I understand that early January is a slow time for news in New Jersey, sometimes at Save Jersey we suffer the problem of scouring the world for anything worthy of comment, but pushing economic fallacies is never the solution.
Stemming from what seems like boredom and an obvious hatred for our popular governor, the Ledger editorial board is arguing for an increase in the minimum wage, and are instructing the Democrat Party to lead the charge.
The reasoning? That Governor Christie is holding minimum wage earners down and sinking them further into poverty by keeping the wage at the federally mandated $7.25 per hour. They claim that an undefined, incremental increase in the minimum wage would not have any affect on hiring and would also have some magical stimulative effect on the economy.
To refute the former point, I simply offer this chart that everyone should be familiar with:
Just in case one of the board members is reading this, P* represents the current minimum wage in this example, and Q* is the quantity of jobs available. If you raise they price, the equilibrium will shift backwards, making fewer jobs available. That first lesson was free, please do not make the same mistake again. The fact is that the higher the minimum wage is, the fewer people businesses can afford to hire. A company in a struggling industry should be able to understand how difficult it can be to make payroll already, especially in New Jersey.
Additionally, even if we accepted the strange idea that a small increase in the minimum wage would stimulate the economy (which it would not), would it be worth it to increase the purchasing power of those who have a job at the expense of those searching for work? Now let’s come back to reality. There is no way that a small increase would stimulate anything. No amount that would even be remotely affordable to business would do anything to increase the consumption or the “aggregate demand” in the economy. The amount of people actually working at the minimum wage is not nearly enough to have any noticeable effect on demand. If the wage is so low, as the Ledger seems to think, that these people are barely subsisting anyway, then what would another quarter or two per hour really do for demand? Yes, I understand that this part of the argument is somewhat cold and heartless, but so is the idea that we should sacrifice the fiscal stability of New Jersey’s small businesses in the name of “stimulus” that would never come.
The fact is that the minimum wage is exactly what it claims to be, the minimum. If it was meant to be the “minimum amount of money that we should pay people so that they can afford things that government and the editorial board thinks are necessities in life” then we would have called it that. It is nothing more than the lowest amount you can be paid, no matter how much value the task you are completing is actually worth. It is not meant to be the wage at which you should attempt to raise a family, as the Ledger argues is unjust. The wage is not meant to be a boon to ensure that you can afford things, its to ensure that you are not working for zero. Should we have a minimum income more in line with the value and costs of living? That has been argued by many on both sides of the aisle over time, but that is not what we are discussing now, and not what the Ledger is pushing.
It does not take long to find that the reason that the board decided to take on this issues, they wanted to attack Chris Christie. I know that election 2012 just officially got under way yesterday, but 2013 is not that far off, and the liberal media cannot wait to begin the demonization process on Governor Christie. Now that the NJEA is as unpopular as Congress, they will have to attempt to make Christie completely toxic to lower income earners. The article took an entire paragraph to remind everyone that Christie made changes to the tax credit system (a valid knock I suppose), and hurt the poor with crippling toll increases. Wait what? Toll increases? You mean the ones that the Ledger published a Politifact about just the other day showing that the toll hikes were actually the fault of Governor Corzine? Oh right, those.
It is ok to take liberal positions and argue for them, but it is not ok to smear a Governor for something he had nothing to do with, and it is categorically wrong to make economic arguments rooted in voodoo and pathos. The Star Ledger Editorial Board should publish a retraction and try again.
I know you're just trying to be cute but your economics "lesson" is misleading. A minimum wage is a price floor and is typically set ABOVE the equilibrium price. That's why it is not efficient. This graph is better: http://en.wikipedia.org/wiki/File:Surplus_from_Pr…