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>Anyone interested in the truth will tell you that raising the minimum wage will destroy at least some jobs. This is the "big lie" used to justify keeping it l

>Anyone interested in the truth will tell you that raising the minimum wage will destroy at least some jobs. This is the "big lie" used to justify keeping it low. The reality is that minimum wage hikes hit profit margins first and hardest, inflation next and jobs get hit last (maybe if it gets hiked $10 / hour). http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.421.7637&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.421... >"Studying profitability is important because the empirical evidence suggests that minimum wages do raise the earnings of low wage workers, but do not seem to have large negative employment consequences." >"Across both datasets our results show that that profitability was significantly reduced by the introduction of the minimum wage. " Minimum waged labor is very, very, very inelastic. For better or worse the people who clean your toilets and serve you coffee in the mornings are extremely necessary and very hard to substitute. Much more so than most middle class jobs, even. Business lobbies know this to be the truth, but they know that they will get nothing but by asking the general public to have sympathy for their falling profit margins. So, they try to scare the shit out of you by claiming that they will be forced to fire you instead (e.g. this expensive billboard for the national restaurant association demonstrating their concern): https://pando.com/2014/07/17/new-san-francisco-billboard-warns-workers-theyll-be-replaced-by-ipads-if-they-demand-a-fair-wage/ https://pando.com/2014/07/17/new-san-francisco-billboard-war...

theodorejb 7y ago
If a business's profitability drops, that very frequently translates to lost jobs or cut hours in order to preserve expected returns. Otherwise the business may close entirely and the owners seek to invest in a more profitable venture.
- pytester 7y ago
  >If a business's profitability drops, that very frequently translates to lost jobs or cut hours in order to preserve expected return Businesses that slash necessary costs in response to cut margins have a special word to describe them: Bankrupt.
mrfredward 7y ago
In a lot of businesses with stronger profit margins, labor costs can go up with no downstream effects. In a brutally competitive industry such as restaurants, where profit margins of 6% are considered extremely healthy, there has to be some sort of downstream effect to keep the business viable. Most likely they'll all just raise prices, but something has to happen for these businesses to have any chance at surviving the next recession. So you're right that minimum wage labor is inelastic for many businesses, but in restaurants a small change in costs can make a large number of businesses no longer viable.
- pytester 7y ago
  >In a brutally competitive industry such as restaurants, where profit margins of 6% are considered extremely healthy, there has to be some sort of downstream effect to keep the business viable. Most likely they'll all just raise prices Non chain restaurant industry is brutally competitive, yes. Burger King/McDonalds not so much. In non-chain restaurant industry the costs are typically either pushed on to diner (in the form of higher prices) or the rentier (in the form of lower rent). The one quirk of the non-chain restaurant industry is that if there is a cost push in the form of higher minimum wage or higher rent it often leads to bankruptcy and a replacement of the business with a different cost profile rather than a smoother transition to higher prices. This is why they fight so hard against unionization and minimum wage hikes.
conanbatt 7y ago
> Minimum waged labor is very, very, very inelastic. For better or worse the people who clean your toilets and serve you coffee in the mornings are extremely necessary and very hard to substitute. Much more so than most middle class jobs, even. Literally the opposite. It's so elastic they can't demand any wages for what they do. Minimum wage is about turning it inelastic with the punishment of prison. The best argument I have heard around MW is that businesses can afford to pay more but have too much market power to let that go. I tend to disagree in a 3.5% unemployment economy, but its possible. These famous studies of minimum wage always come with caveats, on both side of the aisles. If you increase minimum wage today you might not see the unemployment ever in a stat, because you are sacrificing future employment (businesses that don't open because upstart costs are higher). In the end, MW is a handout from left leaning people passing the bill to businesses: they could help the working people they want to target just as well with suplemental labor income, but that implies reducing other expenditures from the government, whereas MW looks like a freebie from businesses.
- formercoder 7y ago
  Elasticity is directional. These wages can be elastic on the downside, and inelastic on the upside. Employers are happy to lower wages, but won't fold if they are forced to raise them.
  - greedo 7y ago
    Are you kidding? Employers will frequently avoid paying higher wages; either by making employees part time, by not hiring additional employees, or by firing. "Do more with less..." is a management mantra for a reason.
    - pytester 7y ago
      Employers will always try to reduce their wage bill by getting rid of unnecessary workers. It's not something they do in response to minimum wage hikes, because if they could reduce headcount and maintain the same level of service, 99% of the time they already have. This is why it's inelastic. Employers naturally optimize their headcount no matter what the size of the overall wage bill is.
formercoder 7y ago
For the record, I’m pro raising the minimum wage. I was just stating that it is absolutely true that _some_ jobs will go away. Therefore a WSJ article about a few jobs going away in a county where minimum wage was raised should not be news to anyone. I completely agree with you. It also makes sense to me that restaurant jobs are more elastic than janitors as they are a product of discretionary spending.
- pytester 7y ago
  >For the record, I’m pro raising the minimum wage. I was just stating that it is absolutely true that _some_ jobs will go away. Yet the study I linked to very much disagreed with this hypothesis of yours. You can cut profits without cutting jobs. In fact, it's very easy in an economy where the ratio of profit : GDP is so high.

