Tuesday, April 1, 2014

Minimum Wage

President Obama is making a push to raise the minimum wage.  Many economists using simple supply and demand analysis are sure this will hurt low income people by destroying jobs.  Some states and cities have defied economists and passed higher minimum wages laws. Michael Reich and Ken Jacobs of the University of California Berkeley have found that the $13 minimum wage in San Francisco has not had the predicted ill effects.  "Our studies show that the impact of these laws on workers' wages (and access to health care) is strong and positive."  They says supply and demand analysis" is not the whole story though.  A full analysis must include the variety of other ways labor costs might be absorbed, including savings from reduced worker turnover and improved efficiency as well as higher prices and lower profits.  Modern economics therefore regards the employment effect of a minimum-wage increase as a question that is not decided by theory, but by empirical testing."
    Reich and Jacobs say that there is a moral value as well.   I used to tell my students, "You are not paying enough for your burgers. The workers need to eat too."

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