Another federal minimum-wage increase would not, as some proponents promise, create jobs, but would reduce employment.
. . . raising the minimum wage reduced employment by 800,000, cutting it back to its early 2009 level is likely to increase employment by 800,000. That would add a bit to government revenue as some of those people moved from unemployment benefits to tax-paying workers.
I understand that there are sophisticated studies showing a limited impact of the minimum wage on employment. My judgment is impacted by those studies. Nonetheless, they are climbing a steep hill against intuition and a supply and demand paradigm that has proved incredibly powerful in the past.
It may not be the case that the minimum wage cut employment by 800K but I have a hard time swallowing that it does not impede recovery and exacerbate long term unemployment.
I can’t imagine that there are no workers at all in America whom it is profitable to hire at $4.75 an hour but unprofitable to hire at $7.25.
Mildly wonkishly, there are some secondary effects that could come from bolstering consumer spending. Our presumption here is that businesses are hoarding cash and that a higher minimum wage would drain that cash into the hands of people who would spend it.
I am skeptical about this. The business sitting on lots of cash are large corporation, especially in Tech and Finance. These are not minimum wage employers. One the other hand small businesses are still struggling with financing.