Saturday, December 16, 2006

Economic law repealed

Here's an article about the likelihood that the new Congress will raise the minimum wage:

WASHINGTON (Reuters) - The incoming Democratic-led U.S. Congress intends to give a hand to dishwashers, fast-food cooks and America's other poorest-paid workers by raising the federal minimum wage for the first time in a decade.

With the gap between rich and poor widening, Democrats promised such a pay hike as a part of their campaign that saw them win control of both chambers of Congress in the November 7 elections from President George W. Bush's Republicans.

I have commented on this before and believe the macro economic consequences are minimal, mostly because so few people actually make the minimum wage. In a bit of wishful thinking Reuters, citing "some estimates" , believes this will raise the pay of other workers as well:

In addition to raising the pay of people who now earn less than $7.25 per hour, the proposed new minimum wage, an increase would prompt employers to increase the wages of an estimated 8.3 million other low-paid workers, according to some estimates

I think that is unlikely and next we'll be hearing about how more people are now making the minimum wage and therefore we need another raise. For those who believe the minimum wage has no effect on hiring, perform this mental exercise. Instead of raising the minimum to $7.25 why not raise it to $15 or $39 or $50/hour. Think that would have an effect on hiring? The last I checked, politicians did not have the power to repeal the laws of economics or to ensure prosperity for all.

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