Minimum wage pricing workers out of the market

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May 25, 2010

The country's minimum wage law is limiting employment and making it harder for unskilled high school graduates to enter the Bahamian workforce, according to Ralph Massey, a Bahamas-based economist.

Massey was addressing the Men's Club of St. Paul's Catholic Church at Lyford Cay on the education crisis in The Bahamas. He outlined a 10-point reform program, one of which was to "change laws and regulations that now limit teenage employment so that students can more readily be employed upon leaving school".

The economist played a key role in putting together the Coalition for Education Reform's seminal work on the Bahamian education system's failings, and the consequences for the Bahamian economy. He told the Tribune that the minimum wage - set at $4 per hour, or $150 per week - effectively acted as a disincentive for employers to hire unskilled school leavers by pricing them out of the labour market.

And he warned that the education/productivity issues in the Bahamian workforce were "going to hurt", possibly impeding - and prolonging - economic recovery.

"If you did not have that drag, the Bahamas would probably be in a better position," Mr Massey added. "The Bahamas does not have heavy investment in human capital, and is suffering for that."

Explaining that one of the laws he was referring to was the minimum wage, Mr Massey told Tribune Business: "One of the effects of the minimum wage is that it limits employment for people not worthy of being employed."

He explained that all employers, whether they recognized it or not, where engaged in processes of determining whether or not to hire extra workers, basing their decisions on whether a candidate was "worth the hourly rate you pay them".

Whenever the minimum wage was raised in the US, the employment of unskilled teenagers dropped because the marginal cost of hiring them had risen for employers, Mr Massey explained, creating a disincentive to retain them.

Click here to read more in The Tribune

News date : 05/25/2010    Category : Business

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