Raising minimum wage would create jobs

Raising minimum wage would create jobs August 4, 2013

Here’s Felix Salmon, endorsing the doubling of the minimum wage.

Yeah, that’s right: doubling — from a poverty-level $7.25/hour to a living wage of $15/hour. Salmon is seconding the suggestion by millionaire capitalist Nick Hanauer, who points out that “If the minimum wage had simply tracked U.S. productivity gains since 1968, it would be $21.72 an hour — three times what it is now.”

The objections to such a scheme are as easy to anticipate as they are to refute. “But that would bankrupt small businesses and force companies to stop hiring!” cry people who desperately want some reason to oppose this, even though those reasons aren’t necessarily true.

Here’s Salmon, offering six reasons doubling the minimum wage would be a “win-win-win-win-win-win.” (I’ve added the numbering here because I want this to be read):

1. Most simply and most cleanly, it would immediately raise the incomes of millions of cash-strapped Americans — precisely the people who most need to be earning more than they’re making right now. A whopping 51 million people would benefit directly, along with 30 million who would benefit indirectly: these are enormous numbers.

2. The cost to the government of putting billions of extra dollars into these workers’ hands would in fact be substantially negative: there’s a strong fiscal case for a $15 minimum wage. We currently spend $316 billion per year on programs designed to help the poor, with the lowest-income households receiving about $8,800 per year. Billions of those dollars would be saved as the workers in question saw their wages rise. And no longer would the likes of Walmart be able to take advantage of implicit government wage subsidies, whereby low-paid workers receive substantial top-up checks from Uncle Sam to supplement their direct income.

3. The move would constitute a huge economic stimulus program: Hanauer says that it would inject about $450 billion annually into the US economy every year. If you like massive stimulus but you don’t like the idea of the government paying for it, then a higher minimum wage is the program for you.

4. Crucially, a higher minimum wage would be good for employment. A $450 billion stimulus, delivered directly into the hands of the Americans most likely to spend it, can’t help but create jobs across the economy. … There’s empirical evidence to suggest that states which raise the minimum wage when unemployment is high — when there’s a lot of slack in the labor force — then you get faster job growth than in the country as a whole. … The bigger economic problem is that employment hasn’t kept pace with economic growth: most of the gains in GDP have gone to capital, rather than to labor. A higher minimum wage would redress the balance somewhat.

5. Insofar as a one-off hike in the minimum wage would be inflationary, that’s a good thing, and exactly what the economy needs. We’re well below the Fed’s target inflation rate right now, and the inflation which might result from this policy would give us a healthy short-term boost in the inflation rate, bringing down real interest rates in a world where the Fed is constrained by the zero lower bound. …

6. … The US has already done a spectacularly good job of exporting most of its exportable low-wage work. As Hanauer says, “virtually all of these low-wage jobs are service jobs that can neither be outsourced nor automated.” As a result, raising the minimum wage will result in many fewer job losses now than it would have done a couple of decades ago.

I don’t doubt that some Mom & Pop operations might struggle to pay this higher wage. The local pizza shop now paying $10/hour would feel the pinch of having to pay $5 more for its workforce. But I doubt they’ll want to lay off any workers to cover that cost, because 51 million other American workers just got a raise and they’re going to be spending part of their next, bigger paycheck buying pizza.

Will that massive increase in demand offset the increased cost of paying those wages? I don’t know — I haven’t crunched all those numbers and I can’t account for all those variables. But the people completely ignoring this increase in demand haven’t done the math either, and their insistence that Very Good News for millions of customers is irrelevant to the bottom line of all those Mom & Pop businesses is surely wrong.

Is $15/hour too much of an increase? I don’t know that either. But I do know that $7.25 is too low, and I don’t see any reason to start the bidding at $7.26 — that’s not how negotiation works.


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  • Oh, christ. You again. Did you even read the thread before blabbering all the standard tired old crap that’s been around since time immemorial?

  • mud man

    I don’t want to argue definitions; what you are saying is a lot like what I said in the first place. I guess I just don’t like the word “class” in the upper/middle/lower sense … aggregating non-rich people who have nothing in common except that they aren’t rich doesn’t seem useful to me.

  • EllieMurasaki

    Do you also dislike any collective noun for a sufficiently large group of people with only one thing in common?

  • Chris Hadrick

    I quote the article repeatedly. The thread is Garden of Eden stuff with no allowance for scarcity. Let’s just declare that we are dating supermodels and we will be

  • Chris Hadrick

    he has more responsibility

  • mud man

    Coalitions built in opposition have no natural cohesion. Whatever will the Republicans do when they don’t have Obama to kick around any more? OK, they can think of something else to be against, is that governance?? Lumping the proletariat is an example of the industrial anti-community leveling that has so distorted society these last few decades.

