Quantcast

History and theory of the minimum wage

Dr. Fred McKinney | 2/5/2014, 11:25 a.m.

That is the traditional economic view. It is logical, analytical and wrong.

This analysis is wrong because it focuses on one particular labor market and not the economy as a whole. The problem facing low-wage workers and the low-income community is that incomes are not high enough to support a more vibrant economy. We have large numbers of unemployed workers, particularly in low-income areas and in minority communities precisely because there is not sufficient income to support a vibrant economy. If workers had higher incomes, they could buy more of everything. As the sale of goods and services increased, more workers would be hired. This would close a loop that results in the exact opposite of what the traditional economic analysis suggests.

Economic theory justifies paying workers low wages as if it is beneficial to them. However, the low-wage economy keeps communities poor and dependent. Increasing the minimum wage would increase the buying power of the poorest Americans. This would help create an environment that would improve the opportunity for higher standards of living to develop. If anything, we are not thinking big enough. The minimum wage should be increased significantly. President Roosevelt was wise enough to understand this. It is about time we understand it all over again.

Fred McKinney is president and CEO of the Greater New England Minority Supplier Development Council.