I Hate It When That Happens!

Everyone (okay, every economic conservative) knows that raising the minimum wage kills jobs. If employers have to pay more per hour, they will hire fewer people. Obvious.

Except real life doesn’t seem to work that way. Washington Monthly recently reported on the experience of states that ignored the conventional wisdom and raised their minimum wages.

Such hikes were not without opposition. Notably, fast food companies sounded the alarm over the possible consequences of minimum wage hikes—namely, that consumers would pay higher prices and companies would be forced to cut jobs….

Six months after California’s minimum wage rose to $9, the state’s job growth continues to outpace nearly every other state in the country. In November, California added more than 90,000 jobs, its highest single-month total in almost two decades.

The Golden State is not alone. Of the 13 states that saw minimum wage hikes go into effect on January 1, all but New Jersey saw positive job growth in 2014. And as a group, those 13 states averaged significantly higher job growth than states that did not raise the minimum wage.

It turns out that decisions to hire more workers are determined more by things like consumer demand than wage levels.

In fact, demand is far and away the most important factor in job creation. So when wages rise, and poorer people have more money to spend, they spend it. Demand increases. The economy improves. Everyone benefits–including the rich. (Except, evidently, in New Jersey…I wonder what/who Chris Christie will blame…)

In 2015, 21 additional states are set to raise their minimum wage. It will be interesting to see what happens–and, if there is a repeat of the experience of 2014– how the ideologues will spin the results.

13 thoughts on “I Hate It When That Happens!

  1. I have mentioned this before but it needs to be repeated after reading this blog. My daughter-in-law was laid off from Rolls Royce over a year ago after years of employment; her unemployment ran out months ago and her sub pay from Rolls Royce ended as of January 1st, her home is already in forclosure. She and hundreds of other laid off at this local Rolls Royce plant may now reapply for their old jobs at MINIMUM WAGE – is this even legal? This is Rolls Royce, people, not flipping burgers at some fast food restaurant. There is also the underlying fact that the state of Indiana gave this Rolls Royce plant millions of dollars last year with the stiputlation that no more workers would be laid off. A few weeks later they laid off 600 additional employees. They of course kept the money; is this legal? Or is this another typical GOP business transaction?

    “It turns out that decisions to hire more workers are determined more by things like consumer demand than wage levels.” Consumers need to be aware of the situation at Rolls Royce and any other business operating under the same guidelines; they need to demand much lower costs for products if manufacturers are only rehiring employees at minimum wage.

    Speaking of typical GOP transactions; my letter to the editor of the Indianapolis Star was printed in “The Last Word” section this morning along with two others stating the same view of Mike Delph’s bill which would “…allow a sitting governor or state lawmaker to seek both re-election and election to any federal office at the same time…” Talk about brass balls; Pence is already “a legend in his own mind” and the minds of other Republicans who are preventing the increase in minimum wage here…along with other tactics making life miserable and difficult for workers.

    The full blame for the minimum wage war cannot be laid at the feet of the GOP – the Democratic and Independent voters who sat home and did NOT vote on November 4, 2014, bear their share of blame. They are keeping minimum wage at current rates so their opinions are worthless in this regard – and regarding all other continuing and escalating problems keeping the middle class and lower income families in our current dire circumstances. I would be thankful for my $15 monthly increase in Social Security if Citizens United hadn’t already raised my monthly budget payment by $10…the sale of Indianapolis Water Company to Citizens was to benefit residents. Whatever shall I do with my $5 monthly SS increase this year?

  2. There is definitely a double standard when the 1% talk about wages. Examples: We have pay our Star Quarterback, Linebacker, Pitcher , Power Forward or Center millions of dollars or he will leave our team. We have pay taxes to our Local Professional Sports Team to make certain they make a profit. We have to pay millions of dollars in Stock Bonuses, maybe a membership in an Elite Golf Club and of course a Golden Parachute for the CEO’s or they will leave. We have to provide Direct or Indirect Subsidies to the Mega-Company or they will move Off Shore. Lower taxes for the Wealthy will trickle down. These few items I have mentioned are all provided as the Golden Gospel for the 1%.

