Seattle today passed a bill that will raise the minimum wage to $15/hour. $30,000 a year.
What nonsense.
The proponents want a “livable wage.” The problem is that money isn’t free. It doesn’t grow on trees.
The talking points are that the business owners are all part of the 1% and this is the working class getting their due.
The truth is that most businesses are small businesses. Small businesses that work hard to stay solvent. Most business owners I know aren’t “rich.” They might be doing well enough, but they aren’t all living high on the hog in their mansions.
The money tree doesn’t exist. You can’t just pay people more if the money isn’t there to pay them.
So, what’s going to happen here?
Where it’s cost effective we’ll see minimum wage jobs get more automation. We’ve already seen things like the self checkout in grocery stores. We’ll start seeing more similar jobs get “upgraded” to machines. The machine might be more expensive in the short term, but now you can justify the costs.
For places that can’t get automated, you’ll see fewer people doing more jobs. Where you had a dishwasher you might have the bus boy double as the dish guy. Or more sharing of responsibilities between employees. (i.e. worse service)
If that’s not possible the costs will just get passed down the line to the end customer.
Let’s keep playing this out.
So if you’re low on the totem pole, you’ll likely see your job eliminated and you’ll go on unemployment. To top it off, the things you buy will start getting more expensive. Oh, and your rent will go up too since the property management company has to pay its people too.
Eventually though, the rents might go down again as you move somewhere that will hire you.
Just as the right seems to play fast and loose with trying to forget about science, the left is equally to blame in terms of trying to ignore the hundreds of years of economics as well.
This post is a bit hypocritical in that it is you that is the one ignoring mountains of evidence while repeating talking points typically parroted by conservatives who don’t have evidence to support their points. I’d expect you to hold yourself to a higher standard.
https://dl.dropboxusercontent.com/u/15038936/Dube_MinimumWagesFamilyIncomes.pdf
But this doesn’t address the ancillary effects that come along with changes in the minimum wage. A good example of this is San Francisco. They famously increased the minimum wage to the then high of $8.50/hour. While the sky didn’t fall, housing prices have increased as well. The same people that were lobbying for the higher wages are now complaining about the gentrification of the neighborhoods and the fact that the city is unlivably expensive. The paper is based on the federal poverty numbers as opposed to a corrected for local living conditions. Yes, people make more money, but that money doesn’t go as far as it did before.
I come back to my original point that money doesn’t grow on trees. The extra costs will get passed downstream to the consumers. While it can and will have a positive short-term effect, the long-term results will actually be counterproductive.
Evidence beats rhetoric:
http://thinkprogress.org/economy/2014/07/03/3456393/minimum-wage-state-increase-employment/
Now, *I* knew this would happen. You need to adjust your model because you mis-predicted things based on conservative rhetoric.
Your money goes a lot farther when you have a job.
I still don’t buy it. The graph at the bottom of the article shows a fairly even distribution of states that did or didn’t increase minimum wage. If you look at it from a population standpoint (likely the correct way to look at it in my opinion) you get different results. California, the biggest economy in the nation by far, grew the fastest. This is a rising tide effect from what I can tell. To say that RI has the same weight as CA is preposterous.
I’m not as much arguing against raising minimum wage for a state anyway (though I still think that’s a futile and counterproductive effort), but rather that for a *city* to raise minimum wage is outright stupid.
I’ll post the full results tomorrow when I can format things better, but on a population-weighted basis the states that did *not* raise minimum wage grew faster. 1.01% vs. 1.00%. Yeah, it’s a wash for the most part honestly. But it’s not a “win” like the article claims.