http://money.cnn.com/2014/05/01/news/economy/seattle-minimum-wage/index.html?iid=SF_E_Lead
Seattle's Mayor plans to raise minimum wage to 15$ per hour. What type of effects will this have on the economy? On the equality/inequality of wealth distribution? Will corporations have to start doing things differently?
If the wage is raised, do workers actually benefit or will employers just cut down on workers to keep costs low?
Please share your thoughts...
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ReplyDeleteYay! Classical economists will not be happy about this, but at the end of the day, economics is an empirical science. The empirical data shows that modest increases in the minimum wage have not reduced employment. In my view, 15 dollars is still a modest increase, for the federal minimum wage would have stood at nearly $22 an hour today if it had kept up with increased rates in worker productivity. Higher minimum wages have also resulted in more economic activity because minimum wage earners have a higher marginal propensity to consume.
ReplyDeleteI am not very confident that Seatte will meet the proposed minimum wage by 2021. The time period is very long for businesses to contest this proposal. Business have the financial means to do so. Also, if wages increases to $15, firms might decide to cut down workers to part-time workers or lay off some employees. In both cases, those workers would lose some of the benefits such as healthcare coverage that the firm could have provided for them. I also think this increase in wage will mean that executives pay might rise. I am not really sure what the effect this proposal will have on inequality since the video that we watched in class showed that people in power always find loopholes to maximize their rewards at the expense of the majority of the population.
ReplyDeleteThere is a trend that is usually established whenever wages increase: companies cut workers. I don't think that this situation is any different. Seattle might be able to keep its workers but not in the long run.
ReplyDeleteHere is a link to article on analysis done by The Congressional Budget Office on increasing the federal minimum wage to $9 and then to $10.10 by 2016.
ReplyDeletehttp://economix.blogs.nytimes.com/2014/02/18/the-impact-of-a-minimum-wage-increase/?_php=true&_type=blogs&_r=0
True, there are important things we can learn from classical supply and demand models. When you raise the cost of labor on firms, the path of least resistance for firms will to be to reduce the number of employees or pass those costs onto the consumer. However, we need to be careful. We have to separate the map and the territory, the theory and the lived experience. Maybe, just maybe, the real world isn't as simple as the simple models we learned in econ 101.
ReplyDeleteThe empirical data shows that actually, raising the minimum wage doesn’t have a drastic, negative impact on employment. I highly recommend you guys to read the following articles:
http://seattletimes.com/html/localnews/2023116005_wageimpactsxml.html
http://finance.fortune.cnn.com/2014/04/08/the-proof-is-in-the-data-time-to-raise-the-u-s-minimum-wage/
"Recent research shows that 1,400 different real-world studies on the impact of moderate minimum wage increases on employment find no negative impact on employment, discrediting the recent report by the Congressional Budget Office that an increase would cut 500,000 jobs."
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