An Argument for a Minimum Wage

There have been myriad studies about the impact of having a minimum wage. Some indicate that there is no particularly strong linkage between creating a higher wage for low wage workers and some indicate that a rise in the min wage causes unemployment.

The politicians arguing against a min wage use a very simplified argument: namely that if employers have to pay their workers more, they will only be able to hire so many workers, mostly fewer. This is way too simple in thinking this. For one, if people are paid more money, they then spend more money (what goes around, comes around) which is good for business. There are many more facets to this issue.

If labor costs go up, and they have myriad times due to labor contracts, etc. how, oh how, do companies cope? (Yes, I am being sarcastic.) The amount of money that goes to labor in any company is not a fixed amount or even a fixed percentage of the company’s budget. There are many, many ways that those increased labor costs can be offset. For one, you can raise prices for the goods created. You could decrease profits. You could find other ways to reduce operating costs (reduce energy costs by going solar, etc.).

Knee jerk responses to these actions abound, of course. “If we raise prices, we will reduce sales!” Really? Companies never raise prices, then? C’mon, get real. Just raising prices alone, of course, is the lazy way to deal with increased labor costs; a combination of actions would be better.

Most of these minimum wage discussions are shallow and politically motivated. Basically, the opponents of min wage increases give minimal arguments and only add to them if we don’t accept (aka we reject vehemently) their overly simplistic argument.

Let me explain a real reason for min wage increases. Minimum wage increases are justified for the simple reason is that business interests (aka the plutocrats) have conspired to suppress wages for a long, long time. This involves bribing politicians to undermine union powers and privileges, delaying minimum wage increases, changing the laws in favor of employers over employees, etc. They have been particularly effective over the past 40 years (see the chart below as to the effectiveness of wage suppression over the past 40 years). The only power source of ordinary people to oppose these powerful business interests is government. The cabal wants wages low (too low) and so government must set a floor on wages. It is not simple but at least that is the political dynamic.

If you want to see this playing out right now, consider the current stance of the GOP. The GOP has been the champion of local rights for a long time. Education, for example, should not be a federal issue, but should reside in the states, with the states deferring to local communities and their school boards. So, what has been the GOP response to cities who have enacted their own min wage increases? GOP dominated states are passing laws to roll back those democratically achieved minimum wage increases and to bar such local increases in the future. Local control doesn’t mean a fig when the GOP’s paymasters issue directives (You will keep wages down, or else).