[quote=no_such_reality]
That’s assuming the top end moves proportionately. The problem is $8/hr is really externalizing the real costs of the products that are provided with $8/hr labor.
It’s exactly the same problem with legal labor and 99 cents/lb grapes.
The grapes aren’t really 99 cents, and the illegal labor isn’t really $5/hour.
The grapes are 99 cents plus $20,000 periodic and random ER bills and $14 Billion in school bonds.
And the labor is $5/hr plus the same $20,000 periodic ER bill and $14 billion in school bonds.[/quote]
In the US that is indeed true. We’ve decided to subsidize a standard of living or a level of consumption. Many countries don’t do this and yet they still don’t have a labor shortage and here in the US we exploit that fact.
The fundamental goal of rising minimum wage or increasing the middle class really boil down to consuming more goods and services. The way to allow for people to consume more goods and services is to increase the supply of goods and services. So how exactly does rising minimum wage increase the total goods and services produced by American’s?
In almost every scenario you can imagine, initially some businesses will be economically nonviable when minimum wage is increased and will go out of business. Therefore the total goods and services decreases. If the total goods and service decreases then as a whole people have to consume less so what have you done in increasing minimum wage is give those at the bottom a slight increase but those directly above them a slight decrease. The guy that used to make $15/hour hanging drywall will get less steak and the guy that worked at McDonald’s will get more. The market will increase the price of steak until it finds that balance.
We need to stop focusing so heavily on the demand side of the equation because we get the increase in demand but we’re weak on the supply side. We either don’t increase the supply and prices rise to meet the higher demand or the supply comes from some other country which doesn’t generate a job here.
Think about the health care law. We know it’s going to increase demand for health care because more people will be covered but what are we doing about the supply side. Are we building more hospitals, training more doctors, developing cheaper drugs? We’re not and likely won’t be.