    Public health is not a rich vs. poor issue, it’s a human issue. So it goes.

    How do you feel about assertions like “All women are X”,”All immigrants are Y”, “All queer people are Z” ??

  • EllieMurasaki

    That rather depends on what X, Y, and Z are. If X is ‘people who like pink’, fuck that, but if X is ‘people who lack male privilege’ with all the associations thereof…

  • Oh wow, you mean responsibility to drive the company into the ground and then walk off with a $100 million golden parachute?

    Don’t flatter yourself and stop pretending you’re just a temporarily embarrassed rich person.

  • Lori

    And the fact that so many people agree with you that economic class isn’t useful is a huge part of the reason that the rich are so consistently able to walk all over the poor in this country. You want people to get it together, but then you say organizing people by class isn’t useful. And so it goes.

  • AnonaMiss

    That’s not entirely true. Engineers and analysts drive a lot of fast food/grocery/big box stores’ business in an indirect way, by determining efficient ways to route goods, predicting what will be necessary where when based on past trends, etc. If your regular grocery store began to be frequently understocked on a staple, and you had another option within a reasonable distance, you’d probably start patronizing their competitors instead.

    Executives are egregiously overcompensated, but they’re not superfluous.

  • Loki1001

    Yes, but there would be nothing for engineers and analysts to engineer or analyze if it were not for the people on the ground doing the actual work of making money. The cashiers and associates are actually making the money, every layer on top of them is farther into irrelevancy.

  • Chris Hadrick

    Who works harder: a guy flipping burgers or a professional baseball player?

    point: there is more demand for an excellent baseball player than a satisfactory burger flipper. Thus it commands a higher price.

  • You’ve never actually been a line cook, have you? I know someone who was, and they worked for six months in a hot, steamy kitchen standing up for 8 hours at a stretch.

    By your very statements you devalue the poor and you devalue the workers.

    Begone from my sight.

  • Chris Hadrick

    How was that related to anything? Did I ever I was ever a line cook?

  • Another person’s shoes. Putting yourself into.

    You fail at this.

  • Chris Hadrick

    http://twitpic.com/bu476x this is what I do everyday. try and call me an elitist again. That’s my car that I own btw

  • Yeah, don’t you work at UPS?

    That means you’re a …

    union worker.

    Quick, get the cooties off of you now so you can be rich like Trump

    EDIT:

    Also? You have zero sense of community of interest with your fellow workers, considering all the tripe you regurgitate that could’ve come from the 18th century.

  • AnonaMiss

    You could turn that around and say that the cashiers and associates would have nothing to sell if the analysts didn’t figure out where and when the goods needed to be.

    The people on the ground are important, far more important than they’re given credit (both literal and figurative) for. But you can’t just dismiss bureaucrats & workers behind-the-scenes. The problem isn’t that they’re increasingly irrelevant the farther they get from the floor – the problem is that they’re increasingly overcompensated.

  • Chris Hadrick

    I do not belong to a union. The union guys I encounter are mostly awful. They act totally put out if you ask them to do their job and mostly act like they can’t get fired which they can’t.

    I’m an independent contractor.

  • mud man

    I think it’s more productive to organize around actual common circumstances, ie community. Don’t see that it’s helpful to say “This is the way to do it although there’s no way to make it work.” Or do you have ideas about how to arouse “class consciousness” in Americans? *I* am not standing in your way.

  • Chris Hadrick

    because the banks aren’t lending it out they’re sitting on it and or buying treasuries with it

  • EllieMurasaki

    I dunno, Occupy seemed to be doing a fine job. Despite the one-percent-controlled media ignoring them and the one-percent-controlled police evicting them.

  • Lori

    I’m not standing in your way either. You go right ahead and organize around community, ignoring economic class because it’s not productive, in such a way that you limit the power of the rich. Be sure to keep in touch and let us know how you’re doing getting people to get it together.

  • Am I the only one getting vibes from this reminiscent of “I don’t believe in feminism because it’s better to be a humanist”?

  • Lori

    I’m getting the vibe that mud man doesn’t want to deal with exactly how self-defeating the “community” standards of the people around him are.

  • Lori

    Coalitions built in opposition have no natural cohesion.

    How exactly are you defining “built in opposition”?
    Public health is, to a large extent, rich vs poor. It has certainly been framed that way by the rich.

    How do you feel about assertions like “All women are X”,”All immigrants are Y”, “All queer people are Z” ??

    Are you actually trying to make this about hurting the feelings of the rich?

  • Yeah, the LIBRARY doesn’t seem the place for that.

