$15 billion being spent more than compensates for $3 billion more in costs. Employers will offset the higher direct costs by a combination of raising prices, increasing volume, or improving productivity. The fact is, there will be many times more people who can afford a Big Mac at an extra 25 cents than there are now who can afford one at today's prices.
The state of Washington has led the country in minimum wages for 15 years now, currently the highest at $9.32. Job growth has continued at 0.8% growth, 266% of the 0.3% national rate.
New Jersey raised the minimum wage by $1.00 to $8.25 in January and immediately saw 8,320 new jobs created. Where are the job losses? Most economists simply don't understand business.
Anyone can understand that there will be as many jobs as it takes to meet demand. When there is more demand you get more jobs. When more people have more money to spend, you get more demand.
Further, most of that added demand will go directly to the kinds of businesses who employ low-wage workers. This is why a smart retailer like the Gap is raising minimum pay to $10 by next year. When you think about it, this is not a new idea at all. Remember how Henry Ford prospered during the Great Depression by raising pay to an unprecedented $5 per day, so folks could afford to buy cars?
But what about inflation? Most people assume that rising wages will cause inflation.
The actual definition of inflation is when you have more money chasing a finite amount of goods and services. In fact, as long as you can produce more goods and services, you do not need to have inflation. And, overall, producing larger amounts of goods and services is generally more efficient and cost-effective. Computers and electronics are just one example.
By creating additional economic activity we get an increase in demand for goods and services, and therefore more demand for workers to produce them. The economy grows by production rather than inflation.
Raising the minimum wage is one issue where everyone from radical liberals to arch-conservatives to the majority in the middle can agree. It is good for job creation, good for the economy, good for reducing government costs and good for the workers, too.
Farid A. Khavari, Ph.D., is an independent candidate for Florida governor 2014. His website: www.khavariforgovernor.com
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