As economists, we understand the fragile nature of this recovery and the dire financial realities of the nearly 50 million Americans living in poverty. To alleviate the burdens for families and improve our local, regional, and national economies, we need a mix of solutions that encourage employment, business creation, and boost earnings rather than across-the-board mandates that raise the cost of labor.
One of the serious consequences of raising the minimum wage is that business owners saddled with a higher cost of labor will need to cut costs, or pass the increase to their customers to make ends meet. Many of the businesses that pay their workers minimum wage operate on extremely tight profit margins, with any increase in the cost of labor threatening this delicate balance.
Apparently the petition never made it to the well known Nobel laureate economist Paul Krugman. Which is a shame because surely Mr. Krugman, given his published statements on the subject (well, those he made as economist Krugman, before he became NY Times columnist Krugman), would have signed it in a heartbeat.
What is remarkable...is how this [Card and Kruger's] rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda.... Clearly these advocates very much want to believe that the price of labor--unlike that of gasoline, or Manhattan apartments--can be set based on considerations of justice, not supply and demand, without unpleasant side effects.
And lastly, supporting the position outlined in the petition, here's White House economic adviser Jason Furman (of course he wouldn't be one of the 500+), back in 2005 (his pre-White House days), making the case that low-margin businesses (which tend to be the employers of low-skilled individuals) can be literally wiped out by what many would consider a minor increase in costs:
Overall, it is no easier for Wal-Mart to change compensation than many other companies. This year Wal-Mart will earn about $6000 per employee. This is virtually identical to the average for the retail sector and somewhat below the national average of $9000 in profits per employee in the corporate sector. Some companies make substantially more, like Microsoft ($143,000 per employee) or General Motors ($12,000 per employee). Overall, it is not much easier for Walmart to change compensation than say a small business making $24,000 a year and employing four people.
If Microsoft paid each of its employees an additional $5000 or extended its health benefits, its profits would be largely unchanged. If Walmart took the same step---and did not pass the cost onto customers---it would be virtually wiped out.
All together now, Hmm...