Anyone with the slightest knowledge of economics is aware what a scam a ‘minimum wage’ is. When an artificial bottom placed on hourly rates is raised ,there are only two rational responses an employer can make: fire anyone whose value is now less than their cost; or raise prices to cover the added cost of doing business.
The raising of prices following a minimum wage hike sends ripples through the economy, like those of a handful a pebbles tossed into a farm pond. At some point everything damps out and the steady state returns. No new value has been created by the higher wages so the end result is roughly enough inflation to wipe out the change.
This analysis misses a detail however. The economy does not respond instantaneously. There is a time lag during which recipients have more purchasing power. They will pay for it later of course: TANSTAAFL. But from the viewpoint of a politician if the gain can be timed to properly coincide with something of value to them, say an election, it is a win. The pain comes later and memories are shorter than the interval betwixt elections.
I realized this morning there is a way in which politicians can hide much of the pain indefinitely: illegal immigration. Think it through. Raise the minimum wage in an environment where there is cheap, willing labour, undocumented and outside the system. What is the rational employer response? Raise wages for legal employees and export the costs to the undocumented workers. Illegal immigrants are not voters so this is a win-win situation to both the ruling class and those who keep them there. The voters get a higher real wage and living standard because the inflationary cost has been shifted. The pain has been exported outside the political game.
Statist politicians cannot do anything about illegal immigration because if they stop it, the deferred inflation will cause prices to rise enough to erase the excess income of their constituents. Employers will have to either drop low end jobs or else raise prices to support them. Voters will not be happy and it is well known the wallet is a bigger determinate of election outcomes than just about anything else. So, QED, illegal immigration is now a structural requirement of the centralized Western bureaucratic state.
A second force drives the need for cheap labour: the demographic transition in modern societies leads to a lowering of birthrates and a consequent labour shortage. Some places, like Japan, are looking to solve this with robots: the real deal kind. Less closed societies are covering the short fall with immigration of both legal and illegal varieties.
There is simply no practical way out of the situation in the short run and politics is all about delaying pain in hopes it will either go away or happen after you are gone.