January 29, 2014
posted by Bernard Avishai
read the worthy full article at:
Obama, Marx, and the Minimum Wage
The President announced on Tuesday, in his State of the Union address, that he will increase the minimum wage for federal contractors to ten dollars and ten cents. He wants, he said, to “give America a raise.” Raising the minimum wage appeals to those who “do not understand economics,” the former Representative Ron Paul argued recently: if you make it costlier for companies to employ each person, you lower the demand for workers and kill jobs. Representative Paul Ryan offered another view: “I think it’s inflationary,” he said. If you raise wages, companies’ costs go up, and then they raise prices to compensate.
These two arguments—which, combined, suggest that raising wages for the poorest winds up hurting the poorest—are very old. So old that in June of 1865, in London, Karl Marx interrupted work on “Das Kapital” to refute them
Marx delivered two lectures to the International, in June. They were eventually published as a pamphlet, “Value, Price, and Profit”—a polemic so succinct and sharp that it makes you wish that Marx could return as a blogger.
Raise wages, and we might see (as one contemporary economic writer has shown) a slight rise in the price of a Big Mac. But we should also see a boost in demand for lower-cost restaurants—and that, ultimately, is good for fast-food businesses and their employees. We should also see a marginal drop in demand for, say, yachts.