So I have been reading various and sundry critiques of minimum wage laws, and I have questions, and in particular, questions about the ideology driving the suppositions. Now, I am a mere, lowly planner who has only taken four classes in labor economics (including one offered at the PhD level), so I understand that I could never ever possibly understand the super-hard economics at the basis of These Things. So please, explain what you can to me, Internet, but using only small words.
The basic idea is that wage floors leave some people willing to worker lower wages out in the cold, as the wage floor forces employers to offer a minimum wage, and at that wage, the employer simply won’t hire an additional person, or they will let people go, because they do not value the additional labor at the price the wage floor sets.
This means that POOR PEOPLE SUFFER DAMN YOU because employers have absolutely positively no way of ever ever paying people slightly more except by screwing labor…even though corporate entities’ top managers and CEO are making eleventy billion dollars a year and the margin fits easily into many of the bonuses we routinely see handed out. I can credit the concern that a small business owner with a small number of employees can’t swing it, but there are plenty of corporate employers in these metro markets whose objections that they could never, ever pay their low-wage labor slightly more strike me as utterly disingenuous and self-serving. Take adjuncts: universities could pay them more; it’s just that labor oversupply means universities don’t *have* to. So they don’t, and they use their money for other stuff, like obscene salaries for administrators.
But that’s actually not my question.
Why don’t benefits from minimum wage laws trickle? We are supposed to believe that putting gigantically large sums of money in the hands of a few people (capital) trickle, trickle away down to us all…but putting marginally more dollars in the hands of a large number people has no trickle down potential at all, none whatsoever, supposedly. But don’t those minimum wage workers go out and buy things and generate more economic activity, so that employers will have more demand for labor, thereby potentially offering new, higher paid opportunities for other low-wage workers? Why isn’t that trickling?
According to this same school of economics, when wealthy people get made better off, the benefits trickle down! When a billionaire buys a private jet, it helps us all. It’s like magical rainbow snow–those benefits just trickle upon us from on high, and everybody should be ever so grateful. (Pukes, narrowly missing the keyboard). But if you make a larger group of poor people marginally better off, there’s no trickling. None! Impossible! That money just gets sucked into Democritus’ void, never to return to anybody in any form. Poor people buy things, and some save money, so it’s not like the move means absolutely positively no new capital investment is possible. Poor people can and do save. When they put money in banks, banks aggregate and use that capital, so…
So increased incomes to rich people are inherently good (because trickle, trickle, trickle), but increases in wealth to poor people is meaningless, according to the “pain and suffering school” of minimum wage writing. Somehow, the dollars know whose hands they are in, and they just won’t act the same for a large number of poor people the way they will for a small number of vastly wealthy people.