  • Lori

    I don’t remember the last time I was in a library that didn’t have at least one self-check out. I’ve used them, mostly when the librarians were busy with patrons who actually needed help or when I just didn’t feel like managing even minimal human interaction.

    They’re just like the self-check out at the grocery store—they work fine for lots of items, less well for others and not at all for some things (you can’t check CDs, videos or DVDs out with them at all and some items just won’t scan).

  • Marshall

    Oh Gaud. I was trying to point out that lumping people together, like “all women”, “all immigrants”, “all queer”, is a tactic that elitists use to divide and conquer. As in, “immigrants take jobs away from Muricans”. “All women like pink” is a way of avoiding taking any woman seriously. Etc.

    The Vietnam War protests were “opposed” to the Vietnam War and mobilized a lot of people (like Occupy), but when that particular war was over, the crowds faded away. Anti-war majorities didn’t last more than one generation, and now we have it all to do over again. The McDonald’s strikes are an example of local people organizing to take local action aimed at local goals. Maybe Occupy had something to do with that, I dunno.

    Here is Belle Warring on South Carolina. Seems relavant to me, YMMV.

    When people in the South complain that they have black co-workers and neighbors and friends, while white Northerners talk the talk but keep black people all crammed together in city ghettoes and move as far away as they can to a “good”, i.e. re-segregated, school district, they are actually right! But this is sometimes for a sad reason, namely, there are a lot of broke-ass white people in the South living 10 people in a trailer, trying to keep their truck running so everyone with a job can get to work. Their black neighbors are just as poor. They are most likely good neighbors on the surface, polite to each other, let them use their jumper cables, all that. Share okra. (Okra did really well this year, but the peaches were all ruined by the rain.) They are neighbors in poverty. That Republicans can use racism to get those poor white people (and damn they are poor!) to vote against their own economic interests is a testimony to the continuing iron grip of racism. It may be all those people have. They’re poor, they’re on disability, their trailer is a wreck—but they’re not black. You can’t take that away from them.

  • EllieMurasaki

    Pointing out a commonality among a large group of people is a method of dividing that group of people?

    What.

  • Marshall

    Thank you, yes I do. I try to raise consciousness about issues like militarization, tolerance, public health, out here in my local rural redneck community which doesn’t have any rich rich people, but does have a considerable spread of wealth. I try to talk to everybody. It’s a small thing, but I don’t know how to do other than small things.

  • Lori

    The Vietnam War protests were “opposed” to the Vietnam War and mobilized
    a lot of people (like Occupy), but when that particular war was over,
    the crowds faded away.

    Groups formed to protest the Viet Nam war. Some of the people who joined were generally anti-war, others were just against that particular war.The war ended & the protesters felt like they had accomplished what they set out to do. Viet Nam was over and folks felt like something fundamental had shifted away from supporting war. The groups disbanded.

    This doesn’t strike me as surprising or like it says anything fundamentally negative about organizing around a particular cause. If there’s a lesson I think it would be to beware of declaring victory prematurely.

    When people in the South complain that they have black co-workers and neighbors and friends, while white Northerners talk the talk but keep black people all crammed together in city ghettoes and move as far away as they can to a “good”, i.e. re-segregated, school district, they are actually right! But this is sometimes for a sad reason, namely, there are a lot of broke-ass white people in the South living 10 people in a trailer, trying to keep their truck running so everyone with a job can
    get to work.

    In the North there are plenty of black people who don’t live in ghettos and plenty of broke ass white people living in bad neighborhoods. I used to live in a working class neighborhood in LA where some of my neighbors had community cars.

    The notion that Southerners are not really racists because they have black friends and Northerners pay lip service to being anti-racist, but are actually bigots who don’t know any black people is a gross over-simplification. It’s flattering to Southerners, but IME it’s not particularly accurate.

  • Giles

    Speaking as an economist (by training) who supports minimum wage hikes I must point out a fallacy in this argument. There’s no stimulus. The money paid to the workers must come from someone else. Or rather there is a kind of stimulus as money is taken from the rich and given to the poor and the rich spend more slowly and spend more on imports. But the money to pay the wages isn’t new money, you’d only get that kind of stimulus if the Government gave Walmart et al newly printed money for the higher wages. But minimum wage rises do tend to increase minimum wage jobs as those in minimum wage jobs tend to frequent other minimum wage establishments. And there’s the quasi stimulus due to the poor spending more rapidly. Fears of wage spirals ignore the fact unions are virtually powerless in the modern economy. In fact employers shave the money for wage hikes from the better off workers. And its average real wages not minimum wages that impact on employment. A bunch of studies support the claim that minimum wage hikes dont destroy jobs and can create them. So it’s the right argument grounded in wrong reasons.