February 12, 2013

Regarding Matt Miller’s Feb. 9 op-ed column, “30 million workers need a raise”:

Mr. Miller noted that raising wages in industries such as home health-care or child care cannot lead to jobs being automated. The point is literally true but substantively empty. While home health-care aides would not be replaced by machines, that does not mean that there would be no ill effects on these intended beneficiaries of a minimum-wage increase. Higher wages mean higher costs, which mean fewer job opportunities.

Further, Mr. Miller cited an Economic Policy Institute estimate that raising the minimum wage would add $25 billion to the U.S. gross domestic product. I doubt this. An increase in wages would add to prices. Making a fast-food meal cost $4 instead of $3 would result in fewer such meals being eaten and a loss of jobs. Even if no one changed his eating habits, the increase in price would reduce disposable income by an equal amount. There might be a $25 billion increase in fast-food sales — but it would be offset by a $25 billion sales decrease in other industries.

New real GDP comes from either investment, such as automating production, or by otherwise producing more goods or services at the same price or lower. Ultimately, Mr. Miller’s argument resolved to this: When a storm breaks windows, this is an economic gain because someone gets paid to fix the window. If that were true, Hurricane Sandy would have been a boon to New York — and government could easily solve all our economic problems by sending out squads to vandalize property.

Jim Foos, Woodbridge

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