The point is: wages are a source of demand, as well as a cost input. Reduce wages and demand plummets, which more than overrides any cost savings derived from paying less to workers (especially given today's paltry minimum wage, which is hardly a living wage for any American).
Let's be clear; Americans have never embraced welfare. For better or worse, our nation has always preferred a more libertarian path: self-help, personal responsibility, individual initiative. As a result, our welfare programs have always been stingy, temporary and purposely demeaning. But maintaining the minimum wage at today’s ridiculously depressed level does not enhance anybody’s employment prospects. In fact, it makes it worse, because it sucks demand out of the economy and minimizes the chances of those now receiving unemployment benefits or other assistance to quickly get back into the workforce, to "pull themselves up by their own bootstraps," as conservatives like to say. They cannot do that when our work force continues to focus on policies which merely enhance the incomes of the top 1 percent.
Read it at AlterNetWhy Low Minimum Wages Kill Jobs and Crush Living Standards for Everyone
by Marshall Auerback
(h/t Kevin Fathi via email)