Rhymes With Right - Why The Unemployment Jump?
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June 06, 2008

Why The Unemployment Jump?

Could it be due to government actions that made hiring workers more expensive?

Especially since the number of jobs lost is relatively modest -- too modest to account for the jump in unemployment. It has to be because of the influx of new workers that happens in late spring and early summer each year, as teens and college students seek jobs.

Why have these new job seekers found it difficult to get jobs? One reason is that Congress made jobs costlier just in time for this economic slowdown. Congress raised the minimum wage last year by seventy cents an hour, from $5.15 to $5.85. It will rise again in July to $6.55 an hour, and next year will hit $7.25 per hour. That makes entry-level labor as much as 27% more expensive this summer, when consumers have already slowed down their spending. The natural loss of work from the slowdown amplifies the effect of the minimum-wage increase, because businesses now cannot afford to raise prices to maintain their entry-level positions.

When the minimum wage increase was under debate last year, many of us warned that it would have precisely this effect. Now we see it unfolding before our eyes. Will the Democrats acknowledge the error and take the blame for hundreds of thousands of jobs lost to their economic meddling — or will they try to shift the blame to the Bush administration for no good reason at all? (via Power Line)

I know I pointed this out in mid-February of last year.

Think about it -- increasing wages by 27%. Why wouldn't we have a decrease in low-wage entry-level jobs as a result? And how can anyone call the increase in unemployment that resulted an unforefeen consequence of the wage increase.

But don't worry -- the additional wage increases coming next summer is sure to make the situation much better. Won't it?

UPDATE: A great real-world example of the impact of the minimum wage increase on a real business over at Patterico's Pontifications-- one operated by the blogger's parents.

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