Side note: Just got to the minimum wage section in Bernie's book and it has really got me thinking and changed my perspective on the matter.
What's his argument?
This sums a good bit of it:
https://www.dol.gov/featured/minimum-wage/mythbuster
Essentially raising the minimum wage will put more money into peoples pockets. They will have money to spend on non life-essential things and therefore stimulate the economy as they will being buying more expensive food, clothes, toys and other things. Furthermore, it will bring less families out of poverty meaning less money will need to go to Welfare among other government facilities that the homeless and poor use.
That DOL website "mythbusters" is either badly worded or purposefully worded to make the reader jump to conclusions.
Here's a few examples:
Quote:
Myth: Raising the minimum wage will only benefit teens.
Not true: The typical minimum wage worker is not a high school student earning weekend pocket money. In fact, 89 percent of those who would benefit from a federal minimum wage increase to $12 per hour are age 20 or older, and 56 percent are women.
The problem with this statement is, is that it doesn't say how much of that "89%" figure is true, current minimum wage or is between MW +$.01 to $12, meaning
above minimum wage (by state, since states have different minimum wage rates). The DOL has the real numbers, they could have easily published how many teens are paid actual minimum wage and how many non-teens (people 20+) are paid actual minimum wage. Why do you think they didn't publish that?
Quote:
Myth: Increasing the minimum wage will cause people to lose their jobs.
Not true: In a letter to President Obama and congressional leaders urging a minimum wage increase, more than 600 economists, including 7 Nobel Prize winners wrote, "In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front."
That "not true" didn't even answer the myth. The
letter only talks about the
positives of
nominal wage increases. It doesn't talk about the
negatives of the increases,
which is what the "myth" was addressing. It also doesn't even come close to talking about "real" wage increases, which any economist worth their salt would know would be the actual benefits given to the workers and what they really need. When economists talk about wage deflation, they are talking about
real wage deflation, not nominal.
Quote:
Myth: Small business owners can't afford to pay their workers more, and therefore don't support an increase in the minimum wage.
Not true: A July 2015 survey found that 3 out of 5 small business owners with employees support a gradual increase in the minimum wage to $12. The survey reports that small business owners say an increase "would immediately put more money in the pocket of low-wage workers who will then spend the money on things like housing, food, and gas. This boost in demand for goods and services will help stimulate the economy and help create opportunities."
Again, their answer isn't even addressing the "myth" at all. A survey doesn't answer the real issue, which is if small businesses can afford it or not. Especially since a lot of small businesses run very thin margin lines that can destroy any price shocks associated with their margin lines, such as
labor cost increases.
Quote:
Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would hurt restaurants.
Not true: In California, employers are required to pay servers the full minimum wage of $9 per hour before tips. Even with a 2014 increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace all but only a handful of states in 2015.
Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would lead to restaurant job losses.
Not true: As of May 2015, employers in San Francisco must pay tipped workers the full minimum wage of $12.25 per hour before tips. Yet, the San Francisco leisure and hospitality industry, which includes full-service restaurants, has experienced positive job growth this year, including following the most recent minimum wage increase.
Oh look, they are talking about 2 states that
don't have the federal tipped minimum wage rates when they try to dispel the "myth" of
federal tipped minimum wage rates. Talk about a strawman argument.
Quote:
Myth: Raising the federal minimum wage won't benefit workers in states where the hourly minimum rate is already higher than the federal minimum.
Not true: While 29 states and the District of Columbia currently have a minimum wage higher than the federal minimum, increasing the federal minimum wage will boost the earnings for nearly 38 million low-wage workers nationwide. That includes workers in those states already earning above the current federal minimum. Raising the federal minimum wage is an important part of strengthening the economy. A raise for minimum wage earners will put more money in more families' pockets, which will be spent on goods and services, stimulating economic growth locally and nationally.
Again, nominal, not real. Which is the arguments presented against minimum wage increases.
Quote:
Myth: Increasing the minimum wage is bad for businesses.
Not true: Academic research has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.
What the DOL "forgets" to say is that those wage increases for
retention purposes are what keeps people staying in that business, not mandatory, across-the-board, wage increases. They are jumping to conclusions based on retention studies that research retention in the workplace. Voluntary wage increases increases retention, not mandatory.
Quote:
Myth: Increasing the minimum wage is bad for the economy.
Not true: Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has steadily increased, even when the minimum wage has been raised.
Even their response shows that raising minimum wage is not a primary factor in the rise of real GDP. There are multiple factors when it comes to the rise of real GDP, but most economists won't attribute minimum wage increases as a factor, because it only effects
nominal increases, not
real. Again, the DOL is using 2 different situations and hoping the reader ties them together for them.
There are several other things I can point out, but I think I got my point across by now. The DOL is being very dishonest in their responses to these "myths."