Can someone answer my question about the minimum-wage hike? [View all]

[scioto99]

(Because, god knows, I'm not an economic genius.)

Here's what I understand:

People work for businesses. Businesses are all different. There are businesses out there, I'm sure, where the owners have vast mansions and the workers are scraping by on next to nothing. The owners could well afford to double the salaries of their minimum wage workers. And that would be the fair and honorable thing to do. In those cases, a minimum wage hike would be great.

OTOH: I can tell you that in my area, businesses fail all the time. I assume they fail because they aren't making enough money to stay afloat, despite the fact that they pay their employees seven-whatever an hour. Just in my neighborhood strip mall in the past few years, shops that have come and gone include:

the card shop
the gymnastics joint
the Asian manicure place
the sports memorabilia store
the haircut place
the fro-yo place
the lacrosse-and-soccer equipment place

When the businesses close, the employees go from making min wage to making zero. Of course, in moves the liquor store, the veterinarian, the healthclub, the weird dance studio, and so on - so that makes for new job opportunities, I guess. Maybe some of those places will make a go of it. Who knows. It just seems kinda unstable.

So I don't quite get how all businesses can start paying a higher wage to employees, when many businesses can't survive even while paying the current crappy wage.

I have heard the theory that when employees get raises and are suddenly making the amazing sum of 13 or 15 an hour, they will all rush out and gleefully spend their improved paychecks on cards, gymnastic lessons, manicures, sports memorabilia, haircuts, fro yo and shin guards - thus making all business owners rich and happy and eager to hire new employees. But that will take some time, if it ever happens. Actually, it seems kinda like a crapshoot to me.... I mean, if I were a hardworking minimum wage worker and suddenly my salary doubled, I would use the money to pay off my debts, start a mutual fund, get my mom that colonoscopy she needs. I wouldn't start getting manicures. And I'd still buy my shin guards at Goodwill.

Can someone connect the dots for me?