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Some thoughts: 1) McDonalds and other large minimum wage employers know what a minimum-skilled employee is worth to their bottom line, and they set prices accordingly. They know that after a wage bump they'll have reduced turnover of their better employees, but they also know that when they do have turnover, that new unskilled employee is worth 1.6 big macs per hour, so they'll raise prices as quickly as they can to compensate. The net result is inflation, and inflation destroys any purchasing-power increase the minimum wage creates. (My own research suggests this takes about 2 years to fully play out.) 2) Increased unemployment right after minimum wage increases might be one of the sources of "general economic recession", rather than (as you imply) one of the consequences. Based on my own research, the unemployment bump actually tends to start about 3 months prior to a minimum-wage bump (as companies slow new hiring), peaks 3-6 months after, and then decreases inverse to price increases/inflation. 3) when people are unemployed, taxpayers pay 100% of their expenses. When they work for the minimum wage, they earn N% and taxpayers pay 100-NxS% (where S is the scaling factor for how quickly benefits are lost in relation to outside income; S should be less than 1.) But in light of points 1 and 2, someone can only get a job if N < their value to some company. So if the minimum wage N is set high enough, it forces people out of the economy long term (because if they're unemployed, they're not gaining work experience, and therefore they're not increasing their value.) I'm of the opinion that setting the minimum too low is self-correcting (because of turnover and the existence of systems like welfare), while setting the minimum too high is the cause of significant unemployment. So I'd rather err on the low side, pairing a low minimum wage with strong welfare and related benefits. |