When costs increase, demand falls. That's the law of demand, on which almost the whole study of economics is based, and until somebody figures a way to repeal it, it explains why the increasing the minimum wage is a disputable idea. Labor is the most expensive component of most businesses. If you force businesses to pay more for labor, they will figure out a way to use less of it, or to increase the prices of their goods and services to make up the difference. Naturally, it's at the top of the Democratic agenda for the next session of the Indiana House:
House Democrats will introduce a proposal in the incoming General Assembly to increase Indiana's minimum wage to $7.50 an hour.
Rep. John Day, D-Indianapolis, who has introduced minimum-wage legislation several years running, said his latest bill would increase the hourly rate from $5.15 per house in three stages: to $6 by next September, to $6.75 by March 2008, and to $7.50 by September 2008.
Actually, though increasing the minimum wage is a bad idea, proposing it right now is just short of brilliant. Either, 1) The House will OK the minimum wage, but Senate Republicans will block it, allowing Democrats to say mean things about the GOP next election time or, 2) The Democratic-controlled Congress will make the issue moot by passing its own version ($7.25, I believe), which is the kind of thing President Bush is not likely to veto. In either case, Democrats get to please their base without actually having to contemplate the possible consequences of their actions.
Comments
Previously I posted a link to a study from the Fiscal Policy Institute that shows every single state that increased their minimum wage above the federal level experienced the same or greater job growth than states at the federal level.
Of course, this is ignored by you, and the right, in favor of more hand-waving arguments and econ101 analysis.
"Some observers contend that because many small businesses are labor intensive and largely
employ low-wage workers, they will experience sharp cost increases when the minimum
wage is increased, leading them to reduce employment levels. However, this report examined
recent state-by-state trends for small businesses employing fewer than 50 workers and found
that employment and payrolls in small businesses grew faster in the states with minimum
wages above the federal level than in the remaining states where the $5.15 an hour federal
minimum wage prevailed.
This report also found that total job growth was faster in the higher minimum wage states.
Faster job growth also occurred in the retail trade sector, the sector of the economy employing
the most workers at low wages, in the higher minimum wage states.
The simplistic introductory economics prediction that an increase in the minimum wage will
result in job loss clearly is not supported by the actual job growth record. Rather, faced with
an increase in the minimum wage, small businesses may have benefited from some
combination of higher productivity through improved worker retention and savings on
recruitment and training. There may also be a
Every time I see or hear arguments in favor of sub-survival economic conditions, I am reminded of the writing of Anatole France, which I may or may not quote precisely here:
"The law, in its majestic equality, forbids the rich and poor alike from stealing bread, and sleeping under bridges."
In a truly civilized society, the need for minimum wage legislation would not even arise.
Jeff, instead of writing a terribly long (non the less correct) economic debunking of your theory, I'll rely this time on a much less complicated objection to raising the minimum wage.
I don't want the government or anybody else to tell me and force me to run my business as THEY see fit. It is not right. Period.
If you want to help the downtrodden souls of this country, put up your own freakin' money (not mine)and pay 'em whatever makes you feel good.
While in America we believe it's true that a commercial business is entitled to make a profit, that principle is not the only one we hold in high regard.
The reality is, and has always been, that in America there are many, many times more employees than employers, and they have all but a tiny percentage of the votes.
There is another equally old and valid truism, that goes something like "A man is worthy of his hire."
If any business in a democracy becomes too nonchalant about thumbing its nose at the needs of working Americans, let that enterprise follow Mr. Zank's idea to its ultimate conclusion and produce its products or services without employees.
The owners can thereby blissfully do away with the pesky internal matters of compensating, listening to, considering the views of, and dealing with other human beings altogether, at least on the production side. Outside sales and customer satisfaction are still going to be among the many flies in that ointment.
Steve,
"If any business in a democracy becomes too nonchalant about thumbing its nose at the needs of working Americans, let that enterprise follow Mr. Zank's idea to its ultimate conclusion and produce its products or services without employees."
Thanks for making my point, the ultimate conclusion is the ultimate demise of the business (free market at work) because I didn't pay my employees enough to make them happy and productive, they did a lousy job which ultimately cost the business it's customers, hence the ultimate demise.....
It's a delightfully simple, unencumbered process until you get the government involved.
I think someone should be paid based on their experience and what kind of worker they are. that means some people are being paid too much at minimum wage and some aren't getting paid enough. But an employer can fire someone if they are not doing their job. maybe minimum wage while on probation for 90 days then if someone is a good worker, a progressive raise until they get to $7. Alot of bigger companies are just plain cheap-their CEO's may get a few million less on their bonus payouts if they give their good workers decent wages. What's bad is too often everyone gets the same increase no matter what kind of worker they are.
One thing no one has brought up is that the Federal minimum wage is most likely unconstitutional by any reasonable interpretation of The Constitution. I think we should abolish the Federal minimum wage and that we should let each of the fifty states set their own minimum wage.
I think we need to get the government out of issues they do NOT belong in.
The government is too large and reaches into too many things.
Lets trim it!
Mike Sylvester
If human beings were all reliable, trustworthy, honest and empathetic, very little of the debate would be necessary.
Pressure has needed to be applied over the years because human nature falls short, and when it does, other elements from unions to law & order take up some of the moral slack.
If the minimum wage were ahead of the curve rather than behind it, I'd have as much problem with it as any other conservative.