’t raise prices on cost-conscious customers, they’re forced to do more with less: that means more customer self-service, and fewer job opportunities for inexperienced employees.

The evidence backs up this intuition: 85 percent of the most credible economic research from the last two decades points to job loss, not creation, following a wage hike.