There is a perennial debate over the impact of minimum wage. Economic theory suggests a higher price for a commodity will reduce the demand, all other things being constant. Commodity is understood to include labor.
Labor is not really a commodity, though labor power is bought and sold. People are not commodities and the abstraction leads to confusion.
In practice, a higher minimum wage does not always produce higher unemployment. Back in April, we posted a short blog about San Jose's experience. The Great Graphic here was tweeted by Stephanie Kelton. It provides another exception to the conventional wisdom. At the start of last year, Washington raised its minimum wage to the highest in the US. As the chart shows, the unemployment rate has trended lower.
This, of course, will not settle the debate. However, the continued accumulation of examples that run counter to the prevailing economic theory, may embolden others to hike minimum wages. Eventually, along the lines of Thomas Kuhn, it may lead to changes in the dominant paradigm.
Great Graphic: Washington State and Minimum Wage
Reviewed by Marc Chandler
on
June 03, 2014
Rating:
Reviewed by Marc Chandler
on
June 03, 2014
Rating:
