|Doug with President Obama back in|
2007 at the California Democratic Convention
"Minimum wage increase,It's a bust..."
MINIMUM WAGE MYTHS
The two arguments most commonly used by conservatives against raising the minimum wage are that it would cause inflation (the cost of labor being passed on to consumers) and that it would reduce employment. Both have been totally debunked by actual economists in economic journals when not funded by the fast-food industry.
As to inflation:
Consumer PRICE is not based on the cost of goods. That is a myth promoted by those who want to scare consumers into supporting lower wages to workers. PRICE is set at the intersection of SUPPLY and DEMAND. At best, cost of goods is one indirect component of SUPPLY.
They can't just "pass the costs along" — they can't sell for more than is allowed by DEMAND — "what the market will bear."
PRICE is NEVER based on cost. People produce stuff they can't sell all the time, and end up selling it at a loss (think about how real estate goes "under water" or what a "short sale" means). New Balance athletic shoes are better quality, MADE IN AMERICA with American wages at higher costs, but sell for a LOWER PRICE than Nike, which is a poorer quality and cheaper (slave labor) production costs, but has more consumer demand because they have better marketing PR. From 1955 to 1975, McDonald's repeatedly complied with numerous significant increases in the minimum wage (which brought it to almost $20/hr in inflation-adjusted equivalent today), yet the price of a basic McDonald’s hamburger, in that entire 20-year period, stayed completely constant at a flat 19¢ — no price increase at all.
And, yes, even IF you passed along the costs, which doesn't actually happen, because compensation to low wage workers is only a fraction of operating costs, the actual price increase if the entire cost were passed along to consumers, which has never occurred in the past, the actual increase would be extremely small.
By the way, how come conservatives who are so concerned about raising wages for the poorest workers are never concerned about the effect on consumer price of waging CEO compensation?
As long as goods are still profitable, even if the margin is diminished, the supply will continue and the price still cannot exceed what the market will bear.
Example: Minimum wage in New York City is $7.25 / hr. Minimum wage in San Francisco is $10.55 / hr — $3.30 per hour higher. Yet a Big Mac in San Francisco does not cost more than in New York City. It is still about the interplay between SUPPLY and DEMAND.
As to causing higher unemployment:
The conservative MYTH that minimum wages reduce employment (because of the supply/demand dynamic they were so quick to overlook in discussing consumer prices), in that if you raise the cost of something, you will have less of it; ergo, raise the cost of labor and you will have less of it.
This myth has been utterly debunked by replicated university studies (and I have the specific references for anyone who wants them) that were NOT funded by the fast-food industry.
Yes, labor is an economic commodity, and raising the price should theoretically reduce the supply, BUT only in a simplistic, myopic, one-dimensional conservative world lacking nuance.
In the reality, what real-world studies have proven, is that LABOR is PEOPLE (duh!) — and the WORKERS who make up the "commodity" element of labor play MULTIPLE roles in the economy; they are multi-dimensional, and it is more complex than simplistic CONs understand. WORKERS are also CONSUMERS, and when they have more money in their pockets, they increase DEMAND, which requires more supply of goods and services, and to satisfy that DEMAND, and produce that SUPPLY, more workers need to be hired, and EMPLOYMENT IS INCREASED. Business owners do not hire teenagers out of the goodness of their hearts because they just love young people or because they have extra money burning a hole in their pockets. They hire exactly the fewest number of workers they need to meet consumer demand. So when consumer demand goes up, so does hiring, even if the profit margin for the employer is narrower. As long as there is one, it will go up.
But NO ONE WILL BE HIRED if no one can afford to buy what no one is making thus resulting in no demand.
And the conservatives only point to the economic cost of low wage workers, never to CEO compensation nor do they explain why CEO's or shareholders should pay LOWER tax rates on their higher incomes.