The Cost of the Minimum Wage

There’s a push to raise the minimum wage to 15 bucks an hour. Of course, the actual cost to an employer will be greater. For example, the employer’s share of the FICA tax on $15 is 93 cents, and there will be other additional expenses. But for the this exercise, let’s use $15.93 an hour as the employer’s cost. What will happen to a marginally skilled employee who provides less than $15.93 of value to the business and whose presence is a net loss to the employer?

Let’s not always see the same hands.

The real effect of a minimum wage is not to make it illegal to pay workers less than some arbitrary wage. Instead, it outlaws the participation of marginally skilled workers in the on-the-books economy, forcing them to work in the shadow economy.

BTW, some politicians see that result as a feature rather than a bug.

4 thoughts on “The Cost of the Minimum Wage


  1. One key problem is that labor markets differ between regions even within the same state in most cases. Urban Virginia won’t see quite the same negative impacts as rural Virginia when $15/hour takes effect. Such rules are likely to kill jobs in these rural areas. In Fairfax County, jobs are close to that already in many cases. But new job creation will slow to a crawl. I’m not sure that isn’t the goal for Bolsheviks though,.


  2. The minimum wage should be $50 an hour. The end of poverty! In fact, let’s make it $100 an hour. We’ll all be rich! Make it world wide. We’ll be the richest planet in the solar system! An electric ski boat in every driveway, world wide! There apparently is no limit to how much we can agree to pay each other.

    The four ways that money can be spent: (Milton Friedman)
    1) you can spend your money on yourself
    2) you can spend your money on someone else
    3) you can spend someone else’s money on yourself
    4) you can spend someone else’s money on someone else
    Government is the # 4. Supposedly. It’s starting to look more and more like government is # 3.

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