Minimum wage: my take

[orangemike]

An excellent science fiction writer asked me offline, "...what's the counter-argument for the conservative/libertarian position of 'Look, if you raise the minimum wage, the employer will raise their prices to compensate, this will ripple down the chain of goods and services, and pretty soon Mr. Minimum Wage is right back where he started.' I reply

Comments

[fidelioscabinet]

I'd frame this and hang it on the wall, along with my explanation on Why We Can't Lose Social Security. Because damn, everyone who's really affected by these things is invisible to these gomers.

[ckd]

Yup yup yup yup.

Money operates very much like the equation for kinetic energy (E=mv^2). If it's not moving, it has no effect. If it's moving slowly, it has very little effect. If it's moving quickly, it has a very large effect.

If someone who's making $250K/year gets an additional $1000, the odds are that it will go into savings or investments; it's moving, but slowly.

If someone who's making $25K/year gets an additional $100, it's going to go into the economy nearly instantly.

[ext_2769615]

Yes --they may lose benefits (you aren't paying for) if you pay them more-- maybe just raise the minimum they can make to get daycare rather than keep a beggars economy

[kalimac]

Well put. On a broader level, we seem to be moving towards a society in which all work is automated and nobody has jobs. But how can an economy run under such circumstances? Who will buy things, if nobody except the 0.01% are making any money?

[del_c]

I get my basic theory of where the money goes from Henry George: it goes to landlords in the end. A higher minimum wage is carved out out of the rent, and a lower minimum wage is poured into the rent. In no case is the change "passed on" as higher or lower prices to customers. There are no landlords out there that would have charged higher prices than the market would bear, but gosh darn it they're such nice guys they don't charge that high unless you force (force!) them to by raising the minimum wage. Plus, as you say, give money to poor people and they spend it; give it to rich people and they sock it away.

I don't doubt there is a class that loses out as a result of having to pay minimum wage. Of course there is, that's the point! It's the asset-owning, labour-employing, rent-collecting class.

[seawasp]

Hm. Yet there are articles which say that the prices would indeed rise very significantly, especially in the industries most commonly employing low-pay people. Are they wrong? Note that any answer that involves a company making less money than they do currently is not an answer, because their stockholders won't stand for it; barring changing corporate law, that ain't happening.

[tandw]

Will have to check the link when I'm not working from my phone. Two preliminary comments, though. First, if you took all the economists in the world and laid them end to end, they'd point in different directions. Second, we have the reverse situation to study. Minimum wage has not changed in many places in the US for some time, during which its purchasing power has gone down due to inflation. To the extent that this represents a reduction in the real minimum wage, has a corresponding reduction in price of goods been observed?

[del_c]

I just checked the link: 38% rise in fast food prices, leading to a 33% reduction in fast food consumption! The Surgeon General would probably be delighted with the positive effect on the nation's health, but those are fantasy numbers. Where's the historical precedent for them?

[del_c]

Stockholders won't stand for companies not making even more money if the companies can, and yet it still happens. Stockholders not standing for something isn't relevant