Good news for the fight against income inequality.
http://www.nytimes.com/2015/05/20/u...to-raise-minimum-wage-to-15-an-hour.html?_r=0
The nation’s second-largest city voted on Tuesday to increase its minimum wage to $15 an hour by 2020 from the current $9 an hour, in what is perhaps the most significant victory so far in the national push to raise the minimum wage. The increase — which the Los Angeles City Council passed in a 14-1 vote — comes as workers across the country are rallying for higher wages, and several large companies, including Facebook and Walmart, have moved to raise their lowest wages. Several other cities, including San Francisco, Seattle and Oakland, Calif., have already approved increases, and dozens more are considering doing the same. In 2014, a number of Republican-leaning states like Alaska and South Dakota also raised their state-level minimum wage by referendum. The impact is likely to be particularly strong in Los Angeles, where, according to some estimates, more than 40 percent of the city’s work force earns less than $15 an hour.
The left populist adoration of 1930s discredited bromides, such "commanding wages or prices", has put wishful thinking ahead of theory and experience; it was unsuccessful during the Nixon administration as it has been in every shoeless socialist third world country. And to the degree that a minimum wage is actually setting a labor price above the market wage (whatever that might be in LA in 2020), rest assured the laws of supply and demand, marginal costs/revenue, and product substitution do not disappear - it will have a panoply of effects, most of them being detrimental to the well being of employers, job seekers, and the most needy employees.
The love of minimum wage stems mainly from the hypocrisy of who desire to give away money to a favored class, but only because it is someone elses' expense. Such is especially attractive to the left, because it harms their favorite class enemy (the proprietor of a small business)...and nothing delights the "humane left" like "punishing those greedy business owners".
But for those moored to reality (and economics 101), rather than class-wage envy, its an extraordinarily bad idea. For example:
- It increases the cost of labor, which increases the input cost of production. Consequently, it lowers (rather than raises) the demand for labor in a labor market.
- It increases wage pressure for raises to other employees, who currently work at jobs in the business THAT are worth 15 dollars an hour and who expect to be paid more than the least skilled and experienced.
- It decreases supply of the product or service produced to the public, while also increasing the product/service prices.
- It reduces profit and profit margins, reducing investment (and incentive) to job expansion.
- It redistributes jobs from the less skilled or educated poor, to the better skilled/educated classes. IF business have to pay above market wages, they will be inclined to higher fewer young, unskilled, dropouts, and to replace them with the higher level educated workers.
- While it harms opportunity for entry level jobs for the young, it "freezes" job advancement by making jobs like dishwashing a "career" for older adults.
Empirical studies have confirmed the unemployment and other effects; including reduced training, price inflation, reduced job opportunity, while having no measurable effect on the poverty rate.
But hey, who can resist ordering the person who owns a little business pay for your effusive generosity?