Wednesday, April 11, 2012

The Minimum Wage

According to yesterday's Times, there is some pressure building for an increase in the federal minimum wage. Yes, it makes for a nice election year issue; and yes, it stands no chance at all of passing in the House. As you would predict, the United States Chamber of Commerce says it would be a "job killer" in this time of economic weakness.

The Chamber, as usual, is lying. American productivity, at the moment, is the highest it's ever been — which is another way of saying that employers are squeezing as much work out of their employees as those employees conceivably can produce. If the employers want more work done, their only option is to hire more workers. It does not matter if they have to pay an extra two dollars an hour. If they need the work done, they'll hire workers to do it.

When the minimum wage is increased, all lower paid workers tend to earn higher salaries. Their buying power is increased, which creates more demand for goods and services. Business meets that demand by expanding, not by pulling back. Higher demand means more jobs, not fewer.

Might there be price increases due to higher labor costs? Possibly; or, profit margins might get smaller — and it's that second outcome that has the Chamber's knickers in a twist. What the business community (always) fails to see, though, is that smaller profit margins don't mean smaller profits if more product is being sold.

Also, as usual, the hue and cry is about the damage that would be done to "small businesses." Well, thanks to the new JOBS act, we finally know what a "small business" is — a business with revenues up to one billion dollars a year. I think they can survive; and if the local convenience store has to charge two-fifty for a can of Coke instead of two bucks, I think we all can survive that as well — especially if everybody is earning something closer to a living wage.

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