A Tip on the Effects of Raising the Sub-Minimum Wage

Economist Thomas Sowell once characterized minimum wage laws as a disconnected third party (the government) preventing those directly affected (a potential employer and employee) from doing what they have both agreed upon.

Legislation has been introduced in Congress to increase the wage below which restaurant servers and other tipped workers are prohibited from working. This sub-minimum wage would rise from $2.13 to $3.75 this year, and to $5.50 by 2013. In Michigan, these workers may not work for less than $2.65 per hour before tips.

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This urge to micromanage the employment decisions of restaurants and their employees stands in contrast to the practice of most elected representatives in Michigan and around the nation, who use unpaid interns to perform a range of duties in their offices.

An example of “good for thee but not for me”?

If members of Congress were truly “focused like a laser” on job creation, one of the best things they could do would be to lower the minimum wage, or even eliminate it for younger workers, like those that work as interns — for free — in their offices. A high minimum wage prices low-income and low-skilled workers out of the job market. When an employer is forced to pay more than the value actually added by a particular employee, the job is eliminated. The mandate also has a disparate impact on minorities.

Economists are in near-universal agreement: Raising the minimum wage, as Congress has done repeatedly the past few years, almost always generates unemployment higher than it would otherwise be, and is a net loss for society and the poor.