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Comment by jamescostian | Hacker News Reader

I know a lot of people who make minimum wage (e.g. fast food jobs). When minimum wages rise (like when they got to 7.25 in the US), they don't get fired, they get a raise.

Just because minimum wages go up, doesn't mean humans are getting replaced. Instead, people often adjust their price limits (e.g. if cleaning was thought to generate $10, and then you don't clean for a while, you'll feel it warrants $11) and workers get better pay. The workers who do get fired due to financial constraints can now get a job elsewhere for more money.

I agree that there is a breaking point and that point does vary by company, but that breaking point (for the vast majority of things) happens to be far greater than zero

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> The workers who do get fired due to financial constraints can now get a job elsewhere for more money.

or they drop away from employment entirely.

https://fred.stlouisfed.org/series/EMRATIO

This is an excellent chart. Now match it up with the times when minimum wages increased - I used the following URL to figure out when those were:

https://bebusinessed.com/history/history-of-minimum-wage/

The big drop goes from June 2008 to October 2009 - which is indeed when we had not one but two increases to federal minimum wage.

However, look at all the other times when we had minimum wages increase - even when employment decreased, there was a pretty quick recovery. I'd argue that 2008 and 2009 minimum wage increases also happened during a recession, and that they were only part of the contribution to the large drop. Am I missing something?

"I know a lot of people who make minimum wage (e.g. fast food jobs). When minimum wages rise (like when they got to 7.25 in the US), they don't get fired, they get a raise."

This reminds me of someone who once argued that schools cannot reduce their costs when the number of students that need educating declines, because e.g. you can't stop renting a building just because there are 10% fewer occupants.

Is there a flaw in this sort of logic?

Schools have fixed costs and marginal costs, just like everything else. Fixed costs consist of capital, like buildings. Marginal costs are like teaching time and books. Increasing your capital is usually relatively slow, e.g. buildings take a while to build and land takes a while to sell.

The motivator to give people raises is that you must meet minimum wage and that you still need those workers.

You don't need a larger building when there are less people in it, and you don't need more teachers when there are less students.

The argument you described is very different from mine. Mine is more like "schools say books are worth $10, but the prices of books raise to $11. Nevertheless, schools continue buying books"

If you don't believe this, there's data on the subject of minimum wage increases and percent employment. Look at this comment and my explanation below it:

https://news.ycombinator.com/item?id=17481847

"you don't need more teachers when there are less students"

You don't need fewer, do you? You can't fire a teacher because their class now has 27 people instead of 30 - those 27 people still have to be educated.

Do you think teachers are not essential to schools in the way that minimum wage employees are to restaurants? How does that work?

I'm not debating whether simplistic supply and demand analysis applies to the restaurant workers - clearly we have empirical results that say it does not.

I think that to understand something, you have to have data, but you also need to have a theory that is consistent and leads to further insight.

The theoretical argument would be that one teacher gets sacked and their 27 students get distributed amongst the other teachers bringing the student:teacher ratio back to 30:1.

Indeed, if this doesn't happen (which is fully possible) you get an interesting avenue of inquiry about market inefficiencies.

As an aside, I personally know of a case where a school needed to cut costs, and they did that by increasing the student:teacher ratio. That ratio is a metric that gets attention and consideration; at least in the Australian system it is not some arbitrary number.

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