There is little question in most academic research that increases in the minimum wage lead to increases in unemployment. The debatable issue is the magnitude of the increase. An issue not often included in minimum wage debates is the substitution effects of minimum wage increases. The substitution effect might explain why Business for a Fair Minimum Wage, a national network of business owners and executives, argues for higher minimum wages. Let’s look at substitution effects in general.
When the price of anything rises, people seek substitutes and measures to economize. When gasoline prices rise, people seek to economize on the usage of gas by buying smaller cars. If the price of sugar rises, people seek cheaper sugar substitutes. If prices of goods in one store rise, people search for other stores. This last example helps explain why some businessmen support higher minimum wages. If they could impose higher labor costs on their less efficient competition, it might help drive them out of business. That would enable firms that survive to charge higher prices and earn greater profits.
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4 comments:
I recently read that the ' poor' people in Seattle are complaining about the new $15 an hour law because with $15 an hour, they can no longer collect welfare.
1017 - WELL HELLO!!!!
10:17 not entirely true, but by your statement alone, goes to show you only read MSM headlines.
Really ?
Read:
But now some workers in Seattle are finding that the higher wage is forcing them off the welfare programs they would rather stay enrolled in and, instead of celebrating their higher income, they are imposing fewer work hours on themselves in order to stay on assistance.
Seattle’s KIRO-TV recently spoke to a nursing nonprofit that admitted that some workers are trying to cut hours and earn less to avoid losing assistance. In another case, a local radio station has been talking about the story.
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