The unemployment rate for teens is at 23%, and the rate for unskilled workers is at 12%. Why does President Obama propose raising the minimum wage to $9 per hour and indexing it for inflation, as he stated in his State of the Union Address?
Obama and his advisors seem to believe that if the minimum wage were raised and then indexed, all workers would retain their jobs. But this is not the case.
Between 2007 and 2009, the federal hourly minimum wage rose to $7.25 in three steps from the $5.15 rate that had prevailed for a decade. If the wage were raised to $9 and then indexed for inflation, it would rise every year.
It sounds compassionate to alleviate poverty by mandating that employers raise wages, but employers often replace low-skill workers with machines. Think self-checkout machines in supermarkets, or computerized call centers.
Or, try a thought experiment — would you have your job if the minimum wage were $50 an hour? Probably not.