It’s simply not true that as wages go up, jobs go down. But trickle-downers need people to believe it.
How could self-respecting economists suggest that an increase in the minimum wage might encourage job growth and hiring? Well, first of all, there’s what economist Michael Reich calls “income effect”: People on the minimum wage tend to spend everything they earn. Increases in the minimum wage thus flow back into the economy (again, like the tide flowing upstream), generating increased demand, which in turn increases hiring and investment. It is a basic principle of capitalism that when workers have more money, businesses have more customers, and when businesses have more customers they hire more workers.
A Threat, Not a Theory
Few issues have moved more quickly from fringe to consensus than the “Fight for $15.” When colleagues and I suggested at a Democratic political conference in early November of 2012 that we should raise the minimum wage to $15, people in the audience literally laughed.