theodorejb 7y ago

If a business's profitability drops, that very frequently translates to lost jobs or cut hours in order to preserve expected returns. Otherwise the business may close entirely and the owners seek to invest in a more profitable venture.

pytester 7y ago
>If a business's profitability drops, that very frequently translates to lost jobs or cut hours in order to preserve expected return Businesses that slash necessary costs in response to cut margins have a special word to describe them: Bankrupt.

mrfredward 7y ago

In a lot of businesses with stronger profit margins, labor costs can go up with no downstream effects. In a brutally competitive industry such as restaurants, where profit margins of 6% are considered extremely healthy, there has to be some sort of downstream effect to keep the business viable. Most likely they'll all just raise prices, but something has to happen for these businesses to have any chance at surviving the next recession. So you're right that minimum wage labor is inelastic for many businesses, but in restaurants a small change in costs can make a large number of businesses no longer viable.

pytester 7y ago
>In a brutally competitive industry such as restaurants, where profit margins of 6% are considered extremely healthy, there has to be some sort of downstream effect to keep the business viable. Most likely they'll all just raise prices Non chain restaurant industry is brutally competitive, yes. Burger King/McDonalds not so much. In non-chain restaurant industry the costs are typically either pushed on to diner (in the form of higher prices) or the rentier (in the form of lower rent). The one quirk of the non-chain restaurant industry is that if there is a cost push in the form of higher minimum wage or higher rent it often leads to bankruptcy and a replacement of the business with a different cost profile rather than a smoother transition to higher prices. This is why they fight so hard against unionization and minimum wage hikes.

conanbatt 7y ago

> Minimum waged labor is very, very, very inelastic. For better or worse the people who clean your toilets and serve you coffee in the mornings are extremely necessary and very hard to substitute. Much more so than most middle class jobs, even. Literally the opposite. It's so elastic they can't demand any wages for what they do. Minimum wage is about turning it inelastic with the punishment of prison. The best argument I have heard around MW is that businesses can afford to pay more but have too much market power to let that go. I tend to disagree in a 3.5% unemployment economy, but its possible. These famous studies of minimum wage always come with caveats, on both side of the aisles. If you increase minimum wage today you might not see the unemployment ever in a stat, because you are sacrificing future employment (businesses that don't open because upstart costs are higher). In the end, MW is a handout from left leaning people passing the bill to businesses: they could help the working people they want to target just as well with suplemental labor income, but that implies reducing other expenditures from the government, whereas MW looks like a freebie from businesses.

formercoder 7y ago
Elasticity is directional. These wages can be elastic on the downside, and inelastic on the upside. Employers are happy to lower wages, but won't fold if they are forced to raise them.
- greedo 7y ago
  Are you kidding? Employers will frequently avoid paying higher wages; either by making employees part time, by not hiring additional employees, or by firing. "Do more with less..." is a management mantra for a reason.
  - pytester 7y ago
    Employers will always try to reduce their wage bill by getting rid of unnecessary workers. It's not something they do in response to minimum wage hikes, because if they could reduce headcount and maintain the same level of service, 99% of the time they already have. This is why it's inelastic. Employers naturally optimize their headcount no matter what the size of the overall wage bill is.

formercoder 7y ago

For the record, I’m pro raising the minimum wage. I was just stating that it is absolutely true that _some_ jobs will go away. Therefore a WSJ article about a few jobs going away in a county where minimum wage was raised should not be news to anyone. I completely agree with you. It also makes sense to me that restaurant jobs are more elastic than janitors as they are a product of discretionary spending.

pytester 7y ago
>For the record, I’m pro raising the minimum wage. I was just stating that it is absolutely true that _some_ jobs will go away. Yet the study I linked to very much disagreed with this hypothesis of yours. You can cut profits without cutting jobs. In fact, it's very easy in an economy where the ratio of profit : GDP is so high.