it is misguided to think businesses would just raise prices in response to a minimum wage hike

Author: n8nrgmi ,

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  • n8nrgmi
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    n8nrgmi
    economics 101

    prices are set by supply and demand. not labor costs. 
  • HistoryBuff
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    --> @n8nrgmi
    prices are set by supply and demand. not labor costs. 
    I don't really agree. There is a reason why most manufacturing has been outsourced to China, vietnam etc. It is cheaper to ship materials around the world, assemble them there, then ship the finished back around the world to sell them here. The primary reason for that is labor costs. 

    So while I agree supply and demand are extremely important, if a company needs to pay their workers, lets say 15% more, then that is going to cut into their profit margin. They will need to make that up somewhere. Most likely raising prices. 

    But if your business model requires you to pay your workers a wage they can't live on, then you have a shitty business model. These businesses need a shake up. either they fix their business model to not rely on abusing workers, or they need to get out of the way so someone with a better business model can replace them. 

  • n8nrgmi
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    --> @HistoryBuff
    i partially agree, i'd say some industries can just absorb the hit of a wage hike, while others would adjust their pricing. 

    i'd still say as a general rule, supply and demand determine prices, so if selling hamburgers is profit maximized at a buck, then they aren't going to raise prices and make less money by selling less. 
  • HistoryBuff
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    --> @n8nrgmi
    i'd still say as a general rule, supply and demand determine prices, so if selling hamburgers is profit maximized at a buck, then they aren't going to raise prices and make less money by selling less.
    if their costs rise due to increased wages, they have to make that money up somewhere. Maybe that is raising prices, or maybe its firing people, or maybe it is finding cheaper materials etc. But they will make that money up somewhere. They will not just eat the costs. 

  • n8nrgmi
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    --> @HistoryBuff
    says who? why wouldn't they just eat the costs, generally?

    look at all the developed world, a big mac costs about the same everywhere, regardless of how much each countries minimum wage is 

  • HistoryBuff
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    --> @n8nrgmi
    says who? why wouldn't they just eat the costs, generally?
    because then they would be making less profits. These companies exist to make profit. They aren't going to take a hit that big without making it up somewhere else. 

    look at all the developed world, a big mac costs about the same everywhere, regardless of how much each countries minimum wage is\
    I googled it. Here is link. They vary from $1.77 USD to $7.29. It would seem like the price of a big mac varies significantly. 

    There are also other ways to raise prices. IE if the Big Mac is their staple item to draw people in, you could raise the price of the combo, or the beverage, etc. That way you can still advertise a cheap big mac but still raise prices. Alternatively, you can make your portions smaller while leaving prices the same, thus effectively raising the price of the food. 
  • n8nrgmi
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    --> @HistoryBuff
    think of my initial argument. if you can sell a hundred laptops for two hundred each, and that maximizes profit, then that is what you are going to do. just because your labor costs change, doesn't change the fact that a hundred laptops at two hundred each, is still the point where maximum revenue is generated. if you raise the price, you will sell fewer and make less money. 

    this is just a rule of thumb, but i'd still say it's the general rule of thumb. most of the time, profit would be eaten into. that's just business. 
  • HistoryBuff
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    --> @n8nrgmi
     if you raise the price, you will sell fewer and make less money. 
    then you find a less obvious way to raise prices. Raise the cost of your extended service plan. add some sort of fees or other charges. 

    For example, I used to work at Target. The electronics department consistently lost money. They did not turn a profit. But they didn't raise prices on the electronics because they knew that advertising electronics would draw people in. But once they came in, lots of them would buy other stuff, like cloths or food etc. And that is where they raised prices. So you keep the cost of those specific items cheap to draw people in, then gouge them somewhere else. 

    this is just a rule of thumb, but i'd still say it's the general rule of thumb. most of the time, profit would be eaten into. that's just business. 
    even if it is true that in some industries they can't raise prices, they will cut somewhere else to try to save money. Corporations don't just accept that they are going to lose money. Those that do get out competed and go out of business. 
  • n8nrgmi
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    even if the price of the big mac varies, in many countries the cost is the same as our cost, even though the other countries pay more. that's because the price is determined by supply and demand, less so because of labor costs. 
  • n8nrgmi
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    --> @HistoryBuff
    you act like companies aren't already maximizing profit. they can't just cut costs elsewhere, cause if they could, they would have already before the wage hike. the only thing that can change, is the profit margin. they make less profit. 

    i acknowledge that the things you say are at play to some degree, but my argument is what generally is the case. 
  • HistoryBuff
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    --> @n8nrgmi
    even if the price of the big mac varies, in many countries the cost is the same as our cost, even though the other countries pay more. that's because the price is determined by supply and demand, less so because of labor costs. 
    It varies by industry. In some industries the cost of materials is much higher than the cost of labor. Like airlines for example. Fluctuations in the cost of jet fuel are more important that fluctuations in the cost of labor. Although labor costs would certainly still be a factor.  In an industry like that labor cost increases would have little effect.

