It depends on how critical the labor is. If there’s a guy whose job it is to push the “make me $100/hour profit after expenses” button, I will gladly pay him $1

It depends on how critical the labor is. If there’s a guy whose job it is to push the “make me $100/hour profit after expenses” button, I will gladly pay him $1 more even if it reduces my profit $1 if I have no alternative. To say it another way, if businesses could reduce labor, they would have already done it. They don’t have fixed labor budgets to use up. Their ideal labor spend is $0. So in some sense it doesn’t matter what the labor cost is as long as the business isn’t losing money.