Re: Effects of raising minimum wages in USA


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An increase in minimum wage will not "allow" you to suddenly
increase the price and you know it. Only AFTER people have more
to spend as a result of an across the board increase in wages forced
by a rising minimum wage will you be able to increase prices...
But the prices will FOLLOW the wages only after people get more
money to spend.

It does not follow that an increase in the wage level will necessarily raise
the income level and therefore the spending level of unskilled labor. The
linkage from wages to income depends on the elasticity of the demand for
unskilled labor. For example, capital is a substitute for labor. After a
minimum wage increase, management may opt for more capital intensive methods
of production and this may result in a decrease of income to minimum-wage
earners.


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