If it is one's vision that an employer must have a fixed number of workers to do a particular job, it makes sense to help workers by mandating higher wages. The same number of workers will be hired earning higher wages and the only difference is that employers will earn lower profits. Other people with the same desire to help low-wage workers will argue against minimum wage increases because they have a more realistic vision of how the world operates. They recognize that there is not a fixed number of workers necessary to get a particular job done. The employer can substitute capital for labor -- automate. If employers do hire the same number of workers with higher wages and try to shift the higher cost on to the product price, consumers can purchase substitute goods, including goods from foreign producers. Finally, employers can relocate to cheaper-wage countries. These and other responses to higher wages reduce employment.
Poor people are not poor because of low wages. For the most part, they're poor because of low productivity, and wages are connected to productivity. Congress can easily mandate higher wages, but they cannot mandate higher worker productivity or that employers hire a particular worker in the first place. The late Sen. Ted Kennedy, echoing the vision of many, said in his support of higher minimum wages, "I believe that anyone who works 40 hours a week, 52 weeks a year, should not live in poverty in the richest country in the world." It's breathtakingly stupid to think of minimum wages as an anti-poverty tool. If it were, poverty in places such as Haiti, Ethiopia and Bangladesh could be instantly eliminated simply by proposing that these country's legislators mandate a higher minimum wage. I'm wondering whether the Obama administration has proposed a $7.25 minimum wage as part of the cure to Haiti's poverty.
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