The adverse effects of the minimum wage have long been known, and the consensus is much more unanimous than you’d be led to believe had you only heard the debate on MSNBC.According to Harvard economist Greg Mankiw, 79 percent of economists agreed with the statement “a minimum wage increases unemployment among young and unskilled workers.” The question didn’t specify how high the minimum wage would be, and we’d likely see that consensus grow the higher the hypothetical minimum.
After all, suppose someone supports raising the minimum wage to $10 an hour. Why didn’t they pick $20 an hour, or $30 an hour? Even they must know that there are unintended consequences of their ideas.Another consequence of the minimum wage is that it’s lowers the youth labor force participation rate, as many of those unable to find jobs resulting from the minimum wage drop out of the labor force (and are therefore not counted as unemployed in the statistics – but aren’t earning any income nonetheless).
And of course, some of the cost of a minimum wage increase will be passed along to the consumer – and it’s not even stealthy. The latest trend of those businesses impacted by the minimum wage is to add a “minimum wage surcharge” at the end of the bill.According to HotAir, As states move to impose higher minimum-wage levels, restaurants have begun offering a more transparent way to pass the costs onto customers. Rather than raise the prices of each dish on the menu, in some states diners now get an added labor surcharge tacked onto the bill.
In lieu of steep menu price increases, many independent and regional chain restaurants in states including Arizona, California, Colorado and New York are adding surcharges of 3 percent to 4 percent to help offset rising labor costs. Industry analysts expect the practice to become widespread as more cities and states increase minimum wages.
“It’s the emerging new norm,” said Sharokina Shams, spokeswoman for the California Restaurant Association. She said California restaurants are adding surcharges as the state lifts the minimum wage every year until it reaches $15 an hour by 2023. It is currently at $10.50 an hour for employers with 26 or more workers. …Many restaurant owners say they have added surcharges because jacking up menu prices can turn off customers who are sensitive to how much a sandwich or bowl of soup should cost. When prices do rise, “consumers often trade down in the types of menu items they order, choosing a sandwich instead of an entree, or they leave off beverages or dessert,” said Bonnie Riggs, restaurant analyst for NPD Group Inc.
According to one estimate, a minimum wage hike to $10.10 an hour would put $5 billion in the pockets of the poor, but would increase prices for them by $3.33 billion, eroding most of the gain.
Additionally, since 67 percent of the poor do not work, most of those paying the higher prices are the unemployed poor. None of that accounts for the fact that a $10.10 minimum wage would put 500,000-1,000,000 people out of work (according to the CBO), wiping out $8.771 billion-$14.204 billion in income assuming they previously worked 30 hours a week at $7.25 an hour.
Or as the New York Times puts it, “Higher Minimum Wage May Have Losers.”You don’t say.
[Note: This post was authored by Matt Palumbo. Follow him on Twitter @MattPalumbo12]