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August 26, 1996 02:00 AM

RAISING MINIMUM WAGE WILL MEAN LOST JOBS

Roger Jones
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    In the June 10 issue, you identified Peter Mooney, the author of the Page 17 Perspective, ``Econo-mist defends minimum wage hike,'' as an economist, although he trots out almost no explicitly economic arguments in defense of Plastics News' May 6 editorial. Like many liberals, Mooney has no trouble finding warm, fuzzy, social justifications for spending other people's money. His problem is that economic facts not only do not support raising the minimum wage, but strongly suggest that it should be abolished.

    One of the basic principles of economics is the inverse relationship between the demand for a commodity and its price: Raise its price and there will be a decline in demand. Except for the Card-Krueger survey, virtually every major study ever done has confirmed that there are significant job losses associated with raising the minimum wage.

    The 1981 congressionally sponsored Minimum Wage Study estimated a 1-3 percent reduction in teenage employment for every 10 percent rise in the minimum wage, which would mean a loss of 130,000-390,000 jobs under Pres-ident Clinton's proposal, which he signed into law last week.

    The Card-Krueger study has been found to have serious errors in data and methodology; Nobel Prize-winning economist Gary Becker of the University of Chicago said that ``the Card-Krueger studies are flawed and cannot justify going against the accumulated evidence from many past and present studies that find sizable negative effects of higher [minimum wages] on employment.''

    Less than 2 percent of U.S. wage and salary workers would be affected by minimum wage legislation. However, minimum wage jobs are typically entry level for those without skills or training, often members of minority groups. In fact, data from the Bureau of Labor Statistics make it clear that previous increases in the minimum wage have fallen disproportionally on black teenagers and virtually devastated their employment chances.

    In 1948, the unemployment rate for black males age 16-17 was 9.4 percent, vs. 10.2 percent for comparable whites. In 1995, the unemployment rate for black teen-age males was 37.1 percent, vs. 15.6 percent for comparable white males. There is a better than 99 percent statistical correlation between every increase in the minimum wage and an increase in black teenage unemployment.

    When someone can't find work, it should not be surprising that they go on welfare or even turn to crime. Studies by Hashimoto of Ohio State University and Phillips of the University of California at Santa Barbara show a connection between increases in the minimum wage and teenage crime.

    Also, Brandon at the University of Wisconsin has found that the average time on welfare rose 44 percent in states that increased their minimum wage, largely because of reduced job opportunities for welfare mothers.

    Mooney trots out the liberal straw man about the difficulty of supporting a family on the minimum wage. According to the Bureau of Labor Statistics, only 22,000 men and 191,000 women maintained families on a minimum wage job in 1993, about 7 percent of the total number of minimum wage earners.

    It would be far more cost-effective to provide supplemental income to these few heads of families, either by outright welfare grants or ``negative income tax'' refunds, than to change the wage structure for the other 93 percent. Among the rest, 66 percent are part-time workers, including students, pensioners and others looking to make extra money; 37 percent are teenagers, many of whom live at home. Even these data overstate the number of people earning minimum wage, because 49 percent work in retail trade, including restaurants, where tips and commissions are not counted but add to income.

    Raising the minimum wage destroys jobs, especially those needed by teenagers entering the labor market. Raising the minimum wage also increases crime and welfare costs. These factors cannot be ignored when dealing with the growing and seemingly permanent inner city underclass.

    The minimum wage should be abolished, as the debris of outmoded and discredited socialism.

    Jones is president of Franklin Polymers Inc. in Broomall, Pa., a distribution and management consulting firm that publishes a monthly economic newsletter.

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