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MINIMUM WAGE VS. TAX BREAKS
January 05, 2007
At both the statehouse and in Washington, it looks like there is going to be a minimum wage increase tied to some sort of tax breaks for "small business." While this will likely be railroaded through by the new Democratic majorities, it still doesn't hurt to point out what a minimum wage increase is. From the Bush-hating bitter blogger Daniel Shaviro:
The subsidy is geared to people based on hourly wage not household circumstances. So you get, e.g., teenagers from affluent households getting a lot of the $$. I think of it as conceptually a wage subsidy to low-hourly-wage workers, financed by a tax on commodities produced with low-wage labor. Not the design one would really want in a wage subsidy program that was being designed from any coherent set of criteria grounded in efficiency or distributional concerns. Note also that if, say, it ends up increasing consumer prices for commodities produced with low-wage labor (e.g., fast food), then it's a bit like a retail sales tax targeted at consumer goods that poor people disproportionately buy.
A minimum wage increase can only be two things: meaningless or harmful. If all employees already earn more than the minimum wage, it's meaningless. Otherwise, it's harmful, because it forces employees to choose between paying employees more than they are worth - not a way to grow a small business - or finding a way to make it up elsewhere, by trimming benefits, automating, or making fewer hires.
If you think a minimum wage doesn't affect employment levels, then the logical conclusion isn't a $7.50 minimum wage. You'd raise the minimum wage to say, $20 per hour. Or maybe $100. If a higher minimum wage doesn't affect employability at the bottom of the wage scale, it shouldn't at any salary level.
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Comments
Wow, your logic is just unassailable, isn't it. There's no chance that perhaps there's another option between minimum wage is meaningless and harmless? That the only options are $100 minimum wage or $0?
This is your brilliant insight to economic theory? Perhaps someone needs to go back and take remedial logic class and learn about the law of the excluded middle, reductio ad absurdiam or why "strawmen" don't win arguments.
Or is all that matters corporate profits? Who cares if the costs of caring for those people are shunted on to the rest of us through taxes right? God forbid we "harm" the corporations unfettered god-given right to maximize their profits.
There's very real research showing the effects of small increases in the minimum wage are not detrimental to businesses, and do a small part to help those whose earning power has been reduced by the increased effect of inflation. What a poor student of history you are.
Posted by: jcricket | January 6, 2007 4:33 PM
Well, now we know you can get mad at me, and worse, call me a poor history student. We still don't know whether you have an answer to my points, or to Dr. Shaviro's.
Posted by: Joe Kristan | January 8, 2007 7:31 AM