Gap to Raise Workers' Minimum Wage

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Feb. 21 (Bloomberg) -- A federal minimum wage increase faces uncertainty in Congress, but Gap Inc. announced Feb. 19 it has joined a handful of other national retailers and at least one fast food company that have chosen to voluntarily raise the pay floor for hourly workers. Culture of Profit Founder Rafi Mohammed and Bloomberg's Nela Richardson speak on Bloomberg Television's "Bloomberg Surveillance." (Source: Bloomberg)

Who's winning the battle?

The american people tend to be supportive, whether republican or democrat, on raising the minimum wage.

It hasn't been raised in a way that kept up with inflation.

If it were to do so, it would be $10.50. from your prism, there is a genuine possibility or likelihood we'll see a federal increase in the minimum wage?

Look, it's great politics.

He already see states and local governments raising the minimum wage already.

I think it's an incomplete policy, it's a very blunt instrument t. doesn't do -- the c.b.o. said this week, it doesn't list the number of people across the poverty threshold as one would like, brings in a lot of teenagers, some second-wage earners into this market.

It's a blunt instrument and incomplete, but it is popular.

The c.b.o. report that you are citing is what republicans have been pointing to, even costco as well, that it ultimately destroys jobs because it raises the cost of hiring people.

What is the best argument you have seen on the other side?

What's the data on the other side that says, no, there's a multiplier he snect you pay people more money, and they'll spend?

The economic research says there's a slightly negative aspect in terms of jobs, so that research is all over the place.

But in terms of spending, you know, increasing incomes does lead to increased spending in the economy for the same reasons we talked about before, low-income people tend to spend more of their income.

Within this political discussion, we're thrilled to have with us one of the great guys on pricing.

Labor has a price.

It's called the wage.

This is a chapter nobody reads in macro economics 101. rafi mohammed with us, with his wonderful work on pricing.

Labor has a price, doesn't it?

In america, how much of a fiction, how much of a distortion is our low wage labor?

Well, i think it goes back to our uber discussion.

The market is setting the price.

But i want to get to your point, adam.

You talked about the economic multiplier, and this is something people talk about a lot, but that depends on people keeping on buying.

And if the prices go up, that economic multiplier is not going to work.

I think the data is indecisive about what the net effect is.

In fact, it's probably negative for the economy.

It's a policy issue, not an economic issue.

I'm interested in terms of what part of the minimum wage debate in washington, is it because president obama can't get more welfare money?

As we know, lot of minimum wage workers are on welfare.

Right, i think that is the heart of the political scandal around the minimum wage.

Look, this is a policy that you can ask gap and wal-mart to contributor and you don't have to worry about congress, and that's my major criticism.

If it's a social policy, as i think it is, then federal dollars need to be behind it.

We can't expect wal-mart and mcdonald's and gap to pick up the slack for what the administration would like to see.

But the redistribution, instead of coming from the government, it's coming from business.

Right.

Ok, i'll go with that.

There's a lot of americans that don't agree with what you just said.

What causes their polarity?

Why do they not agree with what you just said?

Agree in terms of that the corporate sector should -- the public sector should step in on this, that private enterprise will find the correct wage.

Well, there's two issues, right?

There's the competitive wage, and then there's social policy.

So if you want to do something to rid income inequality and help people cross the threshold, there needs to be social policy.

That's a big if.

I'm putting it out there without making a stance.

The question for me, is wal-mart and gap in charge of defining that social policy, or are they in charge of setting a competitive wage?

Right, because if i'm an investor in wal-mart, am i criticizing wal-mart that they're overpaying what the market is telling them to buy?

Do you think that's occurring this morning, wellington or fidelity calling up and saying, why are you raising the minimum wage?

I got to make some news here.

Help me, rafi.

Well, it's about .4% is what you pass on pricing for a 10% increase in the minimum wage.

That's interesting.

I mean, that's chump change for us.

It makes sense that prices would rise, but maybe, rafi, you can address this.

The former advisor to the white house noted that when fast food workers in new jersey were paid a higher wage, it did not have any negative impact on unemployment.

That would suggest that actually wages are too low.

Do you not agree?

Well, this is one of the top princeton professors, and as a former economics professor once said to me, the way he analyzes data is like sausage t. tastes good, but you don't want to necessarily know what goes into it.

Right.

So my point is, i'm trying to understand the rationale, the economic rationale of that study of why there was no effect, or perhaps a positive effect, and i don't see it.

Well, great conversation with a number of diversity of opinions there to keep everybody arguing.

At least, adam, till cocktail

This text has been automatically generated. It may not be 100% accurate.

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