Monday, August 12, 2013

UPDATED: Puncturing The Myth That Raising Minimum Wages Will Kill Jobs

The question of minimum wage has been very much a topic of discussion in alternative media of late, and I have written a few posts about the struggle. I am leading off today's consideration of the issue with a well-considered letter from a Star reader, followed by a Real News video that explores the Australian experience with a much higher minimum wage which, despite the right-wing hysteria equating anything that raises the costs of doing business with the killing of jobs, is doing quite nicely, thank you.

Re: Hiking the minimum wage, Letter, Aug. 9

In his letter, Doug Stewart seems to be forgetting one very important thing. The economy depends on people spending money. If someone is paid so little they can’t afford the basics, they not only will not have much to contribute to the economy and taxes, they will also become a burden on the taxpayer. Do those in the Timmy’s drive-through, sitting in their big SUVs, really need the few pennies they save by being served by those earning poverty wages? Why is that person behind the counter also not entitled to be able to buy things? You might also take a look at Walmart. It’s a very large and successful company. Its owners are among the richest people in the U.S. Yet, their employees often have to rely on the state for things like adequate food and health care. In Wisconsin, a Walmart employee is estimated to cost the taxpayer some $5,000 per year in state benefits. California is working on a law to fine Walmart every time an employee has to rely on medicaid. This is that you get when you don’t pay people enough to support themselves. The taxpayer winds up subsidizing the employer. Is that really what you want?

James Knott, Mississauga

By examining the experience of Australia and some European countries, this video offers a useful counterbalance to the propaganda that permeates the mainstream media about minimum wages:

UPDATE: Thom Hartman adds additional facts that show how wrong companies like Walmart are in bleeding their workers while at the same time being subsidized by the taxpayer.


  1. The economy doesn't work if people aren't spending money, Lorne. And the rich can't spend enough to keep the economy going. It's a simple insight that is lost on our present government.

    1. Too much ideology can blind people to simple truths, it would seem, Owen.

  2. Lorne, why don't today's businesses learn from an iconic businessman like Henry Ford - the founder of Ford Motor Company whose business philosophy was:

    Ford's business philosophy, which rested on standardized, high-volume production, a vast army of well-paid labor, and low prices, became a model for the industrial economy of twentieth-century America.

    He knew that there should be buyers for the cars he was producing - his own well-paid labour.

    1. I have often asked myself the same question, LeDaro, and the only answer I can come up with is the rather short-sighted nature of the business mentality: as long as foreign markets offer opportunities for profit, it doesn't matter if you pay your domestic workers peanuts. Otherwise, corporations would once more quickly rediscover the value of Ford's philosophy and join the increasingly loud chorus demanding living wages.

    2. In 1916 Henry Ford was sued by the shareholders of his company for failing his fiduciary duty to them when he raised the wages in his factories. Ford had decided to quit paying the shareholders a special dividend (more than $40,000,000 between 1911 and 1915) and to spend the money on expanding the company, reducing car prices and paying better wages to an expanding work force.

      Henry Ford owned 58% of the shares, the Dodge Brothers owned 10% and 5 other shareholders owned the rest. The case was first to force Ford to resume the special dividend payments and to stop any expansion plans.
      During the trial Ford testified he thought the company was making more than enough profits and really should be doing something to benefit the customers and workers as well as the general public.
      The Dodge Brothers won by alleging Ford was showing "an improper altruism towards his workers and customers" and this has been the basic law in North America ever since.
      However the courts have often took a more nuanced view since then.

      Steven Bainbridge has a page that covers the Dodge v. Ford Motor Co. case and later court cases.

    3. Thanks for this very useful information, Dan.