I’m putting this in GQ because, although the answer is probably going to be theoretical, I think it can be kept apolitical.
I often here progressives, Greens, etc talking about raising the minimum wage or creating a living wage. My poor, feeble mind doesn’t understand economics. What little I DO know indicates to me that raising the floor wage would cause the business owners to raise prices and thus cause inflation, creating a vicious circle.
Am I right? Am I wrong? Is there any way to raise the minimum wage without causing inflation? I’m so horribly clueless here.
Your logic sounds good. It could very well be true.
Attempt to poke holes:
If, by providing a higher minimum wage, inefficiencies such as apathy or turnover of employees(etc) are reduced, it could turn out that the net cost to the employer is not as high as you would think.
I run kind of conservative. However, it wouldn’t surprise me to find out that raising minimum wage would not have as much price pressures as you would think.
You are correct, Ace 309. Just as prosperity cannot be created simply by lowering (or raising) prices, neither can it be created by raising the minimum wage. For one thing, a majority of workers already make more than the minimum. For another, a business owner is not free of the yoke of economics: If each worker costs more, then he or she will have to have fewer workers and possibly overwork himself or herself to meet production demands. Many of the smaller enterprises would be forced out of business altogether. We want less unemployment and business failures, not more.
I’ve done my time at low-status jobs, including jobs that pay twice minimum wage. It’s been my experience that there is a fairly large proportion of laborers out there who can barely be trusted to find their ass with both hands if you spot them a full cheek. As for apathy and turnover, I worked and knew with people who managed to go through their “personal” days within three months of starting a job. They didn’t have ill health, family demands, or similar problems. They just would call in because they “didn’t feel like working” that day. And if they were at risk of getting fired, they didn’t really care. Reality never sank in until they got hungry, and even then any attempted solution was as short-term and short-planning as possible.
Some sort of minimum wage is a good idea. A great number of businessmen seem to live just to screw over their employees. But I’ve seen enough to know that a minimum wage–and even paying more than this minimum is no guarantee of workers who aren’t crap. People come to expect luxuries as if they were necessities, after all.
Minimum wage kind of defeats the purpose of capitalism, i.e., you pay what the market demands. If some kid wants to work for $1.00/hr, then the job could be filled for $1.00/hr. If someone undersells him by $0.25, then the job gets filled for $0.25.
I’m not promoting this idea; just kind of showing it from the perspective of the free market.
The public is only willing to pay a certain price for a product. Let’s say $1 for a hamburger. Mcdonalds cannot charge $1.10, because they will lose customers. Therefore an increase in the mimium wage will come out of the owners profit.
In the real world economics is a complex mix of many factors, but at least SOME of the cost of minimum wages increases, and business tax increases will come out of the business profits. If companies could just pass tax/wage increase to customers they wouldn’t fight tax/wage increases as much as they do.
That said, like Dogface said, there are many people who don’t deserve minimum wage, and a minimum wage makes these people unemployable. I’m a small business owner and I’ve often run across the problem where people think they are worth $10 per hour, but are actually only worth about $4 per hour. I generally have to let these people go because they are the ones that think you are trying to take advantage of them.
As I’ve read it, most common items are fairly labor-intensive to produce and distribute, so yes–raising the minimum wage just causes price increases, helping nobody except the taxman, when people get pushed into higher tax brackets but whose incomes haven’t really increased in value any more than before.
However you feel about it, an interesting question to ponder is this: if the minimum wage was completely abolished, what do you think the “average” wage paid for low/no-skill jobs would settle at? Would it go higher, lower or stay the same? While I’m certain there are managers who would drive workers to work for free if they could, it has been noted that some businesses already “lose” large amounts of money in recruiting and training workers to continually resupply their high turnover rates…
~
I can honestly tell you, you get what you pay for. In my last job I did OK. Suddenly it was announced that no one would get raises for next year(2003). Except of course for directors, and union people and then the directors gave all the overtime exempt managers an extra raise in Dec 2002. So basically a few employees got screwed at the expense of others.
I used to worked my butt off. After that I did EXACTLY what I could to keep from being fired. If you pay lousy you get lousy employees.
If you want someone to do a $6.00 an hour job and pay them $5.50 it is the customer and business that suffer.
There’s little room for doubt that an increase in a mandated minimum wage brings an inflationary pressure to bear. Another question, already asked, is what minimum wages might be paid without a federally mandated bottom line?
Some jobs might exist that don’t now, and those, I’d suspect, would be the low-end of the low-end. As has been noted, most people don’t work for minimum wage. Also, I believe most people have, and move on. I know I certainly did.
While some people do stay at minimum wage for a long time, for most it’s an introductory and transitional wage level. I don’t think there exists any data to say what low-end jobs might pay without the minimum wage law.
Would there be more of them? Who can say? Does the law provide a disincentive to employers to pay more for certain jobs? That certainly seems likely, but once again, who can say?