05/31/07
Who loses with a minimum wage raise -
Categories: Everyone knows, or should, that the primary losers of a minimum wage raise are the poor who lose their jobs because they have been priced out of the market, the poor who won't get hired in the future for the same reason, and those who move from full or over-time work to part-time work, because their employers are trying to cut costs, costs imposed by minimum wage laws.
But the secondary losers are harder to keep track of. For example, in the nearby town, let's say that demand for fast-food product remains high, because, well, everybody has to eat, and this is a handy way to do so. So, stretch one's imagination a bit and say no one gets fired, at least not immediately, and no one loses hours, either. McDonald's just raised their prices, to compensate for the losses. And because dining at fast food is inelastic compared to other purchases, people continue to flock to McDonald's.
What happens then?
Forget unemployment. Think indirectly competitive businesses. In the town nearby, the business hurt most may be the CD music store. The businessman there has no employees. But the poorer people who shop at his store will have less to spend every month; they've spent that extra at McDonald's. They may very well choose to cut down on recorded music purchases.
So, the chief secondary loser from minimum wage laws is very likely the businessman who can't afford to hire anyone in the first place!
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