How The Minimum Wage Can Kill Job Growth Without Eliminating Current Jobs

How The Minimum Wage Can Kill Job Growth Without Eliminating Current Jobs by David R. Henderson, Foundation For Economic Education

Wage floors impact future capital investment as much as current labor costs

Jonathan Meer and Jeremy West have found that increases in the minimum wage destroy jobs, not so much by destroying current jobs as by reducing the growth rate of new jobs.

That makes sense if employers' investments in capital are even partially irreversible, that is, if some costs of capital investment are sunk, as seems plausible.

Here's a simple numerical example to illustrate the point.

Imagine that an employer is contemplating investing $100K in the price and installation of a piece of machinery that he expects to last 5...