Monday, July 20, 2015

Some Thoughts on the Minimum Wage

To me, the minimum wage looks like a very clever way for politicians to hide a tax that redistributes some money to some low wage employees. 

Who it might hurt:

  • A small number of would be low wage workers who will have no idea that the minimum wage is to blame.
  • Some marginal businesses that now pay below the minimum wage who might go bankrupt quicker.
  • Consumers who buy from those businesses. 

Only the few businesses hurt will know what hit them and they account for very few votes. From the perspective of politicians, it is a brilliant, though on might say unethical, scheme. They get to look like the good guys and companies that provide work for employees who cannot find better jobs look bad.

Who it might help:

  • Shy mostly young people working very hard for very low pay who are to shy to ask for a raise. I think that I was once in that group. 
  • Businesses that pay more than the proposed new minimum that compete businesses that pay the less than new minimum.
  • Those employees who are marginal but will keep their jobs.
  • Businesses like McDonald's and Walmart who can easily pay the higher wages but do not who compete with business that may not be able to afford the new minim wage.
  • Businesses like McDonald's and Walmart that compete for employees with business that already pay more that the new minim wage.

Some facts:

  1. Many people already work for less that minimum wage. If you believe Steven D. Levitt some of those are low level drug sellers. Some work for companies like the one a few offices over from mine called Vector Marketing.  I think in the likes of Vector Marketing most people who end up working for them pay to work. Some work scavenging for metals. A few work for cash. 

  2. Also there always some restaurants teetering on the edge of bankruptcy will a higher minimum wage not push them over the edge a little quicker?

  3. There are large regional differences in cost of living. Some of these are because of differences in real-estate costs but also due to life style.

Much depends on how you feel about the trade off between more money for some workers and less jobs and who should pay for any added expense and also how you feel about hidden taxes. 

I think many on the side of the $15/hour minimum wage believe that it is immoral pay someone so little and so are not bothered if it would drive a few small usually poorly run businesses into bankruptcy. They also have little sympathy for those who buy from low paying businesses, besides it allows them to hit McDonald's and Walmart and they can easily afford the higher wages and can most of their customers.

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