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Minimum wage increases directly affect the purchasing power of all through price inflation. Here we have a real world example of this laid out by a business own

by Agustus 12y ago

Minimum wage increases directly affect the purchasing power of all through price inflation. Here we have a real world example of this laid out by a business owner. The company recognizes that the minimum wage employment costs will be equal for all cafes in the area, as they will pass costs onto customers; the customers see their existing wages worth less through this increase and drives them to seek salary increases from their employer. The minimum wage increase does not make more things attainable as the entire system has raised the cost of goods throughout it to compensate for the employee cost increase. The employees who are most hurt by this minimum wage increase are small businesses, borderlands books, and those trying to make a start in a business

Retric 12y ago
Hogwash, 1 + X and 100 + X are both increases. But, the relative importance of X is 1/100th in the second example. If 3 people can average 2 customers per min. Increasing their minimum wage by 1$/hour increases the customers costs by 3/2/60 = 2.5 cents per order. The difference between a 5$ drink and a 6$ drink would be increasing their pay by ~40$/hour. Increasing the minimum wage slightly compresses the pay scale by reducing income inequality. It has minimal impact on total output, instead top income earners get an effective pay cut. PS: This does how up as a reduction in service jobs and increase in manufactring type jobs due to shifts in demand.
- lambdasquirrel 12y ago
  From a wages perspective, but doesn't the same math that you just described also apply to the cost of production? It's kind of like how when people go to Switzerland and then they don't ever go to a cafe, because it seems ridiculous to take $7 of the money you earned back in the States, or in China, and then spend it on a cup of coffee. The marginal difference between a cup of coffee and a cup of wine also decrease, so it locks in higher consumption. On the durable goods side, you are competing with farther-away places that have lower costs. It's why all the "maker" shops moved out of San Francisco and into Portland. It's not possible to economically produce handmade bikes in SF anymore. The only companies able to "export" are tech startups.
  - Retric 12y ago
    Edit: Production costs are generally a small fraction of sales prices and the salary of workers at farms and factory's well below that. The US produces more durable goods now than at any point in history mostly though automation. Little of that is in SF, but there really are places in the US where you can rent a decent apartment for 400$/month. Or, where the median sale price for a home is less than 90k vs 770k in San Francisco county. When it comes to coffee shops rent is often there #1 cost, in some cases it's more than 1/2 there total costs. When your rent is 50,000+$/month and your limited to people within walking distance who can just as easily go across the street, you’re stuck with the salary squeeze. Bump minimum wage and some of those competitors might fail which lowers your completion and reduces the retail demand in the end the books still balance. From an overall economic perspective there is a lot of infrastructure in people and stuff supporting the wants of people making 100+k/year. Bumping minimum wage changes the equation so the economy focuses more on the wants of lower income workers and more on the highest brackets. Consider a store that might see 1 sale per day vs 1 per minute. There are lots of knock on effects with higher advertising budget of car companies that sell 20k vs 100k cars etc. But, also lower housing costs in major city's and higher costs in the out suburbs etc. PS: Arguably this is vary good in the long term. Consider, the one off economy of the rich leads to stagnation because they don't want mass produced goods.
frozenport 12y ago
>>Minimum wage increases directly affect the purchasing power of all through price inflation Yes, buts it not immediate and its not clear if they are going to spend it on fantasy books.
al2o3cr 12y ago
"The company recognizes that the minimum wage employment costs will be equal for all cafes in the area, as they will pass costs onto customers" The elasticity of demand for cafes is not zero. Claiming that businesses can "pass costs onto their consumers" without losing sales is assuming that decidedly unrealistic fact.
- Agustus 12y ago
  Absolutely, I left this out while cutting parts from my comment. Sales will be affected as individuals debate making a purchase at an increased price.
wwweston 12y ago
> Minimum wage increases directly affect the purchasing power of all through price inflation You're economically savvy enough to realize that increased purchasing power causes inflated costs with more money chasing goods/services, and you're zeroing in on a minimum wage increase from $11 => $15/hr instead of, I don't know, tech worker salaries? Maybe you know something I don't, because I'd guess the effect from the former isn't even close to keeping the class of people it benefits at purchasing parity.
- VieElm 12y ago
  Tech worker salaries aren't set by the government. They're set by market forces, so why would that be something he ought to think about? Are you suggesting a government enforced salary cap on software engineering salaries? What exactly do you think you could do about high pay of software engineers? I don't understand your comment. It seems that you're understandably upset at the negative effects of rising prices, but why the focus on the high pay of others? Should everyone make the same salary?
- Agustus 12y ago
  It is always an incremental straw until the camel's back breaks. If you increase the minimum wage for the worker, all prices across a system will increase as the business must remain a going concern to compensate the increase. The price increase affects end-users purchasing power. The median household income in the United States is $51,000, tech worker salaries are are not the norm, they are 6% of the population ($100,000 for a single individual). Their effect on society is negligent in the purchase of everyday goods as they are only 6% of the population and purchase affluent goods and upward. Assuming direct elasticity, if a place increases costs by 30%, 30% less will shop. If a median income family has a 10% increase in food prices, they have to absorb it. Try getting a 10% wage increase across an entire operating company, let alone a single employee.
  - wwweston 12y ago
    > The median household income in the United States is $51,000, tech worker salaries are are not the norm, they are 6% of the population ($100,000 for a single individual). Their effect on society is negligent in the purchase of everyday goods as they are only 6% of the population and purchase affluent goods and upward. I think it's fairly safe to say the the effects are considerably more pronounced in San Francisco than they are nationally: http://www.spur.org/blog/2014-02-27/forecasting-san-francisco-s-economic-fortunes http://www.spur.org/blog/2014-02-27/forecasting-san-francisc... But since you brought up the median income, let's use that to talk about my point: $51k is about $25/hr. The hike under discussion moves minimum wage up to... well, from just under $10 a few years ago to $11 as of this year (so, less than half that). But wait, that's national median. San Francisco median is closer to $70k ($35+/hr), so we're really talking about a motion that's all below 1/3 median. Again... this is a primary driver of inflation? We're talking about a roughly $2000 yearly boost in the bottom quartile that almost doesn't even keep pace with average monthly rent increases over the last 5 years. If minimum wage hikes aren't even successfully chasing cost of living increases, it's pretty hard to argue they're driving inflation.
malchow 12y ago
And people looking for their first job. We should be upfront about it: controlling prices, including the price of labor, is cruel.

