Jacobs, laying down the law on Bloomberg.
On May 4, 2015 Civic Skunk Works writes:
This Bloomberg interview with University of California Berkeley professor Ken Jacobs is fascinating stuff. Jacobs states that a substantial increase in the minimum wage is the best way to combat the pervasive problem of low-wage workers getting on public assistance programs to supplement their meager pay.
Taxpayers have been supplementing low-wage pay for decades now through food stamps, affordable housing programs, and welfare. Jacobs says “when you increase the minimum wage, you decrease food stamp utilization” by people on the minimum wage. Some more highlights:
“When businesses don’t pay enough for workers to get by and support their families, they rely on public assistance to make ends meet. And in fact when you look at enrollees in public assistance programs, 74 percent are in working families at a cost of about 153 billion dollars a year to US taxpayers.”
Here’s Jacobs explaining why minimum wage increases will not price low-wage workers out of the local economy or shutter businesses left and right:
“Most of these low-pay jobs are in place-specific service sectors. We’re talking restaurants, retail, janitors, security guards. You raise those wages and if everyone has to raise the wages all across the board then firms are still going to be able to compete. What you do see when wages go up is worker turnover goes down, people stay on the jobs longer, that saves firms money in terms of training costs. We estimate that’s about 20 percent of the cost of raising the minimum wage is absorbed that way, and then firms raise prices. The actual price increase is very small and spread across a wide range of consumers.”
Well, what about that price increase? Won’t goods and services become prohibitively expensive?
“If Los Angeles raised their minimum wage to $13.25 an hour, cost of goods would go up one time by one half a percent point and to $15.25 an hour, by a little less than one percent point. Again, a one-time increase.”
Jacobs also says that increasing the minimum wage “has big important long-term effects on children’s health and educational prospects, which also saves the economy money in the long run.” By allowing businesses to take advantage of the working class via a low minimum wage for so long, we’ve created an elephantine government subsidy program. It’s time to end the welfare state.
http://civicskunkworks.com/want-to-get-people-off-food-stamps-raise-the-minimum-wage/
The real big trouble with the imposition of a minimum wage is inflation. I’m loving the zero inflation that Britain is finally enjoying – the people are liberated (if only briefly for Mark Carney doesn’t like it). The world needs zero inflation.
Increasing wages lead inevitably to increased prices and subsequently a reduction in the spending power of the wage increase, leaving the entire population worse off and those on minimum wage exactly where they were before.
Far better to increase standards of living is to increase the productivity of labour which in turn will increase the supply of goods relative to the supply of labour, in turn reducing prices relative to wage rates.
To do good and to really lift the millions out of near poverty – Eliminate all the bureaucratic government interference that restrains rises in the productivity of labour and the buying power of wages. Liberalize licensing, let people work; Abolish Union pay scales and let workers move up to better pay more freely.
Less government intervention is the road which leads to greater economic freedom. Economic improvement for the poor and the rest of us will surely follow.