Democrats want Raise the minimum wage to $ 15 an hour Addressing inequality, but that may not be the best way to fix this problem.
Conservative – and many politically moderate – economists don’t like it when governments set prices above market forces because it wastes resources –too much milk from milk price supports and too much unemployment from the minimum wage.
Long-term studies show that moderate increases in the minimum wage do not necessarily lead to an immediate loss of jobs in neighboring jurisdictions. However, a substantial increase in the minimum in low-income regions – like rural Mississippi or upper Michigan – would be very different from wages in economies that are likely to see robust growth as COVID declines, such as in metropolitan areas of Florida and Texas to crank it up a little.
In the latter places, beginner wages are typically already closer to $ 15 an hour, and the impact of the current federal standard on labor markets is minimal or nonexistent in some places.
The idea among voters is that it is better to help the working poor by providing higher-paying employment opportunities than improved state benefits funded by higher taxes for wealthier Americans. Conservative Florida recently approved a $ 15 minimum wage. and 30 states and the District of Columbia have enacted higher minimum wages than the federal standard.
In places like San Francisco and Seattle Economic studies documented that sudden increases in the minimum wage resulted in significant restaurant closings and job losses.
Counterpoint: Small businesses benefit when wages rise
Dramatic shifts disrupt the wage patterns of workers higher up the wage ladder. For example, it is difficult to increase an employee’s pay at McDonald’s by $ 2 an hour without also increasing the pay of the shift supervisor.
When Congress raised it to $ 7.25 an hour in 2009, the minimum was about 33% of the BLS calculated average hourly wage. Even bump it up to $ 15 over several years as suggestedwould bring it much closer to 50% of the average rate, cause a wave of rising wages during the hourly workforce and inflation that would negate some of the benefits.
Depending on the initial new minimum, the indexation of the federal standard could build an inflationary spiral into the economy, the consequences of which are difficult to predict.
Increase McDonald’s in low wage markets
MCD, -1.68%
Entry fee for servers up to $ 15 per hour This would increase labor costs by about $ 8 an hour – including surcharges for wage taxes and unemployment insurance – and increase the cost of a quarter-pound hamburger meal from about $ 6 to $ 8.
Take-out restaurants, drug stores, and grocery stores in cities with high minimum wages are increasingly using computerized check-out to save labor costs and avoid price increases sufficient to drive customers away.
Overall, higher wages favor e-commerce over brick-and-mortar retail, as fulfillment centers are easier to automate. These favor large companies – at the expense of smaller and independent consumer goods manufacturers, retailers, restaurants, hotels and entertainment venues– because they can distribute the development costs for robotic solutions, software and websites to higher volumes and more points of sale.
For workers near the lower end of the income scale, raising the minimum wage to $ 15 an hour would increase household incomes, even if they pay much more for a Big Mac and a little more for UPS
UPS, + 0.20%
Delivery when shopping online, but it would lower real household incomes higher up the income bracket.
While progressives might call a minimum of $ 15 a blow to economic justice, this is it Budget Office of Congress found that losses on the income ladder were greater than gains for the working poor and reduced GDP. Something 1.4 million low-wage workers would lose their jobs and suffer tragic losses in independence, dignity and income as a whole.
Related story: 30% of workers would benefit from an increase in the minimum wage to $ 15 an hour. Now to the disadvantage …
It is just less harmful for all families to raise the earned income tax credit But raising taxes on middle- and higher-income Americans for such purposes is problematic for the small majority of Democrats and moderate Republicans in Congress.
With robots and artificial intelligence becoming ubiquitous no matter what we do, it would have been necessary to raise the minimum wage to $ 12 an hour, or around 40% of the current average hourly wage, over several years, and then adjust it annually to align it with that benchmark less adverse consequences and a sensible compromise affecting voter empathy for the working poor.
Peter Morici is an economist and professor emeritus at the University of Maryland and a national columnist.
Further reading:
“I will love to shop there forever”: Costco customers are responding to the new $ 16 minimum wage
US minimum wages have already risen – with minimal cost to the business