by Agustus 12y ago

Retric 12y ago

Hogwash, 1 + X and 100 + X are both increases. But, the relative importance of X is 1/100th in the second example. If 3 people can average 2 customers per min. Increasing their minimum wage by 1$/hour increases the customers costs by 3/2/60 = 2.5 cents per order. The difference between a 5$ drink and a 6$ drink would be increasing their pay by ~40$/hour. Increasing the minimum wage slightly compresses the pay scale by reducing income inequality. It has minimal impact on total output, instead top income earners get an effective pay cut. PS: This does how up as a reduction in service jobs and increase in manufactring type jobs due to shifts in demand.

lambdasquirrel 12y ago
From a wages perspective, but doesn't the same math that you just described also apply to the cost of production? It's kind of like how when people go to Switzerland and then they don't ever go to a cafe, because it seems ridiculous to take $7 of the money you earned back in the States, or in China, and then spend it on a cup of coffee. The marginal difference between a cup of coffee and a cup of wine also decrease, so it locks in higher consumption. On the durable goods side, you are competing with farther-away places that have lower costs. It's why all the "maker" shops moved out of San Francisco and into Portland. It's not possible to economically produce handmade bikes in SF anymore. The only companies able to "export" are tech startups.
- Retric 12y ago
  Edit: Production costs are generally a small fraction of sales prices and the salary of workers at farms and factory's well below that. The US produces more durable goods now than at any point in history mostly though automation. Little of that is in SF, but there really are places in the US where you can rent a decent apartment for 400$/month. Or, where the median sale price for a home is less than 90k vs 770k in San Francisco county. When it comes to coffee shops rent is often there #1 cost, in some cases it's more than 1/2 there total costs. When your rent is 50,000+$/month and your limited to people within walking distance who can just as easily go across the street, you’re stuck with the salary squeeze. Bump minimum wage and some of those competitors might fail which lowers your completion and reduces the retail demand in the end the books still balance. From an overall economic perspective there is a lot of infrastructure in people and stuff supporting the wants of people making 100+k/year. Bumping minimum wage changes the equation so the economy focuses more on the wants of lower income workers and more on the highest brackets. Consider a store that might see 1 sale per day vs 1 per minute. There are lots of knock on effects with higher advertising budget of car companies that sell 20k vs 100k cars etc. But, also lower housing costs in major city's and higher costs in the out suburbs etc. PS: Arguably this is vary good in the long term. Consider, the one off economy of the rich leads to stagnation because they don't want mass produced goods.

