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Raising the Minimum Wage for Working Men and Women in California and the Rest of America

Economic Axioms and an Apology for Assuming Something Was Obvious

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Another principle I consider axiomatic is that raising minimum wages either has little effect or causes unemployment, and raising them enough will produce mass unemployment. This has always seemed self=evident to me, but my friend Ron Unz, who is a pretty smart cookie, has a different view.

Raise the Minimum Wage to $12 an Hour

Ron Unz, a software developer and publisher of The Unz Review, is the chairman of the Higher Wages Alliance, which is sponsoring a California ballot initiative next year to raise the state minimum wage to $12 per hour.

Tens of millions of low-wage workers in the United States are trapped in lives of poverty. Many suggestions have been put forth to improve their difficult situation, ranging from new social welfare programs to enhanced adult education to greater unionization. But I think the easiest solution is also the simplest: just raise their wages.
The current federal minimum wage is $7.25 per hour and hiking it to $12 would solve many of our economic problems at a single stroke.


I have tried to follow Ron’s arguments here, but I can’t. I don’t see where the money will come from. The Marxist labor theory of value is that value is added by labor, and the capitalist pays below the value of the labor and keeps the surplus value for himself. Of course he then invests that profit in other enterprises, but that could be accomplished by a better system in which the workers themselves then own the enterprises in which the surplus values are invested.

Ron Unz argues that if Wal-Mart raised prices by less than 2% it could afford the $12 minimum wage without further price adjustments, and this would produce a massive economic stimulus – the higher pay would all be spent, not saved or invested, making more business for Wall-Mart – and the economy would boom. Wall-Mart won’t do that because this would signal competitors to pay less money in wages and use what they save to cut prices below Wall-Mart’s; but a minimum wage law would fix that. Now to compete with Wall-Mart you can’t do it by paying less than it pays, and once again everyone benefits.

I don’t know, but it seems to me that raising minimum wages either has no effect – people are already getting that – or it raises the cost of doing whatever it is that the worker does, and if that isn’t worth the minimum wage the job will disappear.

But I will vigorously dispute one point Ron makes: raising the minimum wage isn’t going to save billions in entitlements.

He says

Ordinary taxpayers would be the other great beneficiaries, saving many tens of billions of dollars each year in payments for Food Stamps, the Earned Income Tax Credit, housing subsidies, and other social welfare programs. Businesses should pay their own employees rather than quietly shifting the burden to government programs and the American taxpayer. Conservatives and free-market supporters should endorse this simple idea.

This assumes that having raised minimum wages the entitlement programs would be cut. I don’t believe that is politically possible.

I don’t disagree that Scrooge ought to have paid Cratchit a higher wage and ought to have bought a goose for the Cratchit family. I am less sure that Parliament should have required him to do it.

• Category: National • Tags: Campaign, Jerry Pournelle