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There are three effects minimum wages can have: 1) They come directly from profits 2) They cause a commensurate price rise (inflation) 3) The business shuts

There are three effects minimum wages can have: 1) They come directly from profits 2) They cause a commensurate price rise (inflation) 3) The business shuts down because it can no longer afford labor it requires to operate effectively If you raised it to $100, #3 would happen for most businesses. In a competitive market, if you raised it a few dollars, #1 would happen. In a non-competitive (monopoly) market, if you raised it a few dollars, #2 would happen.

fiter 9y ago
In a competitive market where less labor is an option, companies that use less labor would have a larger advantage thanks to a higher minimum wage. This would encourage automation and decrease employment. In a competitive market where using less labor is not an option, wouldn't #2 happen? All businesses would have the same cost increase and could expect to raise prices.
- crdoconnor 9y ago
  I've seen no study which demonstrated any causal link between raising the minimum wage and technological progress in automation and frankly I'd be very surprised if there were any connection. Research money doesn't tend to come from angry Burger King franchisees. I have, however, seen restaurant lobby groups threatening an unlikely robot takeover of restaurant labor if minimum wages should rise: https://mgtvkron.files.wordpress.com/2014/07/bad-idea-billboard.jpg https://mgtvkron.files.wordpress.com/2014/07/bad-idea-billbo... I suspect progress in automation follows it's own path and when it destroys jobs, it destroys jobs such that no amount of wage cutting will impede its progress.
  - fiter 9y ago
    I didnt say anything about robots. Labor efficiency is not just about having a robot take your order, it's the difference between a McDonald's where all the parts are pre-assembles elsewhere and a mom and pop joint where someone is hand-forming the patties. Anyway, there is another article in this thread that explains how minimum wage increases tend to force the less efficient mom and pop joint out of business, thus accelerating the labor efficiency progress. I'm for minimum wage increases, but I also believe that certain jobs will not exist with a high enough minimum wage. Any increase in minimum wage probably needs to be met with an increase in training/education.
Animats 9y ago
Another effect is that wage increases increase retail spending. The CEO of Walmart says that their customers are "spent out". They have a metric for this - same-store sales throughout each month. Sales decline week by week after payday, until they're down to necessities by the end of the month. The US economy is demand-limited - there's plenty of excess production capacity and plenty of available capital, but limited consumer spending.
bmelton 9y ago
And yet another effect is consolidation -- e.g., small business competitors are priced out due to the increase, only to be replaced with franchisees or larger businesses filling their void. Overall employment might go up, but you might increase wealth concentration for large company CEOs. And, of course, you neglect to offer the possibility of a mixture of all or some of the above, which is just as likely.
deleted 9y ago
[deleted]

fiter 9y ago

In a competitive market where less labor is an option, companies that use less labor would have a larger advantage thanks to a higher minimum wage. This would encourage automation and decrease employment. In a competitive market where using less labor is not an option, wouldn't #2 happen? All businesses would have the same cost increase and could expect to raise prices.

crdoconnor 9y ago
I've seen no study which demonstrated any causal link between raising the minimum wage and technological progress in automation and frankly I'd be very surprised if there were any connection. Research money doesn't tend to come from angry Burger King franchisees. I have, however, seen restaurant lobby groups threatening an unlikely robot takeover of restaurant labor if minimum wages should rise: https://mgtvkron.files.wordpress.com/2014/07/bad-idea-billboard.jpg https://mgtvkron.files.wordpress.com/2014/07/bad-idea-billbo... I suspect progress in automation follows it's own path and when it destroys jobs, it destroys jobs such that no amount of wage cutting will impede its progress.
- fiter 9y ago
  I didnt say anything about robots. Labor efficiency is not just about having a robot take your order, it's the difference between a McDonald's where all the parts are pre-assembles elsewhere and a mom and pop joint where someone is hand-forming the patties. Anyway, there is another article in this thread that explains how minimum wage increases tend to force the less efficient mom and pop joint out of business, thus accelerating the labor efficiency progress. I'm for minimum wage increases, but I also believe that certain jobs will not exist with a high enough minimum wage. Any increase in minimum wage probably needs to be met with an increase in training/education.

Animats 9y ago

Another effect is that wage increases increase retail spending. The CEO of Walmart says that their customers are "spent out". They have a metric for this - same-store sales throughout each month. Sales decline week by week after payday, until they're down to necessities by the end of the month. The US economy is demand-limited - there's plenty of excess production capacity and plenty of available capital, but limited consumer spending.

bmelton 9y ago

And yet another effect is consolidation -- e.g., small business competitors are priced out due to the increase, only to be replaced with franchisees or larger businesses filling their void. Overall employment might go up, but you might increase wealth concentration for large company CEOs. And, of course, you neglect to offer the possibility of a mixture of all or some of the above, which is just as likely.

deleted 9y ago

[deleted]