frozenport 12y ago

>>Minimum wage increases directly affect the purchasing power of all through price inflation Yes, buts it not immediate and its not clear if they are going to spend it on fantasy books.

al2o3cr 12y ago

"The company recognizes that the minimum wage employment costs will be equal for all cafes in the area, as they will pass costs onto customers" The elasticity of demand for cafes is not zero. Claiming that businesses can "pass costs onto their consumers" without losing sales is assuming that decidedly unrealistic fact.

Agustus 12y ago
Absolutely, I left this out while cutting parts from my comment. Sales will be affected as individuals debate making a purchase at an increased price.

wwweston 12y ago

> Minimum wage increases directly affect the purchasing power of all through price inflation You're economically savvy enough to realize that increased purchasing power causes inflated costs with more money chasing goods/services, and you're zeroing in on a minimum wage increase from $11 => $15/hr instead of, I don't know, tech worker salaries? Maybe you know something I don't, because I'd guess the effect from the former isn't even close to keeping the class of people it benefits at purchasing parity.

VieElm 12y ago
Tech worker salaries aren't set by the government. They're set by market forces, so why would that be something he ought to think about? Are you suggesting a government enforced salary cap on software engineering salaries? What exactly do you think you could do about high pay of software engineers? I don't understand your comment. It seems that you're understandably upset at the negative effects of rising prices, but why the focus on the high pay of others? Should everyone make the same salary?
Agustus 12y ago
It is always an incremental straw until the camel's back breaks. If you increase the minimum wage for the worker, all prices across a system will increase as the business must remain a going concern to compensate the increase. The price increase affects end-users purchasing power. The median household income in the United States is $51,000, tech worker salaries are are not the norm, they are 6% of the population ($100,000 for a single individual). Their effect on society is negligent in the purchase of everyday goods as they are only 6% of the population and purchase affluent goods and upward. Assuming direct elasticity, if a place increases costs by 30%, 30% less will shop. If a median income family has a 10% increase in food prices, they have to absorb it. Try getting a 10% wage increase across an entire operating company, let alone a single employee.
- wwweston 12y ago
  > The median household income in the United States is $51,000, tech worker salaries are are not the norm, they are 6% of the population ($100,000 for a single individual). Their effect on society is negligent in the purchase of everyday goods as they are only 6% of the population and purchase affluent goods and upward. I think it's fairly safe to say the the effects are considerably more pronounced in San Francisco than they are nationally: http://www.spur.org/blog/2014-02-27/forecasting-san-francisco-s-economic-fortunes http://www.spur.org/blog/2014-02-27/forecasting-san-francisc... But since you brought up the median income, let's use that to talk about my point: $51k is about $25/hr. The hike under discussion moves minimum wage up to... well, from just under $10 a few years ago to $11 as of this year (so, less than half that). But wait, that's national median. San Francisco median is closer to $70k ($35+/hr), so we're really talking about a motion that's all below 1/3 median. Again... this is a primary driver of inflation? We're talking about a roughly $2000 yearly boost in the bottom quartile that almost doesn't even keep pace with average monthly rent increases over the last 5 years. If minimum wage hikes aren't even successfully chasing cost of living increases, it's pretty hard to argue they're driving inflation.

malchow 12y ago

And people looking for their first job. We should be upfront about it: controlling prices, including the price of labor, is cruel.