Wall St Journal, March 29, 2016 page A3, “Major Test of $15 Base Pay.” Questions: Who may be hurt by an increase to $15 in the minimum wage? If jobs are lost and companies go bankrupt, should...
- Who may be hurt by an increase to $15 in the minimum wage?
- If jobs are lost and companies go bankrupt, should society somehow make up the difference by providing grants or welfare?
1. The attached article gives a fairly balanced view of the proposed increase of the minimum wage in California to $15/hr. It cites an economist, Michael Reich, as suggesting the minimum wage increase would have no negative effect, because the increase in wages would be paid for by increasing prices for consumers—in a small enough way not to be damaging for the consumer. However, the Congressional Budget Office believes that increasing the minimum wage could have a negative effect on low-wage workers themselves, causing mass unemployment. The report found that "the least experienced, least skilled, and lowest-wage workers" would be most affected by hiring freezes. However, Democratic Governor Jerry Brown believes the pay rise must be implemented over a couple of years to prevent low-paid workers from being "left behind."
2. The answer to this part of the question depends, to a certain extent, on your personal view towards the provision of welfare and social support. However, in this instance, the assumption is that the government's actions will have been the direct cause of job loss and unemployment: if a change in state legislation causes job losses and corporate bankruptcy, then it is arguably the direct responsibility of the state to ensure these people are still able to live. How the government could pay for this is a different matter—it could also be argued that it should not be the burden of the rest of "society," who did not vote to make the damaging changes, to support those who were affected by them. Perhaps the most reasonable option would be to pass a vote as to whether to make these changes. In that circumstance, if society votes for the changes, it too will be responsible for any negative consequences, and it might be better expected to pay for any ensuing damage from the poor decision.