FED up with pay increasing only at a snail’s pace, politicians are resorting to the law instead, by increasing the minimum wages that businesses must pay. But this is taking them into uncharted territory. Britain’s recent minimum-wage increase will take it from the average among OECD countries to the upper ranks. Germany’s new minimum wage, introduced in January, stands at 62% of average earnings in east German states. If a $15-an-hour federal minimum wage were implemented in America, as campaigners want, it would apply to two-fifths of workers.
In the past, cash increases in the minimum wage have been eroded by inflation. America’s federal minimum wage was last set, at $7.25, in 2009 and has not been changed since, so its value has faded over time. This means that in reality most countries have only ever temporarily increased the real minimum wage. If the recently proposed increases are maintained over time (as the electorate will surely expect), there could be long-term effects. Historically, economists have worried that high minimum wages boost the pay of those in work but at the expense of jobs. Take a burger bar, which is forced to...
from The Economist: Finance and economics http://ift.tt/1TTKYXB
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