The Minimum Wage Debate

From Bloomberg: The $15 Minimum Wage Will Kill Jobs. Should You Care?

I use to care much more, and then I realized that since most predictions by pundits are wrong, it probably doesn’t matter that much. The economy will adapt either way, although there may be some unintended consequences of higher wages, as the article alludes to.

A common argument by the left is that taxpayers are subsidizing low wages. This argument is flawed because it ignores the market consequence of higher wages, which may be worse than welfare. If companies terminate employees or raise prices in response to higher wages, it may require that these terminated employees who were earning a low wages and on some assistance to go on total assistance, and inflation will boost the consumer price goods and thus more welfare spending. From Michael R. Strain No, food stamps aren’t subsidies for McDonald’s and Wal-Mart:

“The argument that low-wage employers are doing wrong by paying so little that some of their workers qualify for government assistance suggests that the responsibility of ensuring an adequate standard of living for these workers falls solely on the businesses which employ them. This is a very limited vision…

Resources from all of society — including, but not limited to, low-wage employers — should be used to ensure that no one who works hard lives in poverty.

And that, of course, is exactly how society is currently organized: Wages are (largely) determined by the market, and government assistance — funded by taxpayers — is used to help low-income families meet a baseline standard of living. That some low-wage workers receive government assistance isn’t a bug in the system; it’s a feature. The government isn’t subsidizing Wal-Mart; it’s not exclusively Wal-Mart’s responsibility to make sure that Wal-Mart’s workers bring in enough cash every week. Instead, the government is helping workers who can’t command adequate wages to make ends meet.”

Rather than the government trying to boost wages or employment, which may be counterproductive, a better approach is to find ways to lower living expenses. If workers overseas can live on $3-5 a day, a $3-5/hour minimum wage in America should be doable if costs are low enough. The problem, again, there is no consensus on these matters. Raising wages may discourage hiring, but it may also encourage welfare recipients to look for work. In addition to raising prices, companies also respond by closing locations and cutting hours to avoid paying healthcare. Probably, in the end, it works out no matter what. Rising wages will lead to inflation, which is passed down to the consumer and reflected in the CPI. Also, the process is so gradual that companies will have plenty of time to adjust.

To quote someone from the comments, employment is not a good in and of itself, and a person who is working is not necessarily in a better position than a person who is not. People working for a wage that doesn’t support their needs (which then has to be subsidized by the government) are just vehicles for transfer payments from government to garbage business.

The rise of the ‘gig/sharing economy’ is part of the post-2008 emphasis on productivity, and the decline of overpaid jobs.