Last updated: May 02. 2014 10:18AM - 875 Views
By Jim Waters Bluegrass Institute

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It’s likely that the state Senate’s refusal to pass House Bill 1, forcing Kentucky businesses to increase their minimum wage by a whopping 39 percent, improves the summer employment chances of thousands of high-school and college students now filling out job applications.

However, Secretary of State Alison Lundergan Grimes, who’s running for the U.S. Senate, in a recent op-ed blasted opponents of increasing the minimum wage as being uncaring.

“Raising the minimum wage is a win-win policy, and employers of all sizes agree that giving their employees a livable wage is good for business,” she opined.

One question for a future column: Does Grimes understand the difference in forcing employers to pay a higher wage versus allowing them to choose to do so?

While young workers currently employed might enjoy some economic benefit from a minimum-wage increase, Grimes’s attempt to paint her opponents on this issue as unsympathetic to the plight of the poor lacks credibility by failing to offer so much as even a nod to the impact of such a hike on the employment prospects of these eager job-hunting Kentuckians.

Absent from her rant was any acknowledgement of the Bluegrass State’s burgeoning unemployment rate that has reached 16.9 percent among 16- to 24-year-olds – higher than the youth jobless rates in 32 other states and Washington, D.C. – or how a government-mandated pay hike improves the job chances for these young, unskilled, inexperienced and unemployed workers.

If Grimes really wants to help the young, poor and disadvantaged instead of engage in unproductive class warfare for political gain, why doesn’t she propose a minimum-wage holiday?

Since she and her liberal ilk often claim that economists’ varying views make it difficult to reach definitive conclusions about the impact of government-mandated wage policies on hiring practices, why not find out by observing how Kentucky employers and unemployed 16- to 24-year-olds respond if the state suspends the minimum-wage requirement just for the summer?

I first heard about this idea from Kathy Gornik, who co-founded Thiel Audio in Lexington. Gornik thinks employers and young people would react in an overwhelmingly positive way.

“My bet is that you would see a lot of $5 an hour jobs done the normal way, not through a special program,” Gornik said. “The employment experience would be wonderful for these kids, and it would give them the work experience they need to get their foot on the low rung of the employment ladder with a basis for moving up, rather than standing on the ground and nowhere to go – and they’d be doing it all on their own.”

My own bet is that supporters of forced minimum-wage hikes would be left explaining how it is that the youth unemployment rate dropped – perhaps dramatically – and how thousands of young workers were imminently grateful to obtain badly needed experience that strengthens their resumes and chances for grabbing future career-type positions.

Those who drink the liberal Kool-Aid sincerely believe they help the poor by socking it to job creators. But all these advocates really do is offer ideas that harm the employment chances of those they purport to help by:

Reducing the incentive of employers to take chances on these workers by hiring them. Business owners simply will conclude that they cannot afford to pay $10.10 per hour to young, unskilled and inexperienced workers who cannot contribute at least the same amount to the company’s profit.

Removing the one competitive advantage that lower-skilled workers have when competing for jobs: the price it will cost employers to hire them. Like everything else in the marketplace, when the price (forced minimum wage) goes up, the quantity purchased – in this case, the number who could have been employed – goes down.

Sounds like a “lose-lose” to me.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.

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