Monday, January 21, 2008

On State Unemployment

First quick thought since returning to Blogger... I was looking at some recent state unemployment data (via Wikipedia, if you're interested) the other day, and I noticed that of the 10 states with the highest unemployment rates in the country, 8 have minimum wages higher than the federal minimum (and, IIRC, Louisiana was one of the ones that didn't, and it was hit by a hurricane). Of the 10 states with the lowest unemployment, only 3 have wages higher than the federal minimum.

So, coincidence? If not, which way does the causal arrow point? Do states with high unemployment vote in Democrats, who in turn raise minimum wage? Or does raising the minimum wage increase the cost of labor, causing businesses to purchase less of it? My vote is with the second. You can't violate the Laws of the Market, and one of those is: ceteris paribus, demand decreases as price increases.

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