So what gives? Why are conservatives against the minimum wage? Anybody who has taken an Econ 101 class knows what the argument is: that a raise in the minimum wage is a raise in the cost of labor - and when costs rise, demand falls. The true minimum wage should not be determined by government fiat, but by labor's marginal productivity. If the government raises the cost of labor above labor's marginal productivity, then the result will be greater unemployment. This is the argument of classical economics. And it's available as a fun graph:
Now, as fun as this graph is, this fun does not compensate for the fact that this argument is outdated. Classical economics came of age during the middle of the Industrial Revolution. During the Industrial Revolution, many low-wage toilers toiled their days away in factories or mines producing products. When you are producing product it makes sense to talk about productivity as a determinant of labor's value (to be fair, the term productivity has taken on a more abstract meaning in economics beyond the production of goods, but the crux of the argument remains). If you owned a factory, you could produce more goods by hiring more and more workers and cramming them into your factory until the added productivity of an additional worker equaled the cost of that worker (the worker's wage). Now, this is of course assuming that somebody is willing and able to buy all the crap that you're producing (who needs a minimum wage law when you have Say's law!).
But low-wage workers in America don't really work in factories or mines anymore. They overwhelmingly work in service-sector industries such as retail or food service. In these industries, adding more workers to your store does not add to your overall production - it just adds to the number of people standing there looking at each other when there are no customers. If you own a store, you're only going to hire as many workers as it takes to man the shop, and this number is determined largely by customer demand - not by a capital-intensive conception of the marginal productivity of labor. This is why we are currently seeing stories about Amazon and Walmart hiring a ton of seasonal workers in order to prepare for the increased demand that comes with the holiday season. In this kind of economy, the demand for labor in the fun graph wouldn't be at a 45 degree angle; it would be nearly vertical. Raising the minimum wage would not increase unemployment, because a good retail company would already be running stores with the minimum amount of workers needed.
Of course, a minimum wage hike won't occur in a vacuum. The increased cost of labor will have to get absorbed somewhere. Jared Bernstein has a good piece that examines some studies that aim to find out just where the increased wages are absorbed. The two most plausible avenues are lower profit margins for employers and increased prices. Prices won't rise too much, though, as labor costs account for only a portion of a firm's overall costs. So if you're looking for a way to steer record-high corporate profits into the pockets of workers, a minimum wage hike is the way to go.
Just to be clear: I am not advocating a minimum wage of $100 an hour (conservatives sure do enjoy their slippery slope arguments). It is possible to raise the minimum wage to a point where running a retail establishment or fast food restaurant would be unprofitable, leading many firms to exit these sectors. However, I highly doubt that the line from profitability to unprofitably will be crossed because of an extra $1.75 per hour.
Also, here's David Cross talking about the minimum wage:
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