Add One More to My Growing List of Unintended Consequences

It’s been a recurring theme in my posts – unintended consequences. I find the topic fascinating because the unintended consequence is usually something I would have never thought of.

For instance:

• A couple of weeks ago I wrote about a possible downside to peace – the destruction of rainforests.
• I’ve also written about the unintended consequences of a drop in the crime rate – the closing of prisons in small towns that rely on the prison for jobs and the economic benefits associated with people in a small town having a job.
• I also wrote about the unintended consequences of winning – it can elicit future unethical behavior.
• One post looked at what is known as the Charity Paradox. While most people would assume that charitable giving is a good thing, the enormous amount of such giving to many developing countries such as Haiti has created harmful distortions in the local economy because when what would otherwise be traded or produced by Haitians is given away, it drives entrepreneurs out of business.
• Finally, one of my earliest posts looked at the disconnect between using incentives to reward certain behaviors, and what behavior may actually result.

The most recent example was an editorial in the Wall Street Journal that looked at the potential downside to increasing the minimum wage.

The editors at the WSJ ask if it is merely a coincidence that New York City’s full-service restaurants have fallen into a jobs recession at the same time the minimum wage has risen from $11 per hour to $13 per hour to $15 per hour over the past couple of years.

The editors note that January employment in New York City restaurants dropped 3.7% year over year, even as overall city employment is up around 2% year over year.

A team of researchers at the University of Washington found that when politicians arbitrarily set the price of labor, young workers without skills can be locked out of the job market.

In a more recent National Bureau of Economic Research working paper posted last month, three economists examined whether minimum-wage increases had any effect on crime from 1998 to 2016. “We find robust evidence,” they write, “that minimum wage hikes increase property crime arrests among teenagers and young adults ages 16-to-24, a population for whom minimum wages are likely to bind.”

The economists go on to say that “our estimates suggest that (a nationwide $15 minimum wage mandate) would generate over 410,000 additional property crimes and $2.4 billion per year in additional crime costs.”

So while I have seen arguments against the minimum wage hike for other reasons that are a bit easier to recognize, I would have never thought of a higher minimum wage leading to higher rates of crime.

While it’s just one research paper, if you think about it, you can see the logic for such an argument.

I’ll be curious to see what happens in New York City as a result of these minimum wage hikes.

Apparently, as all of these examples suggest, there’s some truth to that old saying, “no good deed goes unpunished.”

*image from Identity Specialist