FREE LUNCHES ARE NEVER FREE
Last week, President Obama said that "income inequality" is the major problem that his administration would focus on for the remainder of his term. He proposed increasing the minimum wage as a way to solve this issue.
The president's statement is a perfect example of how politicians misdiagnose problems and then offer solutions that make matters worse.
The real problem is the lack of economic growth, which reduces economic opportunity, particularly for the least skilled. Increasing the minimum wage helps those who actually receive an increase in their wage, but it makes it worse for all of those who lose a job or can't get one because the minimum wage is far above the market clearing rate.
As can be seen in this table, most minimum-wage workers are young people who quickly obtain higher wages as their work skills improve.
