The Economist has a good piece on the realities of the minimum wage increase:
We have written a fair bit about the question of minimum wages over the last few months. It is probable that the minimum wage increase will not cost enough jobs to make its effects readily distinguishable from random economic variation. It is also probable that it will improve the lot of a few poor people, though not many, as fewer than 20% of those who earn the minimum wage live in poor households now. On the other hand, it also seems probable that much of any benefit that goes to poor families will come out of the pockets of other poor people—very probably even poorer people, such as convicts, who are currently barely hanging onto the fringes of the labour force.
The left wants to argue that the minimum wage is a transfer of assets from the rich (business owners) to the poor. The reality of the minimum wage is that it ends up being an asset transfer between poor people — or more likely an asset transfer between disadvantaged people and less disadvantaged people. Any increase in the marginal cost of labor tends to be felt most strongly at the bottom — if labor costs rise, businesses are less likely to hire workers who have a higher likelihood of producing less value for their costs. That means people who have families, less reliable access to transportation, or other personal problems. Single mothers, ex-convicts, people on drug treatment, all of those groups that are the most disadvantaged.
Increasing the minimum wage is pure political theater. All it does is assuage the guilt of wealthy white liberals while doing little to nothing to help people. In fact, it’s even a form of corporate welfare:
CEO’s who support higher minimum wages are not, as the media often casts them, renegade heros speaking truth to power because their inner moral voice bids them be silent no more. They are by and large, like Mr Sinegal, the heads of companies that pay well above the minimum wage. Forcing up the labour costs of their competitors, while simultaneously collecting good PR for “daring” to support a higher minimum, is a terrific business move. But it is not altruistic, nor does it make him a “maverick”. Costco’s biggest competitor, Wal-Mart, also supports a higher minimum wage, and for the same reason. Wal-Mart’s average wage is already above the new minimum; it will cost the company little, while possibly forcing mom-and-pop stores that compete with Wal-Mart out of business. This seems blindingly obvious to me. Though I don’t expect we’ll see “the minimum wage—it’s great for Wal-Mart!” in many Democratic campaign commercials.
In in all, raising the minimum wage has low societal costs — it won’t raise unemployment all that much. What it will do is impact the most vulnerable and benefit the least vulnerable. It won’t affect McDonald’s all that much, but it will affect the small-town cafe that can afford to pay its cooks $6.00/hour but not $7.25/hour. Big business doesn’t have much incentive to fight — why take the PR hit when most of them already pay more than the minimum. It’s the small fry that get the shaft.
Raising the minimum wage has nothing to do with poverty, or justice, or any of the other high-minded ideals that are used to justify it — not after rationally looking at what it really does. All this is about is pretending to care rather than actually doing something constructive — which seems to be enough for politicians and the American public. For those who actually need the most help, it isn’t enough and never will be.
Hat tip to Instapundit)