The new minimum wage
. . . as with all progressive policies.
"Why have California and New York state moved to implement a $15 minimum wage? They say that it's to provide workers with a "living wage."
It's true that surviving on $8 or $9, or even $10 an hour, particularly in expensive metropolitan areas like New York, Los Angeles, or San Francisco, is difficult if not impossible. But raising the minimum wage is not going to provide a pathway out of poverty for workers making so little. And lost in all the hoopla is that raising the minimum wage is not only a poverty trap, but really a disguised income redistribution."
But income redistribution is a good thing, no? No. Well, not when the redistribution is from the lower middle class to the lower class. Unless the goal is to limit the costs to the middle and upper middle class for the redistributive socialism. I can smell the ozone pouring off the progressives, angry that someone found them out.
Here's how it works.
More after the page break!
"Workers who earn more than minimum wage will definitely see one, and possibly two effects. If they earn marginally more than the current minimum wage they will likely see pay increases – particularly if they earn more than the current minimum wage, but less than the new minimum wage - assuming their job still exists. Likewise, if they currently earn just marginally more than $15 per hour, they should also see an income increase to prevent wage compression. This is the effect of, "why should I be responsible for all of this stuff for only $15.10 when for $15.00 I can flip burgers." No, the less than and slightly greater than $15 per hour workers will see small pay increases, but also subsequently suffer price increases leaving them economically in the same place.
However, workers earning significantly more than the new $15 dollar per hour minimum wage, say $20 or $25, or more, will have an entirely different experience. They won't see pay increases to offset wage compression, and their current rate is far too high to require a pay raise to comply with the new minimum wage level. What they will see, instead, is the same income, but higher prices. Essentially they are the ones transferring their incomes to minimum wage workers by paying for inflated goods and services."
So, raising the minimum wage will cause many things, but one thing for sure is the increase in prices for products, and services reliant on minimum wage workers. If the market is competitive, and nearly all are, the price is about as low as the producers can make them. Thus, when the costs of inputs like labor are forced to rise, the price must also rise, or profits decline. Here with such a massive increase, the prices will have to rise.
As the author notes, the raising of the minimum wage, and near minimum wage workers will offset this price increase somewhat. The wages for those above this line will not rise, but they will still be subjected to the increase in costs of products. The wealthy won't care, so the pain of this will be felt at the middle class, and even more so the lower middle class.
Read the entire article, it is well worth you time. When politicians attempt to solve perceived problems like this without causing themselves pain, there will be pain, we just need to analyze the issue throughly to figure out where.
If low wages are a problem, we should never correct that problem by inflating the minimum wage, and indeed we should eliminate the minimum wage entirely. To the extent we are left with a real problem, for example families dependent upon a single minimum wage worker, we should address that problem in a way which addresses that problem alone, and does not distort the employment market any more than necessary. The minimum wage increase sounds great, but will have many obvious negative consequences. We can reduce the negatives, and solve the problem if we only seek to solve the actual problem.
Here a better solution would be extending the Earned Income Tax Credit, or using some other similar solution.