TWO ARGUMENTS AGAINST RAISING THE MINIMUM WAGE

(h/t Matt Yglesias)

bite the dust.  At least, a massive increase in the price of burgers is not an unavoidable outcome and neither is a massive increase in youth unemployment if we consider the situation in Denmark.

The minimum wage and the Danish Big Mac
By Ryan Chittum
11:00 AM - September 5, 2013
Columbia Journalism Review

The minimum wage in Denmark (ADDING: I should say that this is an effective minimum wage negotiated with unions, not a legal one) is roughly $20 an hour (though teenagers can earn somewhat less). Not coincidentally, labor-intensive restaurants have very high prices, while less-labor-intensive grocery store prices are much less shocking.

The average full-time equivalent McDonald’s employee in Denmark makes about $45,000 a year in total compensation. Forty-five thousand dollars! Even after high Danish taxes, that average worker will take home some $28,000 a year, roughly double what a full-time American McDonald’s worker will. To add insult to injury, the Dane gets at least five weeks of paid vacation while the American is lucky to get off (unpaid, of course) when her daughter is home sick with the flu.

And so at the Aalborg McDonald’s, for instance, a Big Mac extra value meal costs 58 kroner, or $10.25, while the Dollar Menu is the 10 kroner menu, which means it’s the dollar-seventy-seven menu here. In Denmark, taxes are included in list prices, unlike in the US, so backing out the 25 percent VAT gives us $8.20 for a Big Mac meal and $1.41 for the “dollar” menu. That compares to $6 and $1 in Seattle.

According to Bloomberg View’s Caroline Baum, such a high minimum wage should mean that scads of Danes can’t find work because it “violates the most basic principle of economics”: the law of supply and demand.

Of course, Baum is empirically wrong. Denmark’s unemployment rate is 6.8 percent, despite its close ties to the depressed eurozone. That’s well below the 7.4 percent rate in the US, where the minimum wage is $7.25. The labor participation rate for working-age Danes is 64.4 percent, which means Danes are more likely to work (despite their super-generous welfare state, which includes earlier retirement) than working-age Americans, 63.6 percent of whom work. And amongst teenagers and those aged 20 to 24—the group most likely to have low-paid jobs—far more Danes work than Americans, as this Bureau of Labor Statistics chart shows.