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> Remember that each dollar a customer spends only requires < $1 to employ. So as employee costs go up there is a cushion before an employer must raise prices.
by Sebb767 4y ago
> Remember that each dollar a customer spends only requires < $1 to employ. So as employee costs go up there is a cushion before an employer must raise prices.
This logic is broken. Of course there's a margin in there, but to keep the business profitable, this margin must stay. So there's not necessarily a cushion to fall back on.
- maerF0x0 4y agoThat's exactly what pressures do though. They shrink the business' margin. It's unrealistic for businesses to expect their opex to remain perfectly stable under market pressures. Cost of labour, Capital, market forces these all will ebb and flow their profit margins.
- Sebb767 4y agoOkay, maybe I explained it badly. You said that there's always a cushion. Which would still be true after you raise wages. So you can repeat and repeat and you'll end up with infinite wage for 1$ spent. This quite obviously doesn't work, so the point can't be true. Therefore, we can't deduce the existence or the size of a cushion just by the fact that a product is being sold. -- I still agree with your general point; in a lot of industries, there's a lot of cushion right now. But there are also companies operating on razor thin margins (especially when competing with cheap labor overseas). At some point, companies will either raise the price (if they can get away with charging more) or shelf the product. They might also do so if they think the margin is to small; they usually don't create stuff for net zero just to keep employees happy. We simply can't deduce from a general argument how close they are to taking either measure.