Reply to Help me understand the impact of a $15 minimum wage?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]The argument that I hear from those opposed to raising the minimum wage is that it will cause employers to cut jobs. 
However, it seems to me that the main impact is that it would cause pressure to raise wages for those currently making between $7.50 and $15 an hour. 
Someone who currently makes $15 an hour isn’t going to be happy to find themselves as a minimum wage worker.

So if wages increases, inflation will increase causing those who will be making the new minimum to have roughly the same standard of living as they do now. 
At least, that’s how it would seem to play out to me.

Can someone who has a better understanding of economics explain why raising the minimum wage wouldn’t significantly increase inflation, thus negating the benefit of a higher salary. [/quote]

While wage increases do have a positive correlation with inflation, this is only meaningful in a large economic context. During economic boom cycles, unemployment decreases, wages increase in order to compete for dwindling labor supply in order to address strong consumer demand. This strong demand shifts the demand curve, allowing for higher prices for a given demand level. The result is inflation. If the wage increase is the result of regulations rather than a response to demand, then there is no inflation: increases in price will simply result in less demand. Service/product providers will have the choice of providing an inferior product/service while maintaining price; sell less at a higher price, thus requiring less labor; or figure out some other way to improve efficiency to make up for the labor cost increase.

There is a good case study with NYC car wash businesses. When NYC implemented a $15/Hr wage, carwashing by  hand became unprofitable almost instantaneously. People looking for a car wash was simply unwilling to pay for the higher cost. There was no inflation in car washes. What the car wash services ended up doing is firing the hand washers and installing automatic washing machines. The car washers who lost their jobs ran "black market" hand washing service, often for less than minimum wage after you factoring in their equipment and supply costs. These black market car washers are doing the washes on public streets, draining chemicals into the sewer system without any treatment. And of course, the individual car washers are not as efficient as shops in terms of procurement, time management, energy usage, and tax remittance. [/quote]

of course what happens if we leave the minimum wage low so that the car wash people don't lose their jobs is this: since they cannot actually live on that wage, we have to pay them through social programs like welfare and food stamps.  Because a person cannot work more than maybe 18 hours a day.  So either we pay by paying more for the service or we pay through taxes.  If we leave the wage low, we only have to pay part of their living expenses through salary.  if we raise it, we have to pay more.  What we cannot do is leave it low and not supplement, so that working people are homeless and without enough food.[/quote]

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