Far too often we hear that if we increase the minimum wage it will lead to an increase in prices, eliminating the benefit realized, and will lead to job losses in our ecosystem. Recent Research challenges this popular theory.
Increased wages and the pass through effects on prices is much less pronounced then is often reported. From the UpJohn Institute for Employment Research ” By looking at restaurant food pricing during the periods of 1978-2015, they found that prices rose by just 0.36% for every 10% increase in the minimum wage. They also observe that small minimum wage increases do not lead to higher prices and may actually reduce prices. In fact, small minimum wage increases could lead to increased employment in low wage labor markets. Read “The Effects of Increasing the Minimum Wage on Prices: Analyzing the Incidence of Policy Design and Context, by Daniel MacDonald and Eric Nilsson, to take a deeper dive into the issue.
The “marketing message” of Trickle Down and the “scarcity message” that is broadcast to us needs to be challenged. Wage increases can actually lower prices, increase employment, thus moving us closer to designing an ecosystem where “we all win, when we all win.” On my travels, I have observed that we need to start recognizing the “value” that we all have, so isn’t it about time that we start designing a better system?
Economic Journeyman 