re: In 100 words or less how can raising the min. wage help the middle class?**

quote:

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Supposedly it goes like this:

Increase in MW give Mary 500 bucks a year more to spend.

Mary has a thing about shoes, so she buys 500 bucks worth of shoes at Pay Less.

The jump in sales motivates the owner of Pay Less to hire an extra worker.

Thus, a middle class job is created.


I know a lot of people will jump on you so but your argument is very common. $500 more in shoes, or food, or whatever.
$500 is really only revenue, the contribution margin is what retailer is really concerned about.
Let's just assume there is a 50% COGS.
Now we have $250. Let's leave out all Cost Accounting because it could get confusing and just say all of that all $250 goes to the profit line. After the 35% tax, $162.50 is actual earnings after tax.
In summary:
$500 in revenue where:

$250 to China & shipping company
$87.50 to government
$162.50 in profit

I'm illustrating the leakage where you cannot simply increase someone's wage, and then they spend 100% of the increase to balance it out.

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Why even go that far into it? If an increase in minimum wage gives Mary $500 extra, then $500 is missing somewhere else in the economy. There is no net increase of wealth, only a transfer. Since Mary wasn't worth that $500 on her own, we've just wasted some economic potential by giving it to her.