Ringing in the new year with bad economic policy

As 2019 approaches, millions of Americans are thinking about New Year’s resolutions.

But as many are reflecting on self-improvement, state and municipal governments across the country are about to do just the opposite. They are going to implement legislation that will stifle business growth and reduce employment opportunities for entry-level workers.

Come January, the minimum wage in 20 states and 23 localities will be rising.


To the casual bystander, a higher minimum wage may seem like cause for celebration. However, the unintended consequences of the policy — notably fewer employment prospects and slower business growth — easily extinguishes the possible benefits. This is a trend economists have studied for decades.

Take for example a 1994 analysis of the minimum wage, which applies textbook economic theory to the issue. According to their investigation, “the higher the minimum wage, the more unemployment there will be.”

More recently, a 2017 study out of the University of Washington reveals the negative impacts of Seattle’s minimum wage hike. In 2015, the city began to slowly increase the minimum wage level until hitting $15 an hour at the beginning of 2018. After analyzing the intermediary effects, it was quite clear the policy had major ramifications. 

The study found that employers were forced to reduce worker hours in order to make up for rising labor costs. More specifically, employees earning the new mandated wage level were subjected, on average, to a 9-percent cut in working hours.

Unsurprisingly, the end result was a reduction in monthly income for low-wage workers — the very group the policy was intended to help.

Teenagers are especially susceptible to these negative impacts. Americans between the ages of 16 and 19 years old are unlikely to have significant job skills or experience. Therefore, they are perfect candidates to be paid the minimum wage — a pay level intended to act as employment “training wheels.”

However, when the minimum wage is forced upward, the number of these entry-level job opportunities begins to disappear. According to Pew Research, the percentage of teens working summer jobs has fallen by roughly 15 points since 2000. 

Not only will jobs disappear and working hours be reduced as minimum wage levels continue to rise, but many businesses will be forced to shut down for good. 

In fact, a 2017 study from Harvard Business School investigating restaurant closures found that every dollar increase in the minimum wage will translate to a 14-percent increase in the likelihood of closure for restaurants rated with a 3.5-star review or below on Yelp — an online platform that allows consumers to rate restaurant experiences.

This is a situation even Rep.-elect Alexandria Ocasio-CortezAlexandria Ocasio-CortezHillary Clinton backs Shontel Brown in Ohio congressional race Ocasio-Cortez, Gillibrand and Moulton call for more high-speed rail funding in infrastructure package Pelosi picks Democrats for special panel tackling inequality MORE (D-N.Y.) — who supports a $15 minimum wage —should understand. Earlier this year, she visited the restaurant that formerly employed her one last time before it closed. The owner cited a rising minimum wage as the main reason why. 

As we ring in the new year, let’s remember to note all the negative consequences that will inevitably stem from the minimum wage hikes scheduled to take place across the country on Jan. 1. That way, we can hopefully avoid repeating our mistakes in 2019. 

Joseph Semprevivo is the president and CEO of Joseph’s Lite Cookies. He is an adjunct professor of finance, real estate and insurance at Indian River State College and the best selling author of “Madness, Miracles, Millions.”