In general, I think raising the minimum wage is a bad thing, for economic reasons.
First, you typically wind up helping minimum wage earners a very small amount by hurting small businesses quite a bit. If McD’s has to pay people more, it’s not a huge deal, the executives just have to wait a little longer to buy that Lotus, and maybe stock prices drop a bit (and they’ll hire fewer people and expand a bit less, cutting job opportunities both in the short and long term, but that’s beside the point I’m trying to make here). If Bob’s Shoe Store sees a minimum wage hike, though, they will likely be faced with the choice of cutting profits (which they need to live), or letting off some employees (which they need to sell their products, and make profits, which they need to live). It’s a lose-lose situation for poor Bob, and if the hike is large enough, Bob will be screwed.
In addition to this, there is a supply/demand effect to raising the minimum wage. Labor is essentially a product, just like guns and butter. If the cost of labor goes up (ie, a minimum wage hike), there will be less demand for it (ie, fewer jobs available). In addition, on the other side of the coin, since there is now more financial incentive to get a job for those currently unemployed, the size of the labor base will increase - more competition. However, the way in which the labor base increases isn’t uniform. Why? Minimum wage workers can be lumped into two categories: those who want to work (the majority of them), and those who need to work to survive. The former group consists of students, elderly people who are bored or want some extra money, and so on. The latter group consists of the unfortunate high-school drop-out who happened to marry young and raise a family, or the guy trying to pay for his way through college, etc.
Now, most of the people who need to work are already in the labor base, because, well, they need to work. Some of those who simply want to work may not be in the labor base yet, because it’s not worth it to them. But jack up minimum wage, and suddenly those jobs start looking more appealing. So we now have a large labor base, with a smaller ratio of people who need to work, and fewer jobs on the market. What happens? You wind up with not only fewer jobs overall, but a lower ratio of those jobs going to people who really need the work.
While I don’t have a cite handy, alas, it turns out that every time there’s a minimum wage spike, you see a corresponding drop in employment. I’ve heard the statistic that for every 10 cent increase in the minimum wage, about 100,000 people go unemployed, but I can’t speak for the veracity of this.
There’s also a moral aspect to my opposing the minimum wage: If I feel that job X is only worth $3/hr to me, what gives the government the right to tell me otherwise? Further, if I’m willing to perform a job for $3 an hour, why can the government preclude me from doing so, thus costing me a job? I know that argument doesn’t fly with a lot of people, though, so I typically use the economic argument. It appeals to the save-the-world mentality of a lot of people better than the moral argument does.
Jeff