http://www.startribune.com/minneapolis-kicks-off-minimum-wage-listening-sessions/411921896/
Note: This is an excerpt from my blog post: "The BasicĀ Income Guarantee and
Other Methods to Permanently end Poverty andĀ Homelessness".
While often put forward as a way to reduce poverty, increasing the minimum wage
can have the opposite effect if the minimum wage is set much higher than the
market price of labor. While empirical studies have produced conflicting
results, most economists, using standard economic theory of supply and demand,
predict a negative impact on employment with large increases in the minimum
wage.
Data is now becoming available for the area where a much higher minimum wage
law was recently imposed in Seattle Washington. The results are not good,
especially for those who have been asking for a $15 per hour minimum wage. This
data is showing larger negative, along with fewer positiveĀ consequencesĀ than
was shown by many of the previous studies. This is probably because of the
relatively larger increase in the minimum wage inĀ Seattle over the other areas
previouslyĀ studied.
If unemployment and the other negative effects of a high minimum wage would not
result from a large increase in the minimum wage, above the market rate, then
why not demand a hundred dollars an hour as opposed to the $10.10 or, $15.00
per hour, often proposed by advocates of a higher minimum wage?
In addition to employers not expanding or creating new businesses, they will be
more likely to increase their use of automation and technology to replace the
higher priced labor. We are already seeing robots replace factory workers, self
service check out computers in retail establishments, replacing the staff and
iPads in restaurants, replacing the waiters. Self driving cars trucks and
busses are also on the way. This trend will continue and expand with a higher
minimum wage.
The resulting unemployment caused by raising the minimum wage will be felt most
acutely by teenagers, older workers, under educated adults, the disabled, women
and minoritiesĀ as the market value of their labor becomes, or is considered by
employers,Ā (perhaps because of ageism, racism or sexism),Ā less valuable
relative to the new government imposed minimum wage. The resulting unemployment
to these groups, caused by raising he minimum wage, can only be remedied if a
way can be found to force employers to hire from these less qualified or
otherwise less marketable groups, instead of just hiring from those more
qualified, or otherwise more marketable groups.
The group hit the hardest by the higher minimum wage is, perhaps, young African
American men, especially those who may have a criminal record. It is probably
no coincidence that the rate of employment is about 27% for African American
teens of both sexes with the true rate for African American teenage men over
50%, especially if we count those who have given up looking for work, or those
who are incarcerated. In contrast, the overall unemployment rate for January,
2017 was 4.8%.
This lack of employment for African Americans, especially of African American
men, is a major contributor to the high and increasing violence in the African
American community as anti social pursuits are increasingly seen as the only
alternative. Just the boredom and monotony created by unemployment and lack of
resources, will cause some to pursue activities that may lead to increased
violence.
Raising the minimum wage not only imposes a restriction on what an employer can
pay their employees, it also restricts the freedom of choice of the employee to
set their own price for their labor. For the same reasons that an intern may
agree to work for free, which is completely legal, an Ā employee may wish to
sell their labor at a lower price than the minimum wage laws allow. Like the
intern, they may value the education an on the job training experience may
offer, knowing they will be more employable and earn more in the future as a
result of this training. Developmentally disabled people may find the social
benefits of working a valuable part of the work experience and therefore they
may be willing to sell their labor at market value in order to get the other
benefits.
Not only will some not be hired, and others be more likely to lose their jobs
or have their hours decreased, as a result of these increases but the higher
wages will also result in the employees charging higher prices for their goods
and services. This will compound the problems of those laid off or not hired,
by making everyone, including those not hired and the newly unemployed, pay
more for everything they buy.
While free trade agreements are often blamed for eliminating jobs by sending
jobs to other countries, higher minimum wage laws are likely to also have the
affect of eliminating jobs. If the price of labor is too high to be competitive
here, factories are more likely to move to other countries. While jobs in
retail sales, service jobs and those jobs in the restaurant industry may not be
able to go overseas, in areas bordering a jurisdiction which has not raised its
minimum wage to the same level, businesses may move to those areas just outside
of the jurisdictions which have imposed the higher minimum wages. Also, those
businesses just outside of the higher minimum wage jurisdictions, can charge
lower prices and therefore be more competitive, creating an incentive for
businesses to move there.Ā This is likely to having a negative impact on the
economies of the border regions where the minimum wage is raised.
Some economists argue that employers can pass the costs of a higher minimum
wage on to its customers in the form of higher prices thus negating the
necessity to reduce employment, but Nobel Prize winning economistĀ Paul Krugman,
who believes raising the minimum wage will negatively affect employment,Ā argues
that this explanation does not explain why the firm was not charging these
higher prices before the minimum wage increase.
A Basic Income Guarantee,Ā and even an increase in the Earned Income Tax Credit,
are ways to benefit workers and the unemployed without the negativeĀ unintended
consequences of a higher minimum wage.
http://occupirate.blogspot.com/2016/03/the-basic-income-guarantee-and-other.html
https://en.wikipedia.org/wiki/Earned_income_tax_credit
Washingtonpost.com:15 minimum wage is a terrible idea
Washingtonpost.com: Study raising the minimum wage did little for workers
earnings in- Seattle
Motherjones.com: Seattle minimum wage experiment mixed results so far
Captain Jack Sparrow
Minneapolis Mayoral Candidate
http://occupirate.blogspot.com