New Year's Day is Not Scott Sumner Day

    Or the day of most conservatives who begrudge wage hikes for low income Americans. With the start of the new year, 9 states will see their minimum wage rate rise. These are due to states who tie their minimum wage to the CPI (Consumer Price Index), ie, the minimum wage rises with inflation.

    Leading the raises is the state of Washington who sees the minimum rise $.37 from $8.67 to $9.04. All nine states will see a minimum wage of at least $7.65 compared with the federal rate of $7.25.

   This is good news for workers in those states. Happy New Year! indeed. Here in the allegedly liberal state of NY we have not seen it yet. Neither NY or another liberal state I used to live in-Massachusetts-tie the rate to the rate of inflation.

    Of course the boobirds-like Sumner who sincerely believes that the $7.25 federal rate is too extravagant and may be retarding the recovery-will tell you this will have the famous "unintended consequences." Anything you try to do for the average American is always going to have these bad unintended consequences-but the ill intentions of Sumner, et al, evidently will I guess have unintended good consequences.

    So of course raising the minimum wage is claimed to have all thee nefarious consequences like tightening profit margins and lowering employment. For Sumner the Great Recession has nothing to do with any market failure but the minimum wage hike to $7.25 in 2007 put us over the edge. That along with Fannie and Freddie and the wrongheaded intention to provide more home ownership to undeserving blacks and hispanics caused the recession.

    "In a hurting economy, profit margins are razor thin for many businesses, and some say they will be forced to cut employee hours or consider raising workers’ share of employee-provided health care."

     That is the ideology, however some do push back:

      "But there is no "evidence of any loss of employment or hours for the type of minimum-wage changes we have seen in the US in the last 2"0 years," says Arindrajit Dube, a professor of economics at the University of Massachusetts in Amherst.

      "If employers cut back on labor, it's generally because of poor economic conditions, not pay requirements, Mr. Dube told The Wall Street Journal."

      http://news.yahoo.com/minimum-wage-milestone-why-washington-state-surpassed-9-190723374.html

     "What’s more, an increased minimum wage not only boosts wages for working families who are struggling to get by, but also stimulates economies because workers have more money to spend, according to EPI."

      First of all it's not clear which businesses it is whose profit margins are "razor thin" as we have seen record profits even as unemployment has remained elevated and wages are frozen.

      This last part in particular needs to be kept in mind when Sumner and company start beating the drum about wages being too high. The fact is that we have seen an unprecedented wage freeze in the middle of a recovery-not normal to see a wage freeze in a recovery.

      In any case, it should be clear that if wages in these states rise due to the rate of inflation, it's not really a wage hike anyway merely not a wage cut which it is in the 41 states that don't index the rate to inflation. And this claim that it will hurt profit margins is false for this same reason-it is not a wage hike but merely keeping it constant. What Sumner and company really want is for business to benefit from yet more wage cuts but that's not what they claim.