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This argument is also used against increases in the minimum wage. Now almost everything in economics is up for debate, but very few economists agree that raisin
by learc83 10y ago
This argument is also used against increases in the minimum wage. Now almost everything in economics is up for debate, but very few economists agree that raising the minimum wage by X dollars will result in prices rising by X dollars so that the effect is non-existent.
There are several reasons for this, the biggest is that cost of labor isn't the only input in pricing.
Basically the cost of supply constrained goods will go up, but not enough to outweigh the increased purchasing power for lower income earners.
- getgoingnow 10y agovery few economists agree that raising the minimum wage by X dollars will result in prices rising by X dollars so that the effect is non-existent You are looking for obvious increase in prices, but raising prices is unpopular with consumers. Instead, companies will move the production offshore, lay people off, make smaller packages [2], use machines, use cheaper ingredients etc. and those things create the illusion that the price is not rising. Price is the same, but the quality (of goods/services & of life in communities) is going down. cost of labor isn't the only input in pricing It's the main one, since the biggest cost to most companies are employees + suppliers (that also have their own employees). Increase in the price of labor will certainly have an effect - if not directly on higher prices, then on quality. [2] https://en.wikipedia.org/wiki/Shrinkflation
- learc83 10y agoOf course it will affect price, I never said that it wouldn't. The argument is that it doesn't have an effect large enough to negate the extra income.