In a hearing on Capitol Hill last week, Democrat Massachusetts Senator Elizabeth Warren did some grandstanding on the minimum wage. In an exchange with an economics professor from the University or Massachusetts, Warren made the following observation:
“If we started in 1960, and we said that, as productivity goes up — that is, as workers are producing more — then the minimum wage is going to go up the same. And, if that were the case, the minimum wage today would be about $22 an hour. So, my question, Mr. Dube, is what happened to the other $14.75?”
Minimum wage at $22 an hour? Why not $25? Or $40?
What Elizabeth Warren fails to point out in her analysis is the role that technology and other factors have played in productivity gains since the 1960s. How about just the role of computers! While workers have become more productive, it is reductive to say that this is solely because of their skills.
Be that as it may, there are countless economists, like Thomas Sowell, who have studied the issue and concluded that increasing the minimum wage leads to people losing their jobs. It's a simple fact: Increase the price of labor and that money either comes out of your bottom line, you pass it along to your customer or you reduce the cost of labor (fire workers or reduce their hours). If the bottom-rung of labor becomes more expensive, it creates an inflationary effect on our economy. This ends up hurting the most those whom Elizabeth Warrens claims she is trying to help.