Thursday, 1 January 2015

Why do some business support raising the minimum wage?

In a letter to the Wall Street Journal Don Boudreaux points out one reason, anti-competitive behaviour on the part of higher wage firms:
Labor Department official David Weil justifies his support for raising the minimum wage in part by recounting that “the vast majority of retailers” who he met at a National Retail Federation conference pleaded with him to raise the minimum wage (“Wage-Law Enforcer Favors Proactive Approach,” Dec. 30).

Such pleading by some retailers for a higher minimum wage is not as clear a sign as Mr. Weil would have us believe of the wisdom of raising that wage.

For starters, every retailer is free to raise its wages on its own. And because raising its wages when other employers don’t allows the wage-raising firm to attract a larger and better pool of employees than it attracts when all firms raise wages, there’s something suspicious about some retailers pleading with government to force all employers to raise wages.

I have a good idea what that something is. The retailers who begged Mr. Weil for a higher minimum wage likely have wage scales well above the industry norm; they rely less intensely than do their competitors on minimum-wage workers. Raising the minimum wage, therefore, would impose heavier burdens on their competitors than on themselves. Mr. Weil’s retailer friends thus see a hike in the minimum wage as a way for government to artificially improve their profitability by bankrupting, or at least throttling, many of their rivals.

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