    However, when it comes to the working class to pay higher wages, is categorized as Job Killers. Workers who are in Unions are vilified. Workers who attempt to start Unions are harassed and/or fired.

  3. Louie: the latest Indiana republican initiative is to remove the prevailing wage requirement from state contracts; read: bust the construction union contracts like the other unions that they have marginalized. It continues to amaze me how voters elect the people who do them the greatest harm.

  4. Obviously only a small percent of jobs are minimum wage. So looking at a state’s entire job picture when analyzing the effect of a forced wage increase on only a small percent of that state’s job is an analytical failure. You have to focus on the jobs that are directly affected by the minimum wage increase. Doing that, i.e. with a proper analysis, you’re hard-pressed to find economists who don’t think raising the minimum wage will cost some of those jobs and result in a cut of hours.

  5. Paying your employees no more than the current Federal minimum wage is theft. Ethically and morally, if you owe someone more, but choose not to pay that difference because you won’t get in trouble, you are stealing from that person and keeping that money for yourself. It’s called stealing.
    And you are an accomplice to theft if you’re making money from stock in a company that is stealing from it’s employees. Again, it’s called stealing.

  6. Paul; please provide the source for your statment that only a small percentage of jobs are minimum wage. I don’t see fast food restaurants – or restaurants which pay well below minimum wage – going out of business.

  7. We’re all so very familiar with the melifluously mendacious marketing machine for the moral right with their threats and their fright: The Affordable Care Act will cause fewer jobs and more death panels. Don’t forget those pesky WMDs.
    The claim about loss of jobs is simply put, a stupid one. Threatening to cut jobs is what you actually saying.

    As Liz Ryan stated,”Can you imagine running your business in such a way that a tiny shift in the supply chain, buyer preferences or any other naturally-oscillating aspect of the business ecosystem would put you out of business?”

    Get a manager or CEO who knows how to run a business.

    The best way to change the minimum wage is to boycott businesses who pay it.

  8. What gets missed is that companies don’t, in fact can’t, determine value, consumers do.

    Take the fast food business. Let’s say that a 10% increase in minimum wage translates into a 2% increase in the cost of their product and of course that applies also to their competition. Does that result in less profit? We decide that. The consumers do. And many of their consumers now have more money to spend. They just got a raise!

    Mostly the political rants about minimum wage are based on the conservative perspective that cheap is better vs the liberal perspective that better is better.

  9. As Phil points out companies that pay Federal minimum wage are on corporate welfare. They expect us taxpayers to chip in the difference between their wages and a living wage. They love being on welfare because it’s so much easier than working on running your business effectively.

    It’s called entitlement and it’s the chief plank in the Grand Oligarchy Plot Party’s plans.

  10. Sheila your comments are exactly in line with what I thought when the argument was made that the minimum wage increase would inhibit hiring amongst the low income workforce. Simply put employers don’t hire employees at that level to be nice but because they need them as a vital part of their workforce. They are indispensable. Enough of the nonsense put forth that raising the minimum wage will inhibit employment. It’s a win-win for those employees and for the economy as a whole.

  11. Failure to pay workers a livable wage (more than the minimum wage) costs all of us
    with the dependence low wages require on government assistance. The stories are legion on how Walmart, McDonald’s, and other low paying employers tell their employees how and where to acquire government assistance food stamps, health care, and more.

    Besides those financial costs are the costs of latch key children whose own nutrition to build strong bodies and minds suffers because their parents (often single parents) must work multiple minimum wage jobs to keep a roof over their heads. Children without a parent who has time to pay attention to them, their health, their school work, who their children’s friends are, etc. are at very high risk to themselves and others in childhood and thereafter. Exhausted, absentee, multi-minimum-wage-job parents deserve credit for their work ethic, but employer refusal to pay workers a livable wage increases societal and government costs to all of us. If we really want to be a pro-family nation, families need to be able to make enough money in one job to raise and spend time with their children and care for their elders.

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