I came across this bill being proposed in the CA Senate recently:
The short version, is they want to raise the minimum wage from $8 an hour in CA to $9 next July and then $10 an hour July of 2016.
Really? Don’t we usually decrease the price of something when we want to sell more of it?
Economics people: We have relatively high unemployment in CA right now. Do you remember your supply and demand graphs? Unemployment means that the supply of labor currently exceeds the demand for labor. How do we fix this imbalance?
We can cut the excess supply. Given that our supply is “people” I don’t think that eliminating them is a really great option…
So we have to increase demand. OK, how do you immediately increase demand? That’s right! Put it on sale. A.k.a. decrease the price. When the milk and veggies are about to expire at the grocery store, the manager does not jack the price up. They decrease the price, to encourage you to buy it.
So, we have a bunch of people who want to work, and can’t find a job at $8 an hour. Do you think that they will find work if we increase the minimum pay to $10? You don’t have to be an economics genius to figure this doesn’t work.
Maybe instead we need a minimum wage holiday. A temporary decreasing of the minimum wage. to boost the demand for labor. When the economy goes into recession we lower interest rates to encourage spending, why not lower the wage rates. Maybe it will keep some people employed (albeit at a lower amount) than otherwise would have. $6 an hour isn’t great, but it is better than $0 an hour.
I don’t disagree with the idea of a minimum wage, per se, but with this bill it is clear someone just isn’t paying attention. Maybe next time the economy tanks we should talk to our politicians about a minimum wage holiday!
And yes, I fully expect to get an email from my brother in 5… 4… 3… 2…