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False assumptions. That is the problem. You are leaving out the other side of the equation.
In aggregate, sales will increase because MW workers spend a higher % of their income than the rest of the population.
"Substantially higher costs"?! Do the math. I've already showed it a couple times in this thread. How much will the MW increase, and what % of national income will it represent? Do that and you have your answer.
Is the world going to come to an end because aggregate prices increased 1%? You won't even notice it, though I'm certain that there will great loads of laying blame where it doesn't belong.
The minimum wage worker will get a mandatory increase from the wages businesses pay. Businesses will offset those increases with higher prices. Those higher prices might not be absorbed by the customers. Which will mean less goods and services sold. The shrinking markets will mean fewer workers. And that does not count the fewer workers due to attempts to automate and replace unnecessary jobs.
All of this is supposed to be good for the bottom quintile of the economy. Unfortunately there is another piece missing. Less than half of the households in the bottom quintile have anyone working.
The minimum wage worker will get a mandatory increase from the wages businesses pay. Businesses will offset those increases with higher prices. Those higher prices might not be absorbed by the customers. Which will mean less goods and services sold.
I can see you are mentally challenged so I'll help you out a little:
Assume a 25% MW increase, that effects 20% of the population who collectively make 4% of national income.
The expected rise in aggregate prices would be 25% of 4% or 1%.
The 80% of the population who didn't get a pay increase might not absorb all of that 1% price increase. But the 20% of the population who got a 24% real income increase sure as hell will!
I can see you are mentally challenged so I'll help you out a little:
Assume a 25% MW increase, that effects 20% of the population who collectively make 4% of national income.
The expected rise in aggregate prices would be 25% of 4% or 1%.
The 80% of the population who didn't get a pay increase might not absorb all of that 1% price increase. But the 20% of the population who got a 24% real income increase sure as hell will!
That is a very simplistic explanation that depends on assumptions. Raising the MW 25% means the jobs above MV also need to be raised. That can have a snowball effect in raising all salaries. By my simplistic explanation we just end up with inflated costs and no one wins. But there will be losers...those on fixed incomes.
Raising the MW 25% means the jobs above MV also need to be raised.
No it does not.
Quote:
Originally Posted by jrkliny
Businesses will offset those increases with higher prices.
Or reduce quantity. The argument has been that food prices have not increased, but when examined closely, you note that food quantities have been reduced.
Quote:
Originally Posted by Ultrarunner
What affect, if any, on the cost of housing... renting and/or ownership?
Rents will increase.
Quote:
Originally Posted by rruff
"Substantially higher costs"?! Do the math. I've already showed it a couple times in this thread. How much will the MW increase, and what % of national income will it represent? Do that and you have your answer.
And yet increasing minimum wages have never resulted in higher GDP.
Quote:
Originally Posted by jm1982
People seem to buy into this 'theory' that people will continually pay more for things.
But people will not.
Quote:
Originally Posted by Ultrarunner
SF might get away with it as it is a destination city and unique...
That's a good point, since San Fransisco has a large tourist industry among things. Not every city has a Golden Gate Bridge, with a Golden Gate Park and an Alcatraz.
I know it didn't help some of the minimum wage earners I know that had kids in daycare... the cost of their daycare increased as these low paid workers also go raises...
Let's say, for the sake of argument, that a 15% increase in prices covers the cost to a restaurant for increasing the minimum wage. Could this have a negative the business? Seeing how the demand for their product is elastic, would you expect the amount of business to increase or deccrease? Afterall, people don't have to go there and won't, if they perceive prices to be higher than value received. Let me give you a specific example: Currently I pay $6.45 for a quarter pounder value meal. Last year the same meal was around $5.50. Most of the McDonalds here pay above minimum wage (8.50-9.50) because of competition for the workers in our job market. That being said, I can tell you if it goes up much more, there is a point at which I and others will no longer consume.
While it is true that "some" low income workers will have more money to spend, I believe there will be more of them out of work (and thus have less to spend)! There will also be pressure to automate. When you think about it, what do low income workers actually spend their money on? When I was on of the working poor and got an increase, the only thing it did was help me pay the rent, phone, etc. I didn't go out and purchase a new car and I didn't go out to eat.
It was YOU that mentioned a 15% increase in post 152. Did you just grab that percent out of the air??
This was strictly for the sake of argument/example. Point being 1) Demand for many products is not fixed but in reality depends heavily on the price. 2) Increased demand, based on a certain segment of the population having more money to spend, will not necessarily "spur" the economy and needs to be weighed against the potential negative effects of higher prices.
If aggregate prices in the whole economy go up just enough to cover the wage increases, and no one is laid off or has their hours reduced, sales will actually increase.
Do you know why?
There will definitely be some businesses that have trouble, but it won't be many, and it will be more than offset by others that experience an increase.
If you owned a small business that employed minimum or near minimum wage workers would you want to bet on sales increasing due to an increase in the minimum wage? By the way, "if", is a very big word!
I know it didn't help some of the minimum wage earners I know that had kids in daycare... the cost of their daycare increased as these low paid workers also go raises...
I think this points out another issue with the MW increases. Everyone pays for the increases. Food, restaurant, cleaning, landscaping, day care, elder care are among the goods and services most impacted. Food and daycare could have a major impact on many people.
Daycare costs impact many millions of families. Many middle, middle income families may need to have a family member drop out of the workforce in order to handle daycare. The costs are already too high to afford for a great many. If the increased MW costs force many mid level wage earners to quit working, the impact on the economy could be huge.
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