You get less of it

"If you tax it, you get less of it."

The Congressional Budget Office (CBO) just released a new report on the effects of a higher minimum wage. It looked at raising the minimum wage from $7.25 an hour to $10.10 (President Obama's number) and to $9.00 (something in between). See their report at http://www.cbo.gov/publication/44995

No one should be shocked by the news that forcing companies to pay higher wages will result in significant layoffs. That seems to counter what you hear most politicians and voters saying: they want more jobs, not fewer jobs.

On the other hand, some are arguing that because of "income inequality" we need to raise the wages of the "working poor." My guess is that our rate of "income inequality" will be exactly the same if minimum wages go up. Some workers making more money will have a little less government assistance or will be hit by other spending mandates like the requirement to buy health insurance which will eat up a lot of that extra pay. But the gap between the rich and poor will still be there and this won't make a significant difference.

Increasing the minimum wage acts just like a tax, in this case, a tax on labor. Taxing labor makes it more expensive, so you get less of it....

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