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April 11, 2024

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Democrats tackle national minimum wage

Securing their majority in the House and Senate last November, the Democrats have not been shy in planning themes for their fresh term.

Nancy Pelosi has established a list of focus points for this congressional term, and the Democrats are wearing their true colors.

One of the most discussed, and incidentally supported topics on this list is minimum wage.

On either side of this issue are very well-reasoned arguments. Those of liberal orientation see the issue as a matter of basic human rights, whereas conservatives see it as an inevitable market catastrophe.

To explain: When a liberal looks around at the country and the state of its population, the focus tends to be on the underprivileged.

How does one measure the worth of a country? If we allow massive amounts of people to live below the poverty line, what good is a large gross national product? Does not a society’s treatment of its elderly and poor measure its worth?

On the other hand, the economists counter such thought with threats of recession. Should one state raise its minimum wage, companies in that state will simply move to where rates are lower. If a company leaves a state, so does its jobs.

Are the economists’ fears to be heeded? Are they justified?

An article in last week’s New York Times would pose both of those questions. The article described a town in Washington state, which has had the nation’s highest minimum wage for over five years. In this town, which was right near the border of Iowa, jobs and business actually increased.

What happened was something economists did not expect: Workers actually left their state to work where the wages were higher. Why settle for $5.15 (Iowa’s federally regulated minimum wage) when you could work for nearly $8 an hour doing the same job?

The article also generalized this trend. Apparently, all over Washington state there was no net loss in jobs, and the economy was as strong as ever.

So what’s all the brouhaha about raising minimum wage? An economist could further posit that this raise in wages would bring about a rise in prices. Fair point.

But let’s look at the actual math. In order to raise prices, a company has to have sufficient demand already for its product. If no one is buying it, then even less are going to buy it if they raise prices.

Alternatively, the profit margin for this particular company may be such that they can ‘eat’ the cost. That is, they can just pay the higher wages without raising prices.

Yet, there is another possible outcome: The prices of only a few selective products would rise. It is a possibility that only the industries paying their workers minimum wage would actually have to raise their prices.

What industries are these?

Mainly the only places to do this are service jobs. So, for instance, fast food, cashiers, maybe stock workers in a grocery store, would all enjoy an increase in wages.

However, these industries may all turn around with a price increase. But there is good news: Not all industries would require a price increase.

If you think big, large industries like automobile manufacturing, and oil refining all pay their employees well above minimum wage. Why would they raise the prices?

The last, and most likely scenario to go along with an increase in minimum wage is that the government will chip in tax breaks to small businesses.

In all the talk, from the New York Times to CNN, about wage increases, the Democrats seem to be in favor of giving tax breaks for to the companies who are affected by the minimum wage increase.

This means that for a company who normally would have to raise its prices in order to survive, the government will help make up the difference. Reasonably, this means no price increase.

And still, there are untold benefits to an increase minimum wage. If you put more money in people’s hands, they tend to spend more money. This means that more money will be circulating, and, therefore, a strengthening of our nation’s economy.

Send comments to Chad Puterbaugh at [email protected].

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