The road to recession is paved with good intent

Editor’s note: This letter is in response to the column “Growth of prison labor harms small businesses,” published in Thursday’s Daily Lobo. The column talks about the benefits of increasing the minimum wage and elaborates on the harms of using low-paid prison labor instead of paying other workers the minimum wage or higher for the same work.

Editor,

In Will Thomson’s recent column, he claims that the minimum wage increase proposal that will be on the ballot in November should be the last thing small businesses have to worry about. He’s missing the bigger picture. It isn’t only the small business owner who will have to figure out how to accommodate the rising labor cost.

It is the minimum wage earners and marginal workers who will be negatively impacted directly by a minimum wage increase.

Ironically, it’s those individuals who the proposal is intended to help.

But like so many policies pursued by crusading bureaucrats, the intent never matches up to reality. In a previous article by the same author, and like many other minimum wage advocates, he cites Santa Fe as a prime example of a low-unemployment city with a very high minimum wage. It is true that Santa Fe has one of the highest minimum wage mandates in the country and one of the lowest total unemployment rates in the state, at around 5 percent. Does one really think there is a correlation between high minimum wage and low unemployment? Any sensible person would find this curious and require a closer look for unseen variables.

As it turns out, it is not the entire story. Who does a high minimum wage affect? It isn’t everybody, because many are paid above the minimum wage. It affects those who are in the margin, the low-skilled worker entering the job market or working an additional low-skilled job for extra income. This demographic is primarily the young newcomers to the labor market. With this in mind, the unemployment rates tell a different tale.

The national unemployment rate for 16-24-year-olds is 16.5 percent. Albuquerque does relatively well in this category, with an unemployment rate of 8.8 percent and a minimum wage of $7.50.

Santa Fe, with a minimum wage of $10.29, has a staggering unemployment rate for 16-24-year-olds of 21.9 percent. If the minimum wage is raised, it is unlikely Albuquerque will be able to maintain an unemployment rate of 8.8 percent among 16-24-year-olds.

Raise the minimum wage to $20 or $30 and you will see in plain sight what actually occurs at the marginal level with lower minimum wage increases. It’s easy to look at an individual’s wage of $10.29 and think “Wow, how can someone live off of only $21,000 a year?” However, you don’t help the poor by removing the best choice they have. Then all they are left with is the next bad predicament, which is no job at all, and the closest rung on their economic ladder is just out of reach due to someone’s “good intentions.”

A new study was released by the Employment Policies Institute, which was blogged about by the Rio Grande Foundation’s ErrorsofEnchantment.com. In this study, University of Kentucky economist Aaron Yelowitz examined the impact of minimum wage mandates. The study found that “each additional $1 in wage and benefit mandates reduces young adults’ labor force participation by roughly two percentage points, increases unemployment by 4.5 percentage points and causes a 26-hour reduction in annual hours worked.”

Do not let good intent lead Albuquerque into an economic quagmire. Vote “no” for the minimum wage increase. I find it interesting that Mr. Thomson is so concerned by how “prison labor undercuts small employers and also takes away jobs at a time when unemployment rates are high and finding a job is difficult,” but completely advocates an increase in minimum wage that does this very thing. He ignores economic reality in one instance but seemingly wants to call upon the same concept when it suits him. One can pick and choose when to ignore reality, but one can never ignore the consequences of it.

Marcos Portillo
UNM student