I read an interesting piece in today’s Wall Street Journal about the minimum wage. The article mentions two positives for raising the minimum wage:
…many economists also see long-term positive effects for the economy from boosting the income of those at the bottom of the economic ladder. They note that many small businesses may benefit through higher productivity in the form of improved worker retention and less churn.
The Economic Policy Institute estimates that the minimum-wage increase will add $5.5 billion to the economy, and that this money is likely to be readily spent by low-wage workers, giving a boost to local economies. Heidi Shierholz, an economist at the liberal think tank in Washington, argues that “it is actually a good time” for an increase in the minimum wage.
I think those arguments are weak.
Minimum wage jobs are usually given to those with little or no experience and are often spring boards to something better down the road. Increasing their pay won’t lead to better productivity (have you visited Wal Mart lately?). Productivity increases when people are paid what they are worth.
I think the increased spending is a myth because employers who pay minimum wage are usually retailers, who must raise prices in order to pay their workers MORE MONEY to do the same job. Either that or that cut existing employees’ hours, which leads to poorer customer service.
Raising the minimum wage is simply one of those tools politicians use in order to get elected. No self-respecting politician is going to speak out against it for fear of being labeled as someone who doesn’t care for the little guy.