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Reply to "Help me understand the impact of a $15 minimum wage? "
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[quote=Anonymous]The impact is pretty large in a positive way. Politically, its an odd ball because the states with the lowest minimum or which only follow the federal minimum wage are generally red states while the few states that have already moved to $15 are generally blue states. Even odder is that economically, the red states and their citizens would benefit the most. - It enables workers to live above the poverty line. This reduces the amount of social services people require from the state and federal government. - It can increase the tax revenues of states with many minimum wage workers without ever raising taxes. -It increases the economic activity within communities. People at this end of the economic spectrum tend to spend the money on local necessities such as food, housing or perhaps a used car from a local dealership etc. It increases restaurant and entertainment activity in lower income areas. This increases local sales tax revenues. -It increases contributions into Social Security and Medicare at a time when it is most needed due to aging boomers drawing it out. The change has a smaller impact on blue states that already have a $15 minimum wage. Companies that have already voluntarily adopted $15 wage like Target, Amazon etc are at somewhat of an advantage because they have already built the wage increase into their business model. In terms of negative impacts, the businesses like Walmart and businesses that are larger that 500K a year but rely on cheap labor have to change their model. This means tasing prices or taking less profits or finding other ways to cut expenses. Most of these businesses do not run with excess labor -even with the $7 minimum wage- so they can't really just cut jobs. This is the donor class that contributes to politicians, especially Republicans and one of the main reasons why you see Republican politicians so against a rise in minimum wage even though it helps their voters and state economies the most. Conversely, the donors to the Democrats tend to have already adopted the $15 minimum wage or voted for it in their own state so this is why Democrats are so supportive it even though it doesn't impact their voters or state economies as much. Other negatives include some businesses turning more toward undocumented labor and operating outside the bounds of the law. Construction, hospitality and landscaping are examples of industries that already have a track record of this. However, its not a strong argument to avoid paying workers a living wage because industries which already flout the law may want to do it even more. Just enforce the laws in these industries. In terms of broader impacts, inflation is not risk as the rise in wages is limited to the lowest end of the spectrum. Inflation is also being kept in check now by changes in the supply side of the equations. Things like mass and scalable agriculture, agriculture subsidies, globalization, and even Amazon have changed the models keeping the cost of goods low. Climate change factors or changes in agriculture subsidies are more likely to impact food inflation. Housing inflation is widely a local supply side issue. Energy is rapidly changing. The models from the 70s no longer apply. One potential impact that the combination of the pandemic and a higher minimum wage may have is an acceleration toward automation. Automation is the real threat not only to unskilled labor but more so to skilled labor. Many administrative back office positions have been and will continue to disappear with automation. [/quote]
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