By Will Giovinazzo
Blueberries are healthier than bread, but more people choose to eat bread rather than blueberries. In his article “The economics of blueberries, as metaphor,” Richard Rahn explains that people do not eat more blueberries because blueberries cost 15 times more than bread but offer the same number of calories. Rahn uses blueberries as an example of why the minimum wage should not be increased. Rahn writes, “A legislative increase in the minimum wage above the market-clearing rate can increase real incomes for the relatively few who directly benefit, but will decrease real incomes for all others” (“The economics of blueberries”). Rahn’s theory that an increase in minimum wage slows down the economy and takes work away from the country possesses several flaws. In fact, an increase in the minimum wage benefits a majority of workers and even the economic elite who make money off the backs of low-income workers.
If people really want a product, they buy the product regardless of a price change. Rahn reasons that if we increase the minimum wage, the price of blueberries will go up to pay the workers who harvest them: “if you force blueberry growers to pay more to those who pick the berries or restrict their labor supply, the price of blueberries will rise, fewer will be produced, sold and consumed” (“The economics of blueberries”). The idea that a higher minimum wage causes a drop in the market value of blueberries overlooks a principle called price elasticity of demand (PED). Products like blueberries have a PED less than one, meaning that fluctuations in the price have a small effect on the demand of the product (Moffatt). Rahn also overlooks another principle call the Keynesian effect. The Keynesian effect essentially states that when more money is given to larger groups of people, economic growth is stimulated. If the workers who harvest blueberries now have the money to afford the crop they harvest, they are more likely to buy the crop.
Would it really hurt businesses if they took better care of their workers? One need only look at Wal-Mart and Costco. Costco pays their workers $20 an hour on average while Wal-Mart pays their workers $12. Costco has passed Wal-Mart on Wall Street despite Wal-Mart’s greedy technique of lower wages and lack of employee benefits. Wal-Mart’s wages may allow them to price their products low, but more and more people choose not to shop at Wal-Mart stores. Costco’s technique is different in the sense that they give employees an incentive to work and produce results. Happier employees perform better, earning Costco a recurring customer base.
The key to economic success is Henry Ford’s idea that every one of his employees should be able to buy a car that he or she makes. A business leader should want his or her employees to have more money. If all the wealth accumulates in the top executive’s bank account, less money moves through the system, thereby slowing down the economy. A rich CEO can only buy so many Ferraris while a poor man needs to buy things daily just to survive. Give a million dollars to a rich man and a poor man: the rich man will save it while the poor man will pay off his debts or buy a house and clothes. In order for an economy to be healthy, a strong base is a necessity.
If a higher minimum wage does actually mean us as consumers must pay a few extra dollars, the extra money should be worth it because those dollars will be going toward the person who is handling our food. We should all want to live in a country where the people that make our clothes and sell our food can afford to buy what they make themselves. As Benjamin Harrison famously said: “I pity the name who wants a coat so cheap that the man or woman who produces the cloth will starve in the process”(“Benjamin Harrison”.)
