Wednesday, 23 August 2006
Local Democrats Want Minimum Wage Increase
No surprise that Democrats want an increase in the minimum wage. They know that their bread and butter supporters, the unions, wages in many cases are tied to the value of the minimum wage. If the minimum wage increases so do the union's wages. So it is no shock to see Democrats "rallying" to talk about a minimum wage increase. Here is my favorite quote from the news story.
Opponents of raising the wage say it would have the undesirable effect of increasing prices and unemployment. Jenkins said she thinks it would boost the economy.
"People who make the minimum wage put money back into the economy, by buying gas, groceries and other typical goods", she said. "They're not buying stocks and bonds."
First it is silly to state that buying gas, groceries, and other goods puts money into the economy while buying stocks and bonds doesn't. What do you think happens when you buy a stock? You are investing money in a company. That money is given to the company so they can produce a profit and bring greater returns to the investor. In this case the money is put into the economy by directly funding a company. Secondly, the profit the company makes gets recirculated back into the economy when the purchaser either receives a dividend or sells the stock for a profit. So it actually does more for the economy than just buying goods directly.
Secondly, it will reduce the number of laborers. The amount a company can spend on employees in many cases is fixed. Thus by increasing the cost of labor, one of two things must happen. The company can employ less people, or they can raise prices to increase the amount of money available to spend of labor. Neither of which are good for low income people. There will be either less jobs available or the cost of goods will increase lessening everyone's buying power. In effect, nullifying the "artificial" raise mandated by government's minimum wage laws.
Unfortunately, I don't see the political will to stop an increase in the minimum wage. Regardless of how much sense it makes economically.
