Raising the minimum wage

2014

This is what a February 28 New York Times editorial said about raising the minimum wage:

Much of the discussion about the Democratic proposal to raise the minimum wage to $10.10 an hour by 2016 has rightly focused on the workers who will clearly benefit from the move. But what about businesses? How would higher wages affect them?

The answer — contrary to a great deal of reflexive hand-wringing by some conservative think tanks and politicians — is surprisingly positive. Scholarly studies and the experience of businesses themselves show that what companies lose when they pay more is often offset by lower turnover and increased productivity. Businesses are also able to deal with higher costs by modestly increasing prices and by giving smaller increases to higher-paid employees.

I’m not sure “surprisingly positive” is how the majority of workers who receive smaller increases and consumers paying higher prices would describe the impact of raising the minimum wage. But that aside, let’s assume the overall position of the Times is correct. There is lower turnover and higher productivity. If that’s the case, why would raising the minimum wage require government action? Why wouldn’t smart employers already be paying above the minimum wage to gain the added competitive advantage via their workforce?

But here is the real question. Say there are ten employers in an area each with a substantial portion of its workforce at minimum wage. One enlightened employer pays 25% more and gains the above referenced advantages … smart guy with a happy workforce. 😋

However, what happens when the other nine employers by law are required to pay the higher wage? Hasn’t the enlightened employer lost its advantage? Aren’t we back where we started from among all the employers and their workforces, except at a higher cost level with higher prices?

What reason is there now for lower turnover and higher productivity among all ten employers?😟