Pilot Letter: Wage hike benefits


The writer of this LTE reasons that consumer price inflation reulting from a $15 an hour minimum wage will be offset by lower taxes as the welfare rolls are cleared through higher employment. This assumption is a leap of faith for several reasons:

  • There is no certainty that government will reduce taxes in a way the writer will notice in her own personal finance budget.
  • Because government is a consumer, too, its own costs for consumer goods will rise.
  • The higher minimum wage will cause some unemployment in its own right.

The economy is too complex and unpredictable to be sustained by glibly reasoned public policy. All else being equal, it is usually best to just allow markets to function as they will.

4 thoughts on “Pilot Letter: Wage hike benefits

  1. An excessive minimum wage is harshly discriminatory against those it purports to help.

    If an employer has to choose between a seasoned worker and a young person with no experience, or an immigrant with poor language skills, or even a person reentering society after being incarcerated, and you have to pay either one $15 an hour, he will choose the seasoned worker every time. The only thing the young person, the immigrant or the parolee has to offer is the willingness to work for less to gain experience and a good reputation as a worker.

    Denying them the choice to work for less effectively saws the first rung of the employment ladder. They may never make the leap.


    1. You make an important point: Workers have a contractual interest in their employment.

      The contract involves an exchange of labor for compensation. The compensation is “guaranteed” in the sense that the worker will be paid the agreed upon wage, even if the production he performs loses money for the employer. That’s a sweet deal for the worker, as long as he is happy with the compensation rate.

      It doesn’t make sense for a third party to intrude upon the contract by setting the worker’s wages. One consequence is that workers who would happily work for less, as well as those who might justifiably demand more, lose their bargaining positions. Their access to employment contracts in general becomes more limited.


  2. ” . . . he will choose the seasoned worker every time.”

    That’s the case, regardless. Those will still be the people who have to work for the bare minimum, but the bare minimum will be a little less draconian.

    If anything, it would put upward pressure on the wages of the seasoned workers.

    Liked by 2 people

  3. While a $15/hr minimum wage is a noble gesture, and one I am in favor of, it would seem to make more sense to establish the new minimum wage based on inflation from the last time it was raised (1993, if I recall) and then tie the future raises to the CPI or some other economic measure. I believe that would relieve the pressure on employers and still be beneficial to employees. A potential win-win situation.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s