I need information about raising the minimum wage

[Rochester]

3. Ok, here goes.

By raising the minimum wage, businesses would have to charge more to pay their workers, and the workers would have more money to bid up the prices. That's true as far as it goes, but it's incomplete.

Labor is only one of the costs of business. They also have to pay for energy, raw materials, taxes, etc. To grossly oversimplify, let's assume that Kittycat Industries can produce widgets for $20 each, of which $10 is for labor and $10 is for everything else. If the minimum wage is increased and KI has to spend $12 for labor, a widget now costs $22 to produce (assuming everything else stays the same), a 10% increase, but the workers got a 20% increase (10 to 12) and thus come out ahead.

On the other hand, there are still some problems. The workers who were making a little bit above the old minimum wage will come out behind if prices increase, even by a little, if they don't get a raise to compensate for that. It creates more room for people to undermine the system by working under the table for less than minimum wage, a big temptation when there are so many people out of work or underemployed. Also, there's the issue of perverse incentive; businesses may respond by seeking alternatives such as offshoring or automation rather than pay a living wage. The conclusion I draw from this is that raising the minimum wage piecemeal is generally good, but any plans to really help the working classes will have to be based on suppressing competition. When businesses don't have any profitable alternatives to paying a living wage, they'll pay a living wage then and not before.