4 ms·

in your SaaS example, that's only true if you're unlucky enough to be the only employer in your market whose devs are demanding a raise. if the devs at all your

in your SaaS example, that's only true if you're unlucky enough to be the only employer in your market whose devs are demanding a raise. if the devs at all your competitors are demanding raises at about the same time, it's more likely that all the prices go up, unless they are approaching the point where it's cheaper for your customers to just roll their own.

eru 6y ago
I'm not sure 'demanding a raise' even has any meaning without further context? People are always up for more money. The question is, I guess, what they would be doing different if they got that raise or not. (Ie stay on or quit, or join one vs another company etc.)
- artem247 6y ago
  Sorry for poor wording - my idea was just to propose a situation where you have to pay your employees more somehow, like for example your lead engineer quit and new hire as a substitute will cost you 20% more. The real question is how the business can mitigate rising salary (and lowering of margins) and whether there is relation between labour cost and price of goods.
imtringued 6y ago
In my opinion, he overengineered his entire post because what he is saying is your product and the labor making the product are two separate markets. You are not the only employer in town, if another employer pays more then your employees are not going to stick around to produce <insert_cheap_trinket_here>. Meanwhile customers are in a different market, only willing to pay the current price, so raising prices will just decrease demand.
artem247 6y ago
I think it's where it gets interesting. Imagine a situation on the market where margins somehow are lowering for everyone (all employees demand higher salaries, natural disaster, anything). All businesses in the market raise their prices, except one, which keeps operating at a lower margin. It is easy to see what would happen next - the company that didn't raise prices makes much more than before and all competitors suffer losses. What if businesses collaborate to raise prices all at once? That would be price fixing which is illegal. So margins tend to become lower and lower over time. That leads to a very important problem - Tendency of the rate of profit to fall [0] [0] - https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit_to_fall https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit...

eru 6y ago

I'm not sure 'demanding a raise' even has any meaning without further context? People are always up for more money. The question is, I guess, what they would be doing different if they got that raise or not. (Ie stay on or quit, or join one vs another company etc.)

artem247 6y ago
Sorry for poor wording - my idea was just to propose a situation where you have to pay your employees more somehow, like for example your lead engineer quit and new hire as a substitute will cost you 20% more. The real question is how the business can mitigate rising salary (and lowering of margins) and whether there is relation between labour cost and price of goods.

imtringued 6y ago

In my opinion, he overengineered his entire post because what he is saying is your product and the labor making the product are two separate markets. You are not the only employer in town, if another employer pays more then your employees are not going to stick around to produce <insert_cheap_trinket_here>. Meanwhile customers are in a different market, only willing to pay the current price, so raising prices will just decrease demand.

artem247 6y ago

I think it's where it gets interesting. Imagine a situation on the market where margins somehow are lowering for everyone (all employees demand higher salaries, natural disaster, anything). All businesses in the market raise their prices, except one, which keeps operating at a lower margin. It is easy to see what would happen next - the company that didn't raise prices makes much more than before and all competitors suffer losses. What if businesses collaborate to raise prices all at once? That would be price fixing which is illegal. So margins tend to become lower and lower over time. That leads to a very important problem - Tendency of the rate of profit to fall [0] [0] - https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit_to_fall https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit...