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The cruelty of minimum wage

President Clinton makes it sound so simple. Raising the minimum wage, first by 50 cents in 1999 and again by another 50 cents in 2000, is "one simple, sensible step to help millions of workers struggling to provide for their families."

Such statements generally are followed by hardy applause from those who earn far more than the current minimum of $5.15 an hour but who like to feel they are being benevolent toward the less fortunate.With friends like this, the poor don't need enemies.

No credible economic study ever has disproved the logic that minimum wage hikes hurt the very people they are intended to help. Now, to add a touch of irony to the debate brewing in Congress, three economists have published a report that provides the strongest evidence yet as to just how damaging they are.

The study by David Neumark, Mark Schweitzer and William Wascher concludes that the number of poor and near-poor families actually increases whenever the minimum wage rises. The evidence is clear: Some families do see an increase in salary as the minimum rises, but their prosperity comes at the expense of other families who are forced onto unemployment rolls.

If workers cost more, employers can't afford as many of them. The only alternative would be for employers to raise the cost of the services they provide, and the resulting inflation hurts everyone.

Why then, critics ask, did the overall unemployment rate drop after the last wage hike in 1996?

There are two answers. First, it dropped because most people already earned well above the minimum wage. Natural market forces had raised living standards without government intervention. By some estimates, less than 3 percent of the work force earns minimum wage. Secondly, unemployment did rise but only among the poor and disadvantaged who were struggling to get off welfare.

Writing in the Wall Street Journal last summer, Alan Reynolds, the director of economic research at the Hudson Institute, offered startling statistics about what the last increase did to the three most vulnerable groups - blacks, teenagers and single mothers. In all three instances, unemployment rates rose. Among women heading families, it rose from 8.5 percent to 9.1 percent. So much for benevolence.

At a time when states finally are beginning to reduce welfare rolls by taking advantage of a strong economy, the last thing Congress needs to do is raise the minimum wage.

Beware of economic solutions that are based more in politics than in economics. Or, in other words, when you are struggling to get off welfare and the government says it is here to help, turn and run.