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Comment by bsimpson | Hacker News Reader

This feels like you're nitpicking the language, not the thinking.

Imagine someone's contribution to a business increases revenue by $1000 and the total cost to employ that person for the same period is $800. Do you think most businesses would go "nope, we only hire highly leveraged people who produce $2000 in revenue"?

There are inefficiencies in scale (like communication/bookkeeping overhead) that might disincentivize a business from growing, but generally speaking, I think it's fine to model decisions as rational cost/benefit ones.

Workers who are only "worth it" at some wage. Nobody is going to pay you a million dollars to go sell a hundred dollars worth of stuff. If the value you can earn on the market is sufficiently lower than what someone is allowed to pay, they simply won't hire you. That's bad for everyone.

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Comparing someone's wage to the value they produce is a fine way for a company to decide whether to hire someone, but I didn't think that was the question you were trying to answer, was it? Perhaps I misunderstood, but I thought you were asking something like, what policy would help people who are at the margins, which is an economy-wide question that can't be answered from one employer's perspective. Workers may only be "worth it" at some wage, at some point in time, but that wage is subject to supply and demand just like everything else. A policy intervention like raising the minimum wage will alter that supply/demand curve.

For example, suppose janitors all make the minimum wage. If we increase it, there might be some company at the margin that will go without janitorial services, but most companies will pay their janitors the new wage, which (from the "a worker costs $X and produces $Y" model's perspective) will look a lot like the nation's janitors suddenly started producing more value. Ergo, it's not to say that that model is wrong, just that it's not useful in answering a question like should we increase the minimum wage.

Except an employee's contribution isn't static, while their cost is.

$7.25 x 8 hours = $58 for the day. However what they create is based on output, which for most businesses, varies day by day along with their sales.

A McDonald's could sell 500 burgers in one day at one location, but only 300 at another. In this case the employee at the larger restaurant generates 2/5 more value than the employee at the smaller one, even if both can output at the same speed and quality. So, in reality, the employee at the larger restaurant is being exploited by 2/5 more than the employee at the smaller location. Which also means the employee at the smaller location is getting paid more for doing 2/5 less work than an equally capable employee.

Profits are multiplicative yet unpredictable, while labor is static and predictable.

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