Lockport Union-Sun & Journal — On April 30 the U.S. Senate blocked a bill that would have given low-income workers a raise across the entire country. The reason they denied the raise to workers is because of a false narrative that is being repeated again and again by some uninformed and reckless media outlets. I am writing to dispel a few rumors about the minimum wage.
First off, raising the minimum wage would not lead to mass layoffs. Some restructuring may occur, but if a small raise in the cost of labor causes a company to lay people off, odds are that the company was already in trouble and those layoffs would have come regardless of a change in wages. The truth of the matter is that our labor participation rate will likely rise rather than fall.
The classical economic argument against a minimum wage is that business and labor have come together to find this magical number called the equilibrium, which workers are currently paid based on. Theoretically, it is the highest wage that would sustain the greatest number of workers. The idea is that if a business provides a higher wage it won’t be able to employ as many workers as it would like, and if it sets the wage any lower then it won’t be able to recruit the number of workers it wants.
The problem is that this model assumes a natural equilibrium, but the equilibrium we currently have is far from natural. It is an outdated minimum wage that has not been adjusted for naturally changing market forces. There are millions of people who are not working minimum-wage jobs because they place a higher value on their time than what business is willing to pay. That is what economists call a deficit of labor, and the cure for this ailment of the system is raising wages.