Truth-out leans left, but that doesn’t mean this section isn’t wrong:
“NOOR: Can you talk more about your response to the conservative position that raising minimum wage will actually hurt the economy? You argue that in fact it actually benefits the economy. Talk more about why you believe so.
BABONES: There’s a theory that make raising the minimum wage will result in fewer jobs. And that theory seems to make intuitive sense, that when wages are higher, you know, people hire fewer people. And in isolation that would be true. There’s an assumption economists like to make called ceteris paribus, which means all other things remaining equal, this would happen.
But all other things are never equal. For example, if you raise the minimum wage, people make more money. That’s the first thing that’s not equal. As people make more money, they spend more, they pay more in taxes. The entire character of the economy changes.
And so what we really need to do is instead of arguing from theory that if you raise minimum wage it would cause problems for employers, you should argue from fact, that is, look at countries where the minimum wage is higher, see how well they’re doing. And, in fact, those countries are doing quite well. Even in the United States, we recently raised the minimum wage from an extraordinarily low level of $5.15 an hour in 2007 up to–now it’s $7.25 an hour–not a high level, but still that’s an enormous increase in the minimum wage, you know, almost a 50 percent increase in just a few years. And what have we seen? Even though there’s been a big recession in the U.S., we’ve seen low-wage employment actually increase. So, you know, the idea that raising the minimum wage will hurt employment just has no basis in empirical fact.”
If RJ Gordon’s ideas about growth being a historical accident minimum wage looks like a safeguard against the US becoming what it was in the 1700 and 1800s: a large, not so powerful country with a lot of inequity:
“This paper raises basic questions about the process of economic growth. It questions the assumption, nearly universal since Solow’s seminal contributions of the 1950s, that economic growth is a continuous process that will persist forever. There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely. Rather, the paper suggests that the rapid progress made over the past 250 years could well turn out to be a unique episode in human history. The paper is only about the United States and views the future from 2007 while pretending that the financial crisis did not happen. Its point of departure is growth in per-capita real GDP in the frontier country since 1300, the U.K. until 1906 and the U.S. afterwards. Growth in this frontier gradually accelerated after 1750, reached a peak in the middle of the 20th century, and has been slowing down since. The paper is about ‘how much further could the frontier growth rate decline?’
The analysis links periods of slow and rapid growth to the timing of the three industrial revolutions (IR’s), that is, IR #1 (steam, railroads) from 1750 to 1830; IR #2 (electricity, internal combustion engine, running water, indoor toilets, communications, entertainment, chemicals, petroleum) from 1870 to 1900; and IR #3 (computers, the web, mobile phones) from 1960 to present. It provides evidence that IR #2 was more important than the others and was largely responsible for 80 years of relatively rapid productivity growth between 1890 and 1972. Once the spin-off inventions from IR #2 (airplanes, air conditioning, interstate highways) had run their course, productivity growth during 1972-96 was much slower than before. In contrast, IR #3 created only a short-lived growth revival between 1996 and 2004. Many of the original and spin-off inventions of IR #2 could happen only once – urbanization, transportation speed, the freedom of females from the drudgery of carrying tons of water per year, and the role of central heating and air conditioning in achieving a year-round constant temperature.”
That being said, even if you’re not as pessimistic as Gordon, the success of minimum wage abroad argues that it is not scary. Overseas economies are largely faltering based on austerity, which the US is semi-avoiding. If the US is a powerful country with large resources, and capitalism is awesome, a minimum wage shouldn’t hurt the economy. If conservatives argue against a minimum wage, to me it seems an admission that they don’t really believe in capitalism, or they’d shrug it off, knowing capitalism can handle pulling lower earning wage folk along just fine because it is a strong engine. Like it does in Australia, et al. I tend to view minimum wage non-existence as a feature of developing world economies with an oversupply of manual labor (here, cut grass for pennies and some table scraps because you have no other options and be grateful for it, peasant).