I have managed to hold off the urge to blog about anything political for some time, but the debate over raising minimum wage always infuriates me. Let’s skip past the argument of whether or not there should be a minimum wage and keep this more economical in nature. Because here’s the point: drastically raising minimum wage on a whim really throws off the economy. Doesn’t it make sense to incrementally adjust minimum wage year by year? Then, businesses wouldn’t have to account for sudden and substantial increases, which then get passed onto consumers who probably didn’t see a raise. I am not an economist, but it would be great to hear one respond to an idea like this.
Let’s make a rough draft and go from there. Say we set minimum wage to increase each year at the rate of inflation. Then, on years when the economy goes down, keep minimum wage the same (or decrease it by a lesser percent than deflation). If the economy shrinks for x number of years in a row, adjust minimum wage downward more drastically. Basically, the idea is to keep minimum wage steadily on track with the economy in a way that doesn’t hurt people too badly if things go sour. Isn’t an increase of 1-3% easier to budget than 40%?
Just a thought. Any economists have a critique?