    In an industry that relies on alot of cheap labor, like restaurants, that is not the case. Any rise in the cost of labor would absolutely require the restaurant to take steps to make the money up somewhere else. 
  • HistoryBuff
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    --> @n8nrgmi
    you act like companies aren't already maximizing profit. they can't just cut costs elsewhere, cause if they could, they would have already before the wage hike.'
    you act like a change to the minimum wage doesn't effect the entire market. The cost of a big mac being where it is has alot to do with what other companies charge. If you raise the cost of a big mac, then maybe they go to wendy's instead. If the costs of labor went up for all the restaurants at the same time, then the calculation is different. There would be a new "maximized profit" number. 

  • Greyparrot
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    --> @n8nrgmi

    why wouldn't they just eat the costs, generally?

    You should direct that question to the 50% of startup businesses that fail within  5 years.

    Explain to them that there is an infinite amount of costs that they can absorb.

    prices are set by supply and demand. not labor costs. 

    Labor costs lower the supply which raises the prices due to scarcity.

    Economics 101.

    a big mac costs about the same everywhere, 
    Have you ever bought one at an Airport?
  • Danielle
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    --> @Greyparrot
    Maybe business owners should be able to reduce labor and other supply costs by sourcing outside of the U.S. 

    (Since it's wrong for government to force business owners to pay more than they have to just so Americans can earn a living wage, right?) 
  • Greyparrot
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    --> @Danielle
    If Washington DC finds it profitable to mandate job creators to destroy American jobs and create new ones in another country then it will happen to preserve the job security of Washington DC. That's all that matters.
  • Danielle
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    --> @Greyparrot
    Okay. But it's wrong for government to force business owners to pay more than they have to just so Americans can earn a living wage, right?
  • Greyparrot
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    --> @Danielle
    It's also wrong for the government to force a job creator to create a job for a low skilled American at the moment, but times can change Comrade.

    Until then, Job Creators can give desperate people the opportunity of making zero dollars if they don't produce at the level of whatever wage Washington DC arbitrarily sets.
  • Danielle
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    --> @Greyparrot
    Okay. Do you believe it is wrong for government to force business owners to pay more than they have to just so Americans can earn a living wage?

    A one word yes or no answer will suffice. 
  • Greyparrot
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    --> @Danielle
    I guess it's okay if they still have the option of getting rid of the job or the person if the person can't produce at the level of an arbitrarily set minimum wage.

    For example, the government does not require the Armed Forces to employ a person below a minimum standard of ability that correlates to a minimum wage as well.

    If the Government can leave those people fucked with no recourse, then the private sector should have that luxury too.


    It doesn't matter if you are on the right or the left, Washington DC doesn't give a flying fuck about that 10% of people even if the private sector happens to offer more than a zero dollar income. 

    Freidman was 100% correct in saying the ultimate effect of a minimum wage is that the government mandates job creators to discriminate against a person that produces less than the minimum wage. Those people are fucked and nobody gives a shit. That's postmodernism for ya.
  • Danielle
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    --> @Greyparrot
    We have at-will employment in this country. You know a person can be fired at any time for any reason outside of their inherent identity. 

    So it appears you do think it's okay for government to force business owners to pay more than necessary so Americans can earn a living wage.

    Just wanted to confirm. 




  • Greyparrot
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    --> @Danielle
    Sure. Fuck the 10%.

    Did you at least watch the Jordan Peterson clip while fucking over that 10%?

  • Danielle
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    --> @Greyparrot
    Friedman also advocated for free trade with China. 
  • Greyparrot
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    --> @Danielle
    So did Trump. 
  • Danielle
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    --> @Greyparrot
    Source on Trump advocating for free trade with China? 
  • Greyparrot
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    --> @Danielle
    I'll Drop the Trump argument for the moment since Trump is garbage despite being right about very few things.

    What did you think about the Jordan Peterson video? He says it's a conversation nobody is willing to have. Would you be willing to have a conversation about it?