Harvard Study Proves Minimum Wage Hikes Disproportionately Impact Ethnic Minorities And Millennials
A new study from Harvard University by Dara Lee and Michael Luca shows definitively that raising the minimum wage reduces job opportunities for the working poor.
Specifically, the study highlights how ethnic minorities, particularly blacks and Hispanics, and young people are disproportionately hurt by minimum wage hikes.
Because these groups tend to lack the education, experience, and job skills necessary to hold higher-paying jobs.
Entry-level jobs are stepping stones, and a higher minimum wage simply removes the first stepping stone.
This is one of the many reasons that millennials are worse off than their parents.
How Does Raising The Minimum Wage Impact Employment?
The Harvard Study based its findings on the restaurant industry in San Francisco, using data pulled from Yelp, to track the performance of individual restaurants.
The idea was that after minimum wage hikes, restaurants would die off, thereby decreasing job opportunities.
The researchers discovered that for ever $1 increase in the minimum wage, there was a 4-10% decrease in employment—restaurants indeed closed down.
Basically, higher minimum wages hasten the business’ “shutdown” point—it eats their profit margins.
Of course, this means that less-profitable, local businesses, are hit harder than large corporate chains by minimum wage hikes.
Luca and Luca also found that minimum wage increases disproportionately impacted restaurants with lower ratings.
For example, a $1 increase in the minimum wage increased the likelihood of a 3.5-star rated restaurant closing down by 15%, but didn’t impact 5-star restaurants.
In either case, a higher minimum wage led to fewer restaurants, and therefore fewer jobs.
This is bad news for everyone involved in the business—except large chains that could afford to take the hit, now they just have less competition.
Of course, none of this comes as a shock to people with a basic level of reasoning ability.
If you’re interested in learning a little more about the logic behind minimum wage, there’s no better man to explain it than Thomas Sowell: