A new study from UC Berkeley economists dismantles the lie often told by the bosses that raising the minimum wage would lead to job losses. The study was done through the Institute for Research on Labor and Employment (IRLE) and examined 47 different counties, mostly in New York and California, to analyze the effects of large minimum wage increases in a relatively short timeframe.
The researchers looked at county-wide effects on wages, inequality, and employment from 2014 to 2022. They found that increases of the minimum wage to $15 an hour led to significant increases in earnings and reduced earnings inequality. They also found that when they controlled for differences in average earnings between counties, employment actually increased between 10% and 20% among low wage workers.
Why did employment increase? Economists use a term called monopsony to describe this: monopsony is when there is a single buyer of a good or service. In many cases like this, low wage workers have to sell their labor power to these low wage companies, who use this monopsony power to force workers to accept even lower earnings. Monopsony leads to wages that are so low that it’s not even worth it for workers to take these jobs. Raising the minimum wage, on the other hand, makes it financially viable for workers to take these jobs.
But this is really a fancy way to say something that we already know: under capitalism, bosses have power over their workers to hire and fire who they want. When a single class of people control the entire economy, then they’re going to be able to control wages – and to lower them as much as possible to increase their own profits.
How insane is this capitalist system that we could be being paid more and have more people with jobs, but because it’s unprofitable to do so the capitalist class keeps our wages low? It’s a system that must be replaced.
