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Friday, September 30, 2016

The Great Minimum Wage Disaster

Ever hear of the Great Minimum Wage Disaster where all small and large businesses collapsed bringing down the economy and society?

We get warned about it every time we consider raising the minimum wage by a penny.

Never happened.

Raising the wage does increase business costs and raise prices. However, the wage is concentrated and price increases spread out. They don't rise equally. Pouring water into a bucket fills it quickly. Pouring the same amount into the ocean has no observable effect. A successful business has far more customers than employees, or each product pays for several employees. The weight gets spread out, like taxes where everyone chips in a little to achieve a lot for the most number of people. Small pain generates great benefit. Where it isn't spread because the value of the product is concentrated, the consumer can generally afford it. If you can afford a jet, few more thousand dollars shouldn't be a problem.

A a rough example, a restaurant that raises its wages by 1 dollar might have to raise each meal by 10 cents. Hardly killer inflation that drives away customers and kills jobs. The employees can even afford the increase.

Since first established, the minimum wage has been raised many times, in many places and economic conditions. Society and business had yet to collapse.

In fact, our living standard has risen.

But, far better than a minimum wage is a minimum income. Then you wouldn't need a minimum wage.