I’ve thrown in the towel on the minimum wage. I don’t support jacking it up—see below—but who looks good arguing against posers and demagogues?
Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects (see the table below). As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers…
The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate. However, those earnings would not go only to low-income families, because many low-wage workers are not members of low-income families. Just 19 percent of the $31 billion would accrue to families with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold, CBO estimates.
Moreover, the increased earnings for some workers would be accompanied by reductions in real (inflation-adjusted) income for the people who became jobless because of the minimum-wage increase, for business owners, and for consumers facing higher prices.
In sum: perhaps a million could lose their jobs; less than a fifth of the higher wages would go to people in poverty. Oh well.
Of course, a million more unemployed, at 99 weeks unemployment benefits, means 99,000,000 benefit-weeks of payouts. Those benefits vary by state, but a vague average of $250 seems reasonable for our estimation. Raising the minimum wage to $10.10 could cost the nation as much as $25,000,000,000 in benefits—with a million fewer workers to pay taxes to cover the cost.
But it’s all good. Hey, raise it higher!
PS: You may remember my link to this awesome conversation Rush had with a caller two months ago.
CALLER: This is Sean in San Diego, and I believe those workers at McDonald’s and Burger King deserve some more money. The shareholders are getting rich. I watch every day on MarketWatch, and the CEO is getting rich. They’re making their profits. They can afford to pair their workers a bit more money. They’re not asking for much. They haven’t had a raise in 25 years.
RUSH: Really? In 1988, people at McDonald’s were making $7.25 an hour?
CALLER: I’m not exactly sure of that, but –
RUSH: Well, that would be important.
CALLER: They’re not being paid fairly, Rush.
RUSH: Why can’t they [get a job that does pay]?
CALLER: Probably no other jobs out there in this bad economy.
RUSH: Why? Why aren’t there any jobs out there?
CALLER: The Democrats have destroyed this economy. We all know that.
RUSH: Okay. Well, the minimum wage, by the way, back 25 years ago was $3.35 an hour, just to get the number out there. It was not what they’re making today. I’ll get the inflation calculator out and take a look at it. They’re asking for double their current wages. Sean, why doesn’t the McDonald’s franchise just pay it? You know, why not just give them more money?
CALLER: Oh, that’s simple. Greed.
RUSH: Greed? Or is it competition?
CALLER: Why should they if they don’t have to and nobody’s making them? Government sets the minimum wage, and they don’t want to do it.
RUSH: Well, okay. Let’s take a look McDonald’s, and let’s say the McDonald’s gives their employees a raise. Let’s just say $10 dollars an hour. Would that be enough?
CALLER: No. I don’t think so.
RUSH: How about this? How about McDonald’s raises everybody to $20 an hour? Would that be enough? Would that be okay?
CALLER: I think that would probably help a lot of people.
RUSH: What about $25 an hour?
CALLER: Managers should probably get at least that. They probably already do.
RUSH: Okay, then what about $30 an hour?
CALLER: If that’s the fair market rate.
RUSH: Well, no, that’s what $7.25 is.
CALLER: I don’t believe that.
RUSH: Yeah, that’s why it’s $7.25. It’s the fair market rate. It’s $7.25 not because it’s temporary. That’s the fair market rate. Let’s pay ‘em $50 an hour, how about that?
CALLER: $15 an hour.
RUSH: No, $50.
RUSH: Five-oh, $50 an hour. How about that?
CALLER: Yeah. That should be the new fair market rate.
RUSH: Right on. Right? Well, let’s keep going, how about $75 an hour, let’s pay ‘em $75 an hour.
CALLER: Where you going with this?
Finally! It took how long for Sean from San Diego to get Rush’s point?
Except he doesn’t!
RUSH: Well, I want to know whether you agree with $75. I’m not going anywhere with it. If $50 is good, $60 would be better, right?
CALLER: Well, yeah.
RUSH: What about $75 an hour?
CALLER: Where you going with this, though? I don’t understand.
Coulda fooled me. But Rush is kinder than I am:
RUSH: Sean? Sean, one thing. I’m not trying to trick you. I’m not playing a trick on you here. Please don’t misunderstand. I’m not taking you anywhere. I don’t want you misunderstand.
The point, Sean, is that you just said that $7.25 isn’t the market price, and it is. That $7.25 an hour is what it requires for McDonald’s to be fully staffed. There are people who will work for that, and therefore that sets the wage scale. Now, $10 would be better.
Yeah, you can keep raising it, but at some point, everybody who believes in a minimum wage will say, “No, wait a minute. That’s too much,” and at that point, you have demonstrated that that there’s no market relationship. You’re just talking emotion. You’re just talking “fairness.” You’re just talking being nice, and that’s not how the market works. People aren’t paid a wage because they’re being nice to, or because it’s fair. In the market, the market rules. You can control it all you want, you could add arbitrary numbers on it all you want, and all you’re doing is delaying the inevitable.
The market will always win and will always rule, because it is the market.