Wow. I hate to give the devil his due, but I have no choice. Bill Gates owned that question.
Before I talk about why Gates answer was so great, let me dispense with the “Costco Example.” Because Costco pays better than places like Wal-Mart, it is used as proof that minimum wage could be raised everywhere.
It doesn’t work that way.
Costco has worked out a business model wherein they try to attract high value employees. They pay more for loyalty and quality. By definition, not everyone can do that. Costco was in the right place and right time to adopt that business model. If everyone tried that, it would fail for most of them. It would have to. That’s the meaning of the word “above average.”
Costco, of course, favors raising the minimum wage because, in the ensuing chaos, some of their competitors might go out of business. But eventually they would have to change their business model or increase their pay even higher to make it work.
So moving on to Bill Gates’ comments. Some of what he said will be familiar. For example:
You have to be a bit careful that if you raise the minimum wage, you’re encouraging labor substitution, that you’re going to go buy machines and automate things or cause jobs to appear outside of that jurisdiction.
But he also pointed out something I don’t think I’ve mentioned before, which really pushes back against accusations that low-paying employers should be paying all their minimum-wage workers more:
You have to say which are the households that end up benefiting. Is it much more the teenager in a wealthy household or is it that household in poverty? A lot of the problem there is that those people don’t have many hours. It’s not the actual wage level…
And in response to the claim that most minimum wage workers are in poverty:
80 percent in non-poverty households. There is about 11 percent of those are from the poverty households. But, you know, these are complex issues. It’s not as simple as just saying, okay, raise the minimum wage.
So unless Bill Gates’ numbers are wildly off, then all this railing about the need to raise the minimum wage will mostly help… a bunch of children in middle-class homes! The accusation that low-paying employers are relying on welfare is actually a plea for a much worse situation where most of the money goes to people who are not in poverty at all.
So that’s the best case scenario. But in real life, when suddenly employers have to pay all their employees a much higher amount, there are going to be further consequences. Employers are going to try to make do with fewer workers. And thus, some people will lose their jobs.
So think about this: Who do you think is more likely to lose their jobs? Who will seem to have fewer skills and lower education accomplishments? Those from non-poverty households or those from poverty? I think the answer is obvious. Minimum wage law is a way to get more money into middle-class households at the expense of the poor, who are pushed into unemployment.
One more consideration. Who do you see behind the big push to raise the minimum wage law? Who pays poor people minimum wage (!) in order to protest minimum wage? As far as I can see it is mostly being pushed by a bunch of middle class people. They are pushing a position to “help the poor,” that will, conveniently, help people who are more like them and actually hurt the poor.
Funny how that works out.