WAEX: Reality can be so annoying at times, as any number of social reformers have found out over the years. People should work harder and better in an equitable and equal society, but that’s not what the Soviets found out. Of course the foreigners would prefer to be ruled by us enlightened types, but the break up of the British Empire didn’t seem to show that – especially in 1776. And, sad as it is to say, minimum wages don’t mean that the capitalist exploiters lose profit to increase the incomes of the workers.
Sure, we’d all like to see low-end incomes rise – this is the very point of our having an economy at all, to improve the life of the average Joe and Jane. The question is, how? We can indeed tell everyone that they cannot sell their labor for less than some magic price. What happens then? More importantly, who now pays these higher wages?
We theoretically have three different groups. It could be that the workers pay. Those who keep their jobs get more, those who get fired or laid off lose, their loss meaning that they’re the people who pay. Certainly, we see some evidence of this at high minimum wages.
It could be the employers who pay – those capitalist pigdogs just get to roll in less profit in their basement strongrooms and wouldn’t we all weep bitter tears at that? We don’t in fact see any evidence of this being true.
The third group is us consumers. If prices rise to cover the higher wages then it’s us paying those higher wages. A new paper tells us that this is indeed what happens. “Our results suggest that consumers rather than firms bear the cost of minimum wage increases in the grocery sector “
Oh, right. The full paper is here. “We find that a 10% minimum wage hike translates into a 0.2% increase in grocery prices. This magnitude is consistent with a full pass-through of cost increases into consumer prices.” That is, all of the cost of the higher minimum wage is paid by us consumers out here. READ MORE