Raising the Minimum Wage Is No Free Lunch
10th April 2016
The money for an increased minimum wage has got to come from somewhere, and there are only three places from which it can come: investors, in the form of lower profits; customers, in the form of higher prices; or workers, in the form of fewer jobs. Which group pays for the minimum wage hike depends on how competitive the marketplace is.
If competition for investment funds is intense, as is often the case, businesses will resist cutting investors’ profits. If competition for customers is fierce, as is nearly always the case, businesses will do almost anything not to raise prices. This leaves only the workers. There are always exceptions, but historically, firms have financed increases in the minimum wage by laying off minimum wage workers.