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The thing that the Econ 101 demand curve leaves out of the minimum wage debate is that those extra wages have side effects that impact the curve itself. Workers
by skywhopper 9y ago
The thing that the Econ 101 demand curve leaves out of the minimum wage debate is that those extra wages have side effects that impact the curve itself. Workers who are paid more at their primary job may not need to work a second job and/or will have more money to spend at other establishments that also pay their employees minimum wage, driving back up the demand for workers. Also, workers who are less stressed about affording the repairs on their car, or making the rent this month, or paying for their kid's medicine, will be better and more productive employees, generating additional value for their employers. These effects are harder to measure and imagine than a simple demand curve. They encourage more automation, sure, but automation has side effects, too. It keeps prices from growing as fast, which means people can spend the money they save elsewhere on other products or services, which increase demand for workers in that industry/establishment; if designed correctly automation can make workers' lives better even if there don't need to be as many workers; and automation itself is a product that needs to be designed, sold, purchased, installed, maintained, and upgraded, all of which drive up demand for still other jobs.
Sure, there's a point where a minimum wage would be too high and would start causing drag on the economy, and while I personally don't have a handle on the economics required to calculate an estimate of where that point is, it's clear that we aren't anywhere close to that point. Historical minimum wages have been higher, and just basic common sense tells you that so long as inflation is happening, the minimum wage should also be going up to keep pace. The "living wage" standard that a full-time minimum wage job ought to cover basic living expenses for a typical family seems like an entirely reasonable standard that has the benefit of being somewhat possible to be objectively determined.
- rjtavares 9y agoIt's unfortunate how difficult it is to have a reasonable discussion about economic policy issues. What you describe is pretty obvious - yet most people that have a say in this issue treat it like it's a binary decision ("increase vs. don't", instead of "increase how much?").