So, you wanna raise the minimum wage…

October 1st, 2014 at 8:00 am

Over at PostEverything. Coincidentally, the always insightful Gavin Kelly of the UK think tank Resolution Foundation has a similar piece cogitating on the UK’s minimum wage.

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4 comments in reply to "So, you wanna raise the minimum wage…"

  1. smith says:

    Buried the lead:
    “Higher Minimum Raises Everyone’s Wages”
    It’s implied at the end with “suggestive evidence that the only states where real wages actually went up in 2014 are the ones who raised their minimums”

    This needs to be studied further, but it would defy common sense that raising the minimum doesn’t raise everyone’s wage. It’s also why business and the wealthy oppose the measure. They know it affects everyone and reduces their cut. There is a ripple effect, which leads to a multiplier. The same thing happens when you have a critical mass of unionized labor that bargains effectively for a share of profits. When the private industry labor force was heavily unionized ( 35% in the 1950s, close to 20% as late as 1980 ) it boosted everyone’s salary.
    It boosted the workers not in unions.
    It pushed up the middle management wages of those above the unionized workers.
    It pulled the wages up of those below the unionized workers.

    If you are a white collar professional who reads about overpaid auto workers, teachers, and sanitation workers (the last remnants of unionization) and but wonder why you can’t get a larger raise, well guess what? You need a striking union to do your dirty work, threaten a strike, demand a larger cut of productivity, benefits, cost of living increase, and avoid moving factories and offices to cheaper labor locations, south or overseas.

    That’s the teachable moment missed often when discussing minimum wage.

    I admit to not having a study to cite, grant money would be welcome, or links to already existing papers. Can’t the unions themselves afford that work? Do they grant scholarships for majors and graduate work in labor economics?

    • Fred Donaldson says:

      If you increase the minimum wage, nearly everyone, except the rich, will have more money to spend, even though the price of some items might increase slightly. The only persons who will suffer (a tiny bit) are the very rich, who will see small inflation that lowers their overall wealth’s value, and additional expense as they pay the “help” more to clean toilets, cut grass and otherwise act as today’s servants (wage slaves) to the upper class.

      This tiny inconvenience to the very rich, however, is often considered class warfare, the end of their world, as they know it, by a small interference with their plutocracy’s right to set both prices AND wages. Worst of all, to them, it brings the peons a little closer to the perks of the “better class.”

      True class warfare is the opposition to any economic change that will end misery, so a few can bask in being miserly.

  2. urban legend says:

    The knee-jerk declaration that raising the minimum wage will cost jobs always seems to ignore the fact that a business’s competitors are in the same boat. A 20% increase in the minimum wage in a low-wage industry like fast food will probably increase total costs no more than 1-2%. Big Box retail should be even less than that. But Walmart’s or McDonalds’ pain will be shared by Target and Burger King, so nobody is placed at a competitive disadvantage. So what is the price elasticity of these industries? And to what extent do benefits to the employer like lower turnover and training costs and potential customers with more money to spend override or even make unnecessary any price increases. Will people reduce their fast food purchases because of a 3 – 5 cent increase in the Big Mac or the Whopper, or does the convenience benefit of fast food override the minor cost increase?

    In other words, this is not an Econ 101 matter. The empirical data seems to indicate that the naysayers are simply wrong. Virtually all of the national minimum wage raises since 1950 have been followed by job growth rather than the opposite. Most of the more granular studies seem likewise to identify no net losses.

  3. Jill SH says:

    Coupla things:

    – I remember, as a school girl circa 1960, once being in the car when we had to drop my dad off at his job (a division of a large manufacturing corporation doing utilities and government contracts). The unionized workers had a picket line out in front of the main entrance. I asked my dad how he felt about ‘crossing the picket line,’ though, as a management-level salaried employee, he was not in the union. His reply: “When their wages go up, so do mine.”

    – Let’s consider for a moment those potential 24.5 million minimum wage workers who’d go from 7.25 an hour to 10.10. That’s about a 40% jump. All those wages are subject to payroll taxes, so we’d be seeing a significant rise in those revenues. Has anyone run figures on what that does to Social Security and Medicare funding over time? As a fix to Social Security long-term prospects, a complementary move to raising the taxed top limit on earned income subject to FICA is raising the earned income at the bottom.

    – The “half-the-median” idea as a marker for minimum wage: Since wages and salaries have stagnated over the last 30+ years, it seems we may have a lot of ground to make up. Maybe setting a higher marker — over time, a living wage closer to $15, with its ripple effect of pushing up other wages and salaries, then indexing — should be our goal. But the main message to highly profitable corporations is to make sure all workers share in the prosperity. Who knows? Maybe we could afford to lower corporate tax rates. 😉

    – Which reminds me of another little factoid I figured a few months back: If all the min-wage workers got the same pay increase as Jamie Dimon, we’d be talking $12.60/hour.