Yes, that headline is just an attention getter. Neither party actually intends to be racist or discriminatory but raising the minimum wage has the unintended concequence of causing primarily women and blacks to lose their jobs.
How you ask? Simple neoclassical economics of course. Raising the minimum wage increases the price for labor. Increasing the price for labor will decrease the current amount of labor employed and also increase the demand for labor. Basically, people get fired because the labor is too expensive and more people are seeking jobs now that the new minimum wage is at an attractive level.
Minimum wage polices are discriminatory because, generally, women and blacks are last hired first fired. Now before you label me as a racist, I gained this knowledge at WTAMU. As with anything I learn I do question it, but this premise seems fair given current societal norms. If anyone has any facts otherwise please post them.
The left will argue that the supply and demand curves are inelastic and a change in price will have little effect on the market. Basically this means only a few people will be fired and the greater good will have been served.
This notion is foolish. First of all, the job markets are not the same across the nation. The supply curve could be inelastic in some areas while very elastic in others and elasticity can even vary from company to company. Given this, minimum wage increases wil have little or no effects in places like San Francisco where the minimum wage is far above what anyone in the federal government wants to increase it to and other places with already low unemployment will suffer greatly depending on the amount of the increase.
Other problems with the minimum wage increases would be that it encourages outsourcing, offshoring, and replacing workers with machines. Also, raising the min wage will still have minimum wage earners beloe poverty. Consider the proposed 7.25 an hour would only gross 14.5k a year. This is a good argument for a living wage, but elasticity wouldn’t matter and mass unemployment would occur.
Unfortunately with situations like these we will only have to wait for time to tell to see who is right and who is wrong. I would prefer to be cautious, but with pandering rwpublicans on the house it looks like we are going to choke this stuff down and see what happens. If unemployment increases after the law is enacted, without pther controls in place, then that is proof min wage increases are a bad idea.
I am fully open to the idea that I could eat my words. America has done just fine with a minimum wage and it very well could continue to do so.
The worst part about these situations is that both party’s last interests are the people. Both sides are simply pandering for votes and are ignoring long term concequnces.
If anyone is wondering about pandering claims, note that many unions have their hourly wage tied in with the minimum wage. This means that if the min wage increases so does the union’s. Unions have considerable political power as well, primarily for democrats, which is why they are the biggest proponents for a min wage increase. What seems odd to me is why Republicans would want to pander to the unions when, chances are, there is no possible way the unions will endorse the GOP. I bet their motives have something to do with the tax cuts for corporations mixed in with the bill.
My solution is to not increase the minimum wage and let the local governments enforce their own minimum wage laws. Local governments can better manage their job markets and account for whatever elasticity that market might have as opposed to the federal minimum wage throwing everything out of whack.
minimum wage, econimics, taxes
