Skip to comments.A Minority View: Higher Minimum Wage
Posted on 02/27/2013 9:40:23 AM PST by Kaslin
In his State of the Union address, President Barack Obama proposed raising the minimum wage from $7.25 an hour to $9 an hour. That would be almost a 25 percent increase. Let's look at the president's proposal, but before doing so, let's ask some other economic questions.
Are people responsive to changes in price? For example, if the price of cars rose by 25 percent, would people purchase as many cars? Supposing housing prices rose by 25 percent, what would happen to sales? Those are big-ticket items, but what about smaller-priced items? If a supermarket raised its prices by 25 percent, would people purchase as much? It's not rocket science to conclude that when prices rise, people adjust their behavior by purchasing less.
It's almost childish to do so, but I'm going to ask questions about 25 percent price changes in the other way. What responses would people have if the price of cars or housing fell by 25 percent? What would happen to supermarket sales if prices fell by 25 percent? Again, it doesn't require deep thinking to guess that people would purchase more.
This behavior in economics is known as the first fundamental law of demand. It holds that the higher the price of something the less people will take and that the lower the price the more people will take. There are no known exceptions to the law of demand. Any economist who could prove a real-world exception would probably be a candidate for the Nobel Memorial Prize in Economic Sciences and other honors.
Dr. Alan Krueger, an economist, is chairman of the president's Council of Economic Advisers. I wonder whether he advised the president that though people surely would be responsive to 25 percent increases in the prices of other goods and services, they would not be responsive to a 25 percent wage increase. I'd bet the rent money that you couldn't get Krueger to answer the following statement by saying either true or false: A 25 percent increase in the price of labor would not affect employment. If anything, his evasive response would be that found in a White House memo, reported in The Wall Street Journal's article titled "The Minority Youth Unemployment Act" (Feb. 15), namely that "a range of economic studies show that modestly raising the minimum wage increases earnings and reduces poverty without measurably reducing employment." The WSJ article questions that statement: "Note the shifty adverbs, 'modestly' and 'measurably,' which can paper over a lot of economic damage." My interpretation of the phrase "without measurably reducing employment" is that only youngsters, mostly black youngsters, would be affected by an increase.
University of California, Irvine economist David Neumark has examined more than 100 major academic studies on the minimum wage. He states that the White House claim "grossly misstates the weight of the evidence." About 85 percent of the studies "find a negative employment effect on low-skilled workers." A 1976 American Economic Association survey found that 90 percent of its members agreed that increasing the minimum wage raises unemployment among young and unskilled workers. A 1990 survey found that 80 percent of economists agreed with the statement that increases in the minimum wage cause unemployment among the youth and low-skilled. If you're looking for a consensus in most fields of study, examine the introductory and intermediate college textbooks in the field. Economics textbooks that mention the minimum wage say that it increases unemployment for the least skilled worker.
As detailed in my recent book "Race and Economics" (2012), during times of gross racial discrimination, black unemployment was lower than white unemployment and blacks were more active in the labor market. For example, in 1948, black teen unemployment was less than white teen unemployment, and black teens were more active in the labor market. Today black teen unemployment is about 40 percent; for whites, it is about 20 percent. The minimum wage law weighs heavily in this devastating picture. Supporters of higher minimum wages want to index it to inflation so as to avoid its periodic examination.
Dr. Williams is apparently not wise to the hustle.
With the requirement to cover employees working over 30 hours a week under Obamacare, they’ve created an incentive to cut the existing workforce to part-time hours.
That of course leaves gaping holes in the schedule, meaning all of these minimum wage employers are on a hiring binge (and the optics of all those Help Wanted signs across the fruited plain certainly help Obama in the short run).
So you get these firms to vastly increase their part-time workforce. Then you cram a Living Wage on them, after which The Secretary Shall decide that the Obamacare requirement actually applies to everyone who works even a single hour on the clock.
At that point the business has two choices: Go Galt or shut up and go with the program. Not all will choose Option 1 unfortunately.
The left is marketing for fools. Unfortunately, there are more of them than us.
It’s simply commons sense that raising the minimum wage decreases demand for unskilled labor.
But the real reason for the minimum wage increase is to increase Union wages. Many union wage contracts are pegged to the minimum wage. Recently, a union leader called the 1% union wage increase Obama proposed ‘absolutely unconscionable’. This move is a backdoor way to get them more.
....and, many union wages are tied to the minimum wage. Increase the minimum wage and union wages must increase.
Any time a politico encourages an increase in the minimum wage, he is throwing a bone to his union thugs.
when it goes from 7.25 to 9.00 overnight, what happens to the workers who were makin 7.50-10.00 the day before ???
they just got screwed didnt they ???
Let me play as Krugman for fun: (without the beard)
“ No gilb, it raises all salaries because the greedy employers have to give everyone else a raise also to keep up. And it doesnt cause inflation because of competition so those greedy rich guys just make less $$$ and we hate them anyway for laying us off to save $$$$. Minimum wage is a civil right, the 14th amendment outlawed slavery. Its Black history month dude”
I can answer that.
The (unnamed) grocery store in my neighborhood consistently charges higher prices. 25% more? Dunno, but it's a bunch.
They cater to people who:
1) Need something specific and go there for the better selection.
2) People who think that "Higher Prices = Better Quality". (More common than you think, I've heard it a couple of times from people in my neighborhood.)
3) People who forgot to get milk on the way home at their regular grocery store and run in to pick it up. (that's me, occasionally)
So, to answer the question, "Do they sell more?"...I'd say "No, but they sell less for more money. :-)". Place stays in business somehow, likely *because* their prices are so much higher. However, if they got competitive pricing, I'm near certain that they'd be better off.
And - I should add that if a Walmart went up across the street from this grocery store, then it would either adapt or be out of business in about a week. :-)
sickdude chanels krugman and nails it !!!
dont grow the beard, lest somebody attempts to shave it off with a guillotine in the near future...
As long as they don’t lose their jobs—and surely some will, those below $9 would get a raise and those above would still get their regular wage.
no problem bustin ass for a couple yrs to get raises, and the new guy comes in and starts at that rate ???
obviously bambam hates poor/unskilled people...
We don’t need a higher minimum wage. More manufacturing on US soil is a better answer.
I agree somewhat, but I think minimum wage should be for those who are just starting out in a job, like high school graduates etc