When the Numbers Really ARE the Numbers

Dec 16, 2013

Does raising the minimum wage have any bad side effects? George Will, in his op-ed piece in yesterday’s Washington Post, gives about fifteen reasons why raising it is the wrong thing to do. There are valid policy reasons on both sides of the issue, but Will highlights some issues that have to be faced. The numbers, and the process generating those numbers, can’t be ignored.

The numbers may be harsh and cold and tell us something we don’t want to be told, but they describe a reality. For example, here are some consequences of raising the minimum wage that are hard to argue with:
  1. Unemployment will increase. You cannot raise the price of a good – yes, labor is a “good” – without reducing demand. Somewhere an employer will choose to do without that last employee, or replace him or her with another way of getting the same work done.
  2. Prices will go up. When production costs rise, so do the prices that producers charge. They have to. In fact, the more unemployment doesn’t increase (see point (1) above), the more prices will go up. And to the extent that this effect will be most noticeable at fast-food restaurants and low-end retailers like Walmart, the impact may fall disproportionately on the economic bracket we’re trying to help.
  3. Not just the poor will benefit. Some percentage of those earning minimum wage are young people in households where the household income is above the poverty level. Is this an important policy objective?

These effects may be hard to quantify, but they can be quantified. And even if they measurements aren’t beautifully precise, they reflect reality. To deny that they exist at all, and to fail to weigh the costs against the benefits, is dishonest.

“Painting with Numbers” is my effort to get people talking about financial statements and other numbers in ways that we can all understand. I welcome your interest and your feedback.

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