Minimum wage only really encourages businesses to hire fewer people and train those fewer people to do more and be more productive, if not to raise prices. There are many small bookstores and mom-and-pop stores that are going to be closed when the minimum wage is raised because they literally can’t raise prices any more or hire fewer people.
That’s why in some other countries, instead of a minimum wage, which is the government forcing businesses to pay a certain wage, the government itself makes up the difference between the actual wage and a desired wage. So if the government decides that everyone should earn at least $15/h but the market price for flipping burgers is only $10/h, the government itself will provide the additional $5/h. This effectively raises the standard of living without pressuring businesses and also without the adverse effects like pushing up prices or creating more unemployment.
To some degree there will be cases like that, but that is not really what happens on a macro level though. In aggregate, there tends to be no statistical correlation between the minimum wage level and employment levels. Companies try to be efficient, so they try not to have any more or less people than they need (based mostly on demand). The desire to pay as few people to do as much work as possible always exists. Higher minimum wages may put some extra emphasis on this, but it's likely that the extra demand from consumers having more income balances this out.
What's your source for this? If there's no statistical correlation between the minimum wage and the unemployment rate (and I thought I had read otherwise) then I suspect the statistics aren't telling the whole story.
Your explanation of what's going on at the micro level contradicts my experience as a business owner who's been signing paychecks for many years. All businesses have inefficiencies, and in general the larger the check, the more scrutiny the expense will receive. Internally this manifests as having higher expectations for a higher paid employee, and prioritizing automation, offshoring, or other business decisions when labor costs get too high. Externally, when we expand our relationship with a client, we fully expect that it will receive more scrutiny from various stakeholders at the company simply because the check getting written to us is bigger, even if we deliver proportionately more value.
The government in the US already subsidizes businesses that can’t or won’t pay a living wage - with food stamps and such for their workers. Perhaps having government make up the difference in pay, as you say they do in other countries, would be better.
Depends on one's definition of "livable wage." Minimum wage and "decent standard of living" are often conflated but minimum wage was not imposed and has never been intended to provide that. It's always been a wage that was at or slightly above the federal poverty line.
The lowest minimum wage I remember hearing about as a kid was $1.50/hr. I thought that sounded like a lot of money at the time, but I probably was not even 10 years old.
That would have been in the first half of the 1970's when the federal poverty line was around $2,500. So working full time, you'd make $3,000 or about 120% of the poverty level.
Today, the federal minimum wage is $7.25 an hour and the poverty level (2016) is $12,200. So still, a full-time minimum wage worker earns nearly 120% of the poverty level.
You could call it corporate welfare. Or you could consider the 3 to 4% profit margins these companies have and assume that they might not sustain that number of employees at a higher wage.
This comment implies that these companies going out of business would be a bad thing. In the short term, definitely.
But jobs are just means to an end for most people. Why can't government aim to simply provide those ends?
The obvious counterargument is that the free market is more efficient. But the US government has shown itself to be very capable in providing some services to the entire country. The military has done a great job keep the country safe. There just doesn't seem to be the willpower to create the navy/army/airforce of food, shelter, healthcare and education.
I guess the issue is that it's hard to get elected if you promise to make things better 20 years from now.
Hilarious that you use the word "efficient" and then in the next sentence make the claim that the US military has done a great job at keeping the country safe. Yes, they do a good job. But the US military is one of the most bloated, over-funded organizations in human history.
I'd like to stretch some ideas for the sake of exploration. Curious to hear what you think:
I think you could interpret the US military's success despite "waste" to mean that a federal government can get away with a lot of inefficiency and still beat the "free market."
History already showed us what private military is like. I believe it's essentially feudalism and warlords. I.e. true poverty for 90% of the population. A powerful federal millitary that follows the laws of democratically elected officials gives people in the US historically unprecedented safety.
It's not clear to me why the federal government couldn't build a military-like organizations for addressing food, shelter, health care, and education.
The fundamental issue seems to be that the free market is the best means for deciding resource allocation towards those other goals. So why not simply implement UBI pegged to prices in LCOL areas?
It's not really success despite waste. It's one of the principal factor's bankrupting the nation. Apply that to other major issues as you listed and we are bankrupt even faster.
That’s why in some other countries, instead of a minimum wage, which is the government forcing businesses to pay a certain wage, the government itself makes up the difference between the actual wage and a desired wage. So if the government decides that everyone should earn at least $15/h but the market price for flipping burgers is only $10/h, the government itself will provide the additional $5/h. This effectively raises the standard of living without pressuring businesses and also without the adverse effects like pushing up prices or creating more unemployment.