Friday, July 24, 2009

Minimum Wage Goes Up Today

The raise in minimum wage means that it is that much expensive for the poor and lower middle class to receive services.

The primary beneficiaries of minimum wage labor is low and lower-middle class people. Hence the primary cost of the minimum wage increase will be born by this group.

The minimum wage has funny effects on communities. The increase rarely has effects in expensive areas like San Francisco, Boulder or Park City. People in rich areas usually have to pay more for labor since the cost of living is higher.

Minimum wage increases tend to have a big impact on jobs in poor neighborhoods where it is difficult to raise prices to cover the new expense.

Another really strange effect is that the people who lose their marginal job in a poor community, then have to start competing for the service jobs in rich communities. This creates a downward pressure on wages in rich 'hoods.

The minimum wage is a great feel good issue for the ruling elite as the legislation will have very little effect on their pocketbooks. Whereas the poor, who are the supposed beneficiaries of the legislation, have to bear a much larger leap in prices along with a drop in the number of local jobs.

The minimum wage laws only make sense when people look at one side of a transaction. Transactions, by their nature have two sides.

Minimum wage increases have consistently been followed by a drop in jobs available to low income Americans (Cato at Liberty). The 2006 legislation that set the currently schedule in minimum wage increases should be numbered among the blunders of the Bush Administration. Clearly this legislation has increased the depth of the current economic downturn.

How much of the job loss in recent months was from businesses that realized that they couldn't afford the increased liabilities that went into law today?

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