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Originally Posted by kane
The overall theory is that if McDonald's paid $20/hr other fast food places and low wage places like Walmart would be forced to do the same. Then since those people would be making more money they would have a higher standard of living and those of them that are currently also collecting some kind of government aid like food stamps, housing assistance, health insurance, daycare help etc would no longer need it or need as much of it. This would lower the government's costs and thus lower taxes. In the end you might have to pay a small amount more for the things you buy, but the tax savings would more than offset it.
The problem with the theory is that the government never really lowers taxes. They would just find other ways to spend that money so we would end up at the same tax rate while also paying more for many goods and services. This would then leave us with only the hope that these overall higher wages made for a better economy where everyone made more money and were better off, but I have yet to see any real evidence that this would actually happen.
In the end, sure, these places could pay a lot more (I read a few years ago that Walmart could double most of their employees pay and only have to raise their prices by about 1.5%-2% to cover the cost), but it doesn't appear that these thing really have a large, overall benefit to the economy as a whole.
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The other issue with the theory is the fact that all skilled labor will also demand more money to be in line with the increased in pay, their skills warrant. In McDonald's alone, that would mean the assistant manager, manager and GM etc.
Then you take college graduates. Teachers, Police Officers, Welders, Electricians, Doctors etc. They will demand more money, and be entitled it, based on their skill set. And if given, inflation rises rapidly, and these low entry level unskilled workers are back to the same spending power they had before. Things just cost more.
And if you don't pay the skilled workers what they are worth, then you are going to see a brain drain, as there is no incentive for these people to get educated and spend all that money on tuition if the net pay is just over what it would be to work fast food. Why put yourself if in debt, and have a job with stress, if you can get paid good money, for a carefree job like flipping burgers at McDonalds.
Utopia is just that. An idealistic dream, but never achievable.