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Comment by jmugan | Hacker News Reader

The thesis seems to be that businesses would pay more if they were smart enough to realize it was in their interests. Since they aren't, raising minimum wage seems to force them to pay more, which actually lowers labor costs because they have less turnover and fewer mistakes by new employees. Maybe. I've always been surprised that more businesses didn't pay more, since a few dollars an hour more would often bring in a much superior employee.

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I wouldn't have bought this take in the past. However, currently, right now, I am fighting an uphill battle trying to get a raise for an incredibly bright, thoughtful, attentive employee who directly contributes to the bottom line. One who is embarrassingly underpaid. And one I will probably lose because of this situation, which will ultimately be a costly waste of time and effort to rehire and retrain.

No, the evidence cited is that a significant portion is also absorbed by companies making lower profits (and a small amount by higher prices).

So this is simply also a case of lack of bargaining power of workers.

So you are saying that the pie is not grown by paying more, it's just that the workers are getting a bigger slice. Could be. That didn't seem to be the main point of the article, but that could also be true. I haven't looked at the data carefully.

Not true about the pie not growing.

The pie did grow, so it’s a benefit to society. It just didn’t grow enough that giving the employees a larger slice didn’t slightly shrink the owner’s pie. However, The owners pie shrunk less than it would have had the pie not grown due to increased efficiency.

I wonder how these studies captures the way the workers have more money that immediately flows back into the economy, benefiting everyone.

> I wonder how these studies captures the way the workers have more money that immediately flows back into the economy, benefiting everyone.

I think you left out the part about, "and at what point that creates inflationary pressure."

Minimum wage does not increase inflation in any measurable amount. Has been demonstrated over and over in praxis.

deflation is good?

Is wage the only cause of inflation we care about? Guess so.

Higher wages should create more demand, and that should create pressure to raise prices.

On the other hand, if people were going into debt with high interest credit cards, then it's very possible that demand doesn't actually change. Instead credit card debt gets paid off, or surplus income is banked as savings.

> No, the evidence cited is that a significant portion is also absorbed by companies making lower profits (and a small amount by higher prices).

From the article:

The authors calculated that about 62 percent of the wage increase was absorbed through higher prices, while the rest was likely absorbed by a mix of reduced turnover and, crucially, lower profits for franchisees—hence the massive industry resistance.

Bargaining power is undoubtedly an issue here, but the success of the increase in minimum wage can probably be attributed to it being uniform across similar businesses and in an industry that can't exactly move to the next state over (without loosing business).

Thank you, "small amount by higher prices" was wrong. Should be "most of it by small price increases".

That article leaves out a lot of result that should have been cited, but they run counter to his narrative and would make the story sell less.

The last big CBO analysis on results of min wage does a better job summarizing all the literature. They also made a nice tool to visualize results https://www.cbo.gov/publication/55681

The results are pretty much what one should expect.

This was why Henry Ford paid a decent wage. It turns out to reduce labor costs due to turnover dropping and less time spent training workers.

The original logic was to discourage “low quality” immigration.

H1B visas are an extension of this. H1B visa workers are allowed in the country, but have a minimum wage in excess of 90k.

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