Employers could respond to Washington’s wage dictate by “cutting wages for other, higher-paid workers,” essentially transferring money from a $12 per hour worker to a $9 per hour worker. Wonkblog notes there are “plenty of theoretical papers” suggesting “people might work harder and be more productive if they’re suddenly paid more.” Of course, for those workers who were making $12 per hour, effectively $24,000 per year, the incentive may be just the opposite when they are held back for the purposes of pay parity.
Of course, companies could “raise their prices in response” or “just settle for fewer profits.” An increase in consumer services and products is not good for America’s struggling middle class, let alone the working poor. And the idea that increased costs won’t be passed along to the consumer is simply a pipe dream, and something Wonkblog acknowledges is “pretty inconclusive.”
Finally, there is the theory a mandated wage increase is actually good for the employer. Wonkblog explains businesses could “react by trying to squeeze more productivity out” of their minimum-wage employees. (Insert union joke about evil corporations exploiting low-skilled workers here.) But the employer benefits do not stop there. Companies, Wonkblog argues, “might actually save money” because there would be less turnover among entry-level employees.
As the Wall Street Journal editorial board exclaimed, “No doubt employers are slamming their foreheads wondering why they didn't think of that.”
That same editorial notes University of California at Irvine economist David Neumark found 85% of major academic studies focused on the minimum wage "find a negative employment effect on low-skilled workers."
If you’re a low-skilled worker, be on the lookout for a fancy sounding bill to be introduced in Congress, something like the Eliminating Poverty in America Act. If history is any guide, the EPA Act will do you more harm than good.