In a free labor market, wage rates reflect the willingness of workers to work (supply) and the willingness of employers to hire them (demand). Worker productivity is the main determinant of what employers are willing to pay. Most working people are not directly affected by the minimum wage because their productivity and, hence, their pay, is already well above it.
The law of demand says that at a higher price, less is demanded, and it applies to grapefruit, cars, movie tickets and, yes, labor. Because a legislated increase in the price of labor does not increase workers' productivity, some workers will lose their jobs. Which ones? Those who are the least productive.
Minimum wage laws mostly harm teenagers and young adults because they typically have little work experience and take jobs that require fewer skills. That's why economists looking for the effect of the minimum wage on employment don't look at data on educated 45-year-old men; rather, they focus on teenagers and young adults, especially black teenagers. Paul Samuelson, the first American winner of the Nobel Prize in economics, put it succinctly back in 1970. Analyzing a proposal to raise the minimum wage to $2 an hour in his famous textbook, Economics , he wrote, "What good does it do a black youth to know that an employer must pay him $2 an hour if the fact that he must be paid that amount is what keeps him from getting a job?"
A comprehensive survey of minimum wage studies found that a 10 percent increase in the minimum wage reduces employment of young workers by 1 percent to 2 percent. To put that into perspective:
Gov. Schwarzenegger's proposed 15 percent increase in the state minimum wage would destroy about 35,000 to 70,000 unskilled jobs - putting 1.5 to 3 percent of young Californians out of work.
Overall, the proposed minimum wage increase in California would eliminate about 70,000 to 140,000 jobs.
A 15 percent increase in the minimum wage nationwide would destroy about 290,000 to 590,000 young people's jobs, and about 400,000 to 800,000 jobs overall.
Fortunately, and to his credit, Gov. Schwarzenegger wants to avoid indexing the minimum wage to either the consumer price index or a wage index, as the French government did in 1970. Indexing the minimum wage makes it much harder to get the inflation-adjusted minimum wage down and makes it permanently harder for the least-skilled workers to find jobs. The rising minimum wage in France since then has added to the country's youth-unemployment woes.
http://www.ncpa.org/pub/ba550/