In a recent editorial, Holly Sklar praises the recent hike in the minimum wage using faulty economic logic. She makes the claim that higher wages have the effect of increasing consumer spending which we are to assume is good for the economy. However, an artificial raise in wages not backed by underlying economic reality will have the effect of increasing demand for the current supply of goods and services, thereby putting an upward pressure on prices. In the end those people who she wanted to help will have higher nominal wages, but their real wages will be the same or lower. We should be looking to increase real wages by increasing the supply of goods and services, which will put downward pressure on prices. Raising costs for producers will do nothing to achieve this goal.
She then states that higher wages raise "worker morale and productivity" and improve product quality and company reputation. If it were that easy wouldn't the greedy, profit-seeking companies she admonishes so much figure this out as well? Maybe she should start a business and show us how to defy economic law.
Tuesday, July 31, 2007
More minimum wage silliness
Actually, the same minimum wage silliness we've heard before. So, I sent this letter to the New & Observer.