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> employer would hire someone that only produces $96 worth of value per week for $106 per week? The argument is a little more complex than that. No business wi
by dpatru 15y ago
> employer would hire someone that only produces $96 worth of value per week for $106 per week?
The argument is a little more complex than that. No business will operate at an outright loss. But the minimum wage can cut into a business's profits. A hotel likely won't go bankrupt and shut down if it payed its workers a higher than market rate. And it still needs to pay for cleaners. But a higher-than-market cleaning rate will skew the market from the optimal. For example, a higher cleaning wage would make robot cleaners comparatively more attractive to a hotel. Investing in a robot might not make sense if wages were at market, but if they are raised too much, then it might be worth it to pay for an expensive robot that can replace a large portion of the cleaning staff.
In general, the minimum wage encourages capital investment. If people are expensive, then you should try to replace them with machines.
- jeffdavis 15y ago"But the minimum wage can cut into a business's profits." Sure, part of the burden of minimum wage falls on the employer, and part on the potential employees that aren't hired. While what you say sounds plausible -- a hotel running a 20% profit every year might bear the entire burden of the higher wages and may still hire the same number of people. But there are many businesses (in the hotel industry or elsewhere) that will end up scaling back rather than pay higher wages. While minimum wage may encourage the building of machines, workers versus machines is a false dichotomy. Sure, those are alternatives, but there's another alternative as well: no machine and no worker, just a smaller business (or less service). To say that the same number of people will be hired at the higher wage is to say that the demand curve for employees is perfectly flat near the lower wages. I would have to see some evidence of that.