As famed economist Thomas Sowell once said, “The first law of economics is scarcity, and the first law of politics is to disregard the first law of economics.”
This July, and for the second time in two years, the minimum wage in Texas was once again raised, this time to $7.25 an hour. While this may be seen as a triumph for unskilled workers, I and many economists see it as a tragedy for our already hurting economy.
Many politicians in Congress who passed the legislation claim these laws are made to help raise the standard of living for working families. However, a minimum wage affects very few workers supporting families since most get paid far beyond the minimum wage. Who does the law really affect? Primarily, teenagers and young people just like us looking for entry-level positions.
The Wall Street Journal reported that teenage unemployment hit a high this summer of 24 percent. For African American teenagers, the story is even worse. Their unemployment rate was nearly 36 percent. While this may be attributed to the bad economy, it doesn’t make sense to increase unemployment by telling employers they now have to pay workers with no experience even more money.
The minimum wage creates a problem for teenage workers by preventing them from getting entry-level jobs that give them job experience and would eventually lead to higher paying jobs. This essentially kicks the ladder away from teenagers trying to move up in the world.
The minimum wage increase does this in two ways. Let’s say Marcus, a teen who has recently dropped out of high school, is looking for a job. Marcus is not very skilled but he can still produce six dollar an hour’s worth of goods and services. But with a minimum wage of $7.25 an hour, Marcus cannot find a job and he stays unemployed.
The second way these laws prevent teens from getting entry level jobs. Let’s say Mary, a college student, wants to get an internship at Company X. She is very qualified and the company would like to have her but they must turn her away because they have to pay their janitors and other lower level workers the minimum wage, taking resources away that could have been used to train Mary.
Basic economic theory will tell us that minimum wage is a bad thing. Economist Milton Friedman put it best when he said “the fact is that the programs that are labeled as being for the poor, for the needy, almost always have effects exactly the opposite of those which their well-intentioned sponsors intend them to have.”
In the end, minimum wage laws are another example of how government policy can have unintended consequences. It does not help those who are truly in need, but only hurts young, teenage workers. Maybe politicians should have stayed awake in economics 101.
Michael Lauck is a sophomore broadcast journalism major from Houston.