On the minimum wage

I just finished reading this morning Paul Krugman’s piece, “Raise that Wage” published in The New York Times.  The Nobel laureate argues for an increase in the minimum wage after taking issue with GOP arguments that such an increase result in Americans losing jobs.

I don’t think Americans will lose jobs per se.  I base my expectations on negligible if not nonexistent job loss based on real world observations.  In one of my past lives i was an assistant manager at a fast food restaurant.  Fast food workers, mostly teenagers, are always scrambling for more hours, while management lays a heavy hand on the amount being paid out per hour on labor.  Managers are always ready to send employees home when hourly labor expense and hourly store revenues are not meeting projections.  Fast food is notorious for tight margins (at this store, profits averaged $700 a month) so reducing hours has become both art and science.  With capital being fixed ( stores don’t throw out freezers and fry bins every six months) the reduction in expenses is targeted at labor.  Increases in wages would really squeeze an already tight profit margin.

Loss of jobs?  Probably not.  Loss of hours, definitely.  For the most productive workers (in fast food they are in the ten percent of employees), they will see the most upside.  They will be counted on to take up whatever slack hours reduction creates from the less productive employees.  Other than that, raising the minimum wage will have no other positive benefit.  Raising the minimum wage won’t lead to job creation; it won’t lead to capital accumulation on the part of labor; it won’t increase business profits either. 

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in capital, consumers, Economy, free markets, labor markets, libertarian, minimum wage, personal income and tagged , , , . Bookmark the permalink.

One Response to On the minimum wage

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