Lower Wages the Unintended Consequence of Higher Minimum Wage

Heritage presents a few good reasons to oppose the minimum wage on its website, the chief one being that it lowers income. But wait, you ask, how can a law that mandates that businesses pay more per hour reduce the income of workers? Shouldn’t it raise income? These questions reflect a mindset steeped in static economic equations that ignore the unintended effects of government action.

One effect of a rise minimum wage is to reduce teenage educational levels, as higher wages beckon students to work more and study less.  Yet the long term consequence is lower income as adults with lower educational attainment than they otherwise would have achieved earn less money. Once again the difference between static and dynamic economic models incentives play a prominent role in a political debate.

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