Hacker News Reader

Hacker News

Comment by robotresearcher | Hacker News Reader

Parent Full thread

robotresearcher

Naive question: why not raise prices?

View on HN

Some people will, many will find other ways to optimize (lower inventory, lower wastage), or deal with smaller margins.

Others will change their product offerings to maintain margins.

And some will misjudge the situation, or were too close to the bone to survive in this environment and fold.

Prices are rising.

Because if everyone raises their prices, the wage increase then effectively makes no difference.

If everyone raises wages, they have to raise prices. For the restaurant, this means they have to charge more for the same service, and they have to pay more for their supply chain (because they also increased their prices).

For the worker, that means they will pay more for things and services they need/want, because every other business will suffer from the same issues and be forced to raise their prices.

All this to say, the worker's purchasing power decreases if everyone raises wages, and that is the definition of inflation.

All wages increasing is better than only the elite wages increasing and leaving service workers in the dust. They are the ones paying for the lunch.

Inflation is a factor, but it's not perfectly fixed to wage increases. E.g. if min wage goes up 30% we're not going to see 30% inflation rates.

Citation needed. I can find plenty of studies that show it doesn’t. [0] Raising wages at the bottom doesn’t increase prices across the board, and so this benefits folks at the lower end more than it hurts.

[0]: https://www.jstor.org/stable/41445397

From the Congressional Budget Office:

https://www.cbo.gov/system/files/2021-02/56975-Minimum-Wage....

The second point, in the first paragraph:

> Higher prices for goods and services—stemming from the higher wages of workers paid at or near the minimum wage, such as those providing long-term health care—would contribute to increases in federal spending.

The whole thing is an interesting read, actually

>Because if everyone raises their prices, the wage increase then effectively makes no difference.

Not really. The relative elasticity of various goods and services (including labour) will determine which parties ultimately shoulder the cost. The additional costs could cut through margins or they could be passed on.

> Because if everyone raises their prices, the wage increase then effectively makes no difference.

This only holds if a restaurant's costs are entirely wages, but actual average labor costs for restaurants (at least in the US) are only about 30%.

> Because if everyone raises their prices, the wage increase then effectively makes no difference.

That’s only if everyone makes about the same, which is less and less true due to rising wealth inequality. As it stands now, there are people making $200k/year and people making $30k/year, raising prepared food prices isn’t going to chip off everyone’s income the same way.

A rise in interest rates would have much more effect on upper income buying power than a $5 increase in the cost of lunch.

That would only be true if labor were 100% of the input costs.

It's interesting that nearly everything that might benefit the lower and lower-middle classes seems to lead, inexorably, to inflation: UBI, a living wage, decent benefits, the list goes on. One might almost conclude that inflation has become a lazy boogie man, to be trotted out for propagandist purposes whenever change is suggested.

> Because if everyone raises their prices, the wage increase then effectively makes no difference.

Depends heavily on specifics. Like, which goods and services? How much of someone's purchases do they represent? Are they substitutable? Restaurants deal in the substitutable and minority part.

The relationship between per-unit price and labor cost per unit also matters quite a bit. If labor costs per unit are small, it may not take a big per-unit price bump in order to give labor a substantial raise.

Reply on news.ycombinator.com