Would a higher federal minimum wage help low-paid workers?

You know, we are in a consumer-driven economy, and the employment rate in this country is absolutely fantastic. So just three quick charts here. You know, this is the number of job openings we still have, even if we burned off in 2022 from 12 million to 7 million jobs. We still have a ton of jobs available. Then if you look at our unemployment rate, it's still at historical lows for our lifetime. If you were born in 1970, this is as good as it gets. 4.456 is what it's been. It's ticking up modestly, but still lowest of our lifetimes. And then finally, the employment participation rate, number of people in our society who are working and able to work. It peaked at 68% or so during the Clinton years. And this is still low, 62%. We still have people who could be participating. So all of these problems will be solved if more people were to participate and take those jobs. Why don't they take those jobs? Sometimes it's a geographic mismatch. Sometimes it is a skills mismatch. But very often it is the jobs are not paying enough. So if you want to give Trump his flowers by closing the border, you've reduced the number of people taking the jobs off the books. And then you have the businesses are going to have to raise their minimum wage. They're going to have to raise their offering wage, which then might get this 7% or so that are sitting on the sidelines to take their jobs. Crazy prediction. I wouldn't be surprised if we see Trump, who is obviously a populist, and I tweeted about this the other day, got almost a half a million views or 400,000 views. What if Trump decides he's going to raise the minimum wage? Not saying I endorse this or not, but it's incredibly low at seven bucks an hour. Obviously in different cities and states, it's 15 to 20 But what if Trump said we're going to add a dollar to it or two dollars to it over each year of the next three? This would be incredibly popular and it would get some of those people off the sidelines and maybe take these jobs. So just a crazy prediction there, but I think it's a possibility. And I think they're going to lose the midterms as it stands right now. It looks like I think that's the consensus opinion. And they haven't been able to do something with this affordability. Well, I think most Americans would say if you raise the minimum wage, that that would increase affordability. You can make the counterargument, it's going to just be inflationary. But I think most Americans are going to believe in that. So I wouldn't be surprised if you saw Trump take action there, because he does take populist actions like this from time to time.

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Looking at what happened in the different cities or in Australia or other countries, they have a much higher minimum wage and they have much more happiness. Businesses and prices go up about 20%, 10% to 20%. So in Australia, if you go to a restaurant or if you go to a Scandinavian country, things might cost 10%, 20% more, but you have a happier population. And yes, it could lead to more automation. We got rid of cashiers because it became too expensive in New York to pay 15 to 20 bucks for a cashier. Sure, but we have really low minimum, we have very low unemployment now, and the businesses can clearly afford to pay an extra buck an hour or two bucks an hour. So there's the theoretical academic argument, which you are correct on and I understand it fully well. And then there's the reality on the field, which is Seattle, San Francisco, New York, Los Angeles, Australia, other places have a much higher minimum wage. They have higher happiness in the population. I don't actually think it will have any impact, because I think it's artificially low. But that's just one man's opinion. I think it would change the game here in America. And I think it would actually do something to your concern, Friedberg, about socialism. I think that if people felt that there was a kind of a backstop against this low, low cost of labor, it might actually make people pretty stoked that they could get a higher paying hourly job. And it might take some of that edge off. In the same way, universal health care might do that. But again, just one man's opinion.

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No, what it does is it makes it illegal to hire someone whose labor is worth less than the minimum wage. And so it is shown to create higher unemployment in those segments of the economy. It's like one of those core findings of economists. So yeah, it's true that some people will be a beneficiary of getting a higher minimum wage, but then there'll be other people who just lose their jobs. And it creates an incentive for those employers to shift more labor towards automation. So if you're already worried about those people losing their jobs to automation, that's a downside. So anyway, if the minimum wage were a panacea and it just increased everyone's living standards without having downsides, why wouldn't you make the minimum wage $100 an hour? Everyone would just keep raising it infinitely. Obviously, it doesn't work because if you raise the minimum wage too much, which is to say more than the value of someone's labor, then they just get unemployed.

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