Originally posted by Mountain Man
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For starters you are imagining that they said that. On page 1 of this thread Carrikature explained that they actually said they expected they would raise prices.
More importantly, the common mistake that people often make when thinking about minimum wage increases is that they only consider the fact that some employers will have to pay staff more. But the equally important effect is that those staff then have a higher income and will spend it, meaning businesses in the area will have more income. This will result in local business making greater profits and/or needing to employ additional staff to meet the higher level of demand for goods and services.
It is very difficult to predict in advance exactly how these two effects balance out since it depends on where the people choose to spend their extra money and to what extent the various businesses in the area can afford to pay employees more and/or need to employ more staff to service the increased demand. Existing empirical studies show that these two effects tend to balance each other out, giving a net result of very little change in the overall employment numbers.
As your link said:
"More than 600 economists, including seven Nobel Prize laureates, recently affirmed the growing consensus that low-wage workers benefit from modest increases in the minimum wage without negative consequences for the low-wage job market"
Poorer people, unlike richer people, spend all or nearly all of their income from week to week. If the income of poor people is increased, then immediately more money is spent by them in purchasing goods and services. (And poorer people, far more than richer people, are more likely to spend their money purchasing from local businesses) This has a multiplier effect throughout the community, as the businesses that are selling more goods then in turn need to employ more people to sell them, who in turn then have a job with more money to spend etc. Various empirical studies have suggested the multiplier effect is around 4x, so every additional $1 you give to a poor person there will be $4 total economic growth.
The most effective way to stimulate any economy is therefore to give more money to poor people (regardless of whether it is by entitlement increases, minimum wage increases, or union negotiations for higher pay). Conversely, too much wealth inequality hurts the economy, because the richer people simply store the money away in savings and investments (often offshore) and it goes out of circulation, while the poorer people are unable to buy the amount of goods and services they would have otherwise purchased, and due to less demand for products the local businesses will have less income and need fewer staff. The OECD recently published an analysis looking at how increasing income inequality is harming economic growth. They note, "In particular, what matters most is the gap between low income households and the rest of the population."
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