The Minimum Wage and Job Destruction

Posted on November 4, 2013 by Kathy Hoekstra

How the Minimum Wage Impacts Jobs

New Jersey voters tomorrow will decide whether or not to add a minimum wage increase to the state’s constitution.

As the Wall Street Journal says, doing so “could affect workers and employers for years to come.” 

The ballot issue is for a one-dollar per hour hike to the minimum wage – to $8.25 an hour – and allow yearly increases tied to inflation. According to the WSJ, about three percent of New Jersey’s workforce, or 49,000 people earn minimum wage.

It is important for all Americans to understand just who would actually benefit from a minimum wage increase.

Our newest Kitchen Table Economics lesson suggests that to tinker with the minimum wage, is to remove opportunities for people who simply want a start in the working world – the very people it is supposed to help in the first place.

Think about a fast food restaurant. About one third of the restaurant owner’s costs goes to wages, many for entry-level jobs like what many of us had when starting out.

If you raise the minimum wage, the same amount of money the restaurant earns in selling its food simply can’t pay for the same number of jobs. That means the restaurant can’t offer as many jobs and has fewer people on staff to carry out the same amount of work.

Read more on this and other important government policy issus on our employer to employee website, InformationStation.org. A well informed public is the best defense against bad government policy.