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> Changing the price of a good does not 'decrease demand'. It changes the supply curve - and given an identical 'demand curve' (aka demand does not change), the

by jsbg 3y ago

> Changing the price of a good does not 'decrease demand'. It changes the supply curve - and given an identical 'demand curve' (aka demand does not change), there may end up being less consumption of that good. Demand means the amount of a product or service that people want. Increasing the price of something does reduce the demand for it (and increases the supply). > this is even worse than wrong, I don't know what to say at this point. This is puzzling and I think you misread what I wrote. An employee bringing in less in revenue than they are paid is an unsustainable situation. > no, they can't replace with cheaper workers - because of minimum wage They can replace the workers with fewer more experienced ones who will be able to command the higher wage. > A wage increase means the money has to come from somewhere It does come from somewhere: fewer hired workers. If you raise the price of oranges, you will sell fewer. Setting a price floor on labor is no different. > It depends. No, it doesn't. Employers try to pay employees as little as they can and employees try to earn as much as they can. When an employer feels they're not getting enough for their money, they replace them. When an employee feels that they aren't compensated enough, they find another job. "Labor" is too generic to make claims about elasticity of demand–some types of labor may be elastic, others inelastic, but minimum wage laws do not discriminate. In addition, there is always a ceiling where supply and demand become irrelevant: the revenue added by hiring a worker must be higher than their wage. If a new price floor is higher than what an employee is able to bring in in revenue, that employee will not remain employed. > I know what you are trying to say [...] > FYI here is 'supply and demand' [1] So you're either being pedantic or condescending. https://en.wikipedia.org/wiki/Principle_of_charity https://en.wikipedia.org/wiki/Principle_of_charity

jasmer 3y ago
It seems you have mostly grasped the concept of supply and demand, but are applying it very crudely without context. First - your definition of 'demand' is 'completely wrong' and totally at odds with the entire field of economics - even the schools that traditionally disagree with one another. 'Demand' is a function of 'how much people are willing to pay for stuff, and at what price'. The 'supply' of something is how much suppliers will sell, at what prices. A change in the supply curve (the cost of something) does not change demand. It does change much of the item will be sold for, aka the 'market clearing price' - which I think you are confusing with 'demand'. Please have a closer look the 'Supply and Demand' Wiki entry I referenced. As for the rest of your thesis: You're trying to rigidly apply concepts of Supply and Demand in 1) theoretical contexts, which do not exist in reality and 2) you are ignoring the fact that Supply and Demand for goods (like labour) are balanced with other forces, which always alters the equation. For example, in the case of higher minimum wage: "They can replace the workers with fewer more experienced ones who will be able to command the higher wage." It is a 'rigid assumption' that corporations would simply try keep their labour costs consistent. While it's possible they could do this, 1) there are any number of other things the could do, and2) in reality, they probably won't do that at all, because this idea that an increase in labour cost will materially result in better workers is false. 'Paying 5% more will get workers who work 5% better so we can then reduce employment by 5%' is a fallacious equivocation. There's no real situation in which that equation holds, even theoretically that does not generally hold true. In reality, any company that 'hires fewer people' (even with a bit of a wage increase) probably will have less output, therefore less revenues - which changes a lot of things. A company could increase it's prices, while theoretically that might reduce unit sales, it may or may not yield a better situation depending on what the curve looks like. 'Profit' matters, because that's what sets the internal 'demand curve' for labour. In a highly profitable company, the most efficient solution to a wage hike may simply to do nothing, and just pay them more out of profits. That could very well be the 'rational self interest' response which maximizes profits after that wage adjustment. But all of that is pedantic because nothing in the real world works that way, there are always other variables. Subway is not selling 'widgets' that buyers have a perfect understanding of, and none of these markets operate efficiently. They could reduce the size of their meat patties - and customers may be none the wiser and therefore consume just as much (which would result in suppliers getting paid less). They could raise prices in conjunction with a smart marketing campaign that encouraged people to buy in the same quantities even at higher prices (result is customers paying more). They could somehow have better morale and more enthused workers who just had better output. They could do financing restructure and get better terms from the bank (again, supplier paying the price). They could 'dock the overzealous executive pay programs' for performance failures (executives pay the price). Finally there are big unknowns/risks and issues with time (aka upgrading tooling to increase efficiency maybe has a long time horizon). I hinted at that with marketing, but the same applies to product, process, market conditions and every other aspect of the business.
- jsbg 3y ago
  https://www.merriam-webster.com/dictionary/demand https://www.merriam-webster.com/dictionary/demand Definition 3b. I don't care what you think demand means, you already said you know what I mean and you keep being obtuse about it. I'm not moving demand and supply curves, I'm saying if the price of oranges goes up, some people are gonna substitute them with apples. Yes, some people are gonna keep buying oranges anyway because they value them at more than what the price increase is at. But overall fewer people will buy oranges. You keep giving specific examples of where employers might keep employees even if they have to pay them more, maybe to convince yourself that this is a complicated issue. I didn't say all minimum wage employees lose their job when the minimum wage rises. But there are fewer jobs. This isn't complex, there isn't a special nuance that requires a PhD in economics and an MBA to understand. Some employees are barely worth it at the current price to some employers and not worth it at a higher price. Minimum wage laws don't magically make employers value employees more. The effects of minimum wage laws are visible. Increased unemployment, primarily for teenagers and young adults, automation, and outsourcing are commonplace everywhere with minimum wage laws.

by jsbg 3y ago

jasmer 3y ago

It seems you have mostly grasped the concept of supply and demand, but are applying it very crudely without context. First - your definition of 'demand' is 'completely wrong' and totally at odds with the entire field of economics - even the schools that traditionally disagree with one another. 'Demand' is a function of 'how much people are willing to pay for stuff, and at what price'. The 'supply' of something is how much suppliers will sell, at what prices. A change in the supply curve (the cost of something) does not change demand. It does change much of the item will be sold for, aka the 'market clearing price' - which I think you are confusing with 'demand'. Please have a closer look the 'Supply and Demand' Wiki entry I referenced. As for the rest of your thesis: You're trying to rigidly apply concepts of Supply and Demand in 1) theoretical contexts, which do not exist in reality and 2) you are ignoring the fact that Supply and Demand for goods (like labour) are balanced with other forces, which always alters the equation. For example, in the case of higher minimum wage: "They can replace the workers with fewer more experienced ones who will be able to command the higher wage." It is a 'rigid assumption' that corporations would simply try keep their labour costs consistent. While it's possible they could do this, 1) there are any number of other things the could do, and2) in reality, they probably won't do that at all, because this idea that an increase in labour cost will materially result in better workers is false. 'Paying 5% more will get workers who work 5% better so we can then reduce employment by 5%' is a fallacious equivocation. There's no real situation in which that equation holds, even theoretically that does not generally hold true. In reality, any company that 'hires fewer people' (even with a bit of a wage increase) probably will have less output, therefore less revenues - which changes a lot of things. A company could increase it's prices, while theoretically that might reduce unit sales, it may or may not yield a better situation depending on what the curve looks like. 'Profit' matters, because that's what sets the internal 'demand curve' for labour. In a highly profitable company, the most efficient solution to a wage hike may simply to do nothing, and just pay them more out of profits. That could very well be the 'rational self interest' response which maximizes profits after that wage adjustment. But all of that is pedantic because nothing in the real world works that way, there are always other variables. Subway is not selling 'widgets' that buyers have a perfect understanding of, and none of these markets operate efficiently. They could reduce the size of their meat patties - and customers may be none the wiser and therefore consume just as much (which would result in suppliers getting paid less). They could raise prices in conjunction with a smart marketing campaign that encouraged people to buy in the same quantities even at higher prices (result is customers paying more). They could somehow have better morale and more enthused workers who just had better output. They could do financing restructure and get better terms from the bank (again, supplier paying the price). They could 'dock the overzealous executive pay programs' for performance failures (executives pay the price). Finally there are big unknowns/risks and issues with time (aka upgrading tooling to increase efficiency maybe has a long time horizon). I hinted at that with marketing, but the same applies to product, process, market conditions and every other aspect of the business.

jsbg 3y ago
https://www.merriam-webster.com/dictionary/demand https://www.merriam-webster.com/dictionary/demand Definition 3b. I don't care what you think demand means, you already said you know what I mean and you keep being obtuse about it. I'm not moving demand and supply curves, I'm saying if the price of oranges goes up, some people are gonna substitute them with apples. Yes, some people are gonna keep buying oranges anyway because they value them at more than what the price increase is at. But overall fewer people will buy oranges. You keep giving specific examples of where employers might keep employees even if they have to pay them more, maybe to convince yourself that this is a complicated issue. I didn't say all minimum wage employees lose their job when the minimum wage rises. But there are fewer jobs. This isn't complex, there isn't a special nuance that requires a PhD in economics and an MBA to understand. Some employees are barely worth it at the current price to some employers and not worth it at a higher price. Minimum wage laws don't magically make employers value employees more. The effects of minimum wage laws are visible. Increased unemployment, primarily for teenagers and young adults, automation, and outsourcing are commonplace everywhere with minimum wage laws.