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Comment by lifeisstillgood | Hacker News Reader

I struggle to imagine why a business that cannot employ someone at 10 dollars and hour, is suddenly a Facebook style gangbusters when they pay 7 dollars an hour.

If your business model is so thin that 3 dollars cripples you, really you need to re-think.

(As an example, do we really think that the Comet/Currys/Circuit City sitting in a big car park miles out of town is running a sustainable business model for buying the latest gadgets? )

And on the demand side, do we think it is likely that the law firm that has five floors in the office block will decide that since all the cleaning companies costs have gone up, they will just leave the bins overflowing and ask the clients to wipe the toilets before use?

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>> If your business model is so thin that 3 dollars cripples you, really you need to re-think

well... that really depends on economy of scale I would say.

Wal Mart has 2.2 million employees[1]. Lets assume 1 million of them are min-wage workers (assuming bottom rung has a high turnover, I think this might be conservative) Suddenly that $3/hr becomes $3 milllion/hr. Lets say the average worker works 30hrs/week, and suddenly this "$3" change from a $7 to $10 min-wage is costing Wal Mart 90 mil a week, over 4.5 billion a year! And eating 20% of your profit.

[1] http://en.wikipedia.org/wiki/Walmart

Only 20% ?!

That is surely a great argument for raising the minimum wage. I am sure Walmart will kick up a fuss, but there are plenty of other things coming down the road that will hurt it's profits more.

Maybe they will get robots to stack the shelves from behind and save a billion. Either way the problem is still mot what should the actual wage level be, but how do we spread the wealth if pay packets no longer go to everyone?

Tsk tsk. The problem with Wal-Mart is that their wages are so low some of their stores hand out Food Stamps and Medicaid applications when they hire you. They literally do not expect that you can make a good living working at Wal-Mart.

Which means that some portion of Wal-Mart's revenues is mathematically equal to the money the government spends topping-up their workers' incomes.

My point exactly. A minimum wage that is not a living wage is a subsidy to employers who troll at those depths

So food stamps and medicaid enable jobs like that to exist.

They enable their children to not be malnourished.

Yup. Its a general rule that government spending supports the lower/middle class (the majority, and therefore most of the economy). The origin of the U.S. middle class was WWII spending. Without gov spending, you get ever-greater inequality as the economy is reduced to a corporate fiefdom run for the benefit of the wealthy minority.

I think if you looked at a graph of U.S. welfare spending vs. the Gini coefficient over the last 40 years you'd see exactly the opposite of the correlation you suggest.

You aren't thinking at the margin.

In general, you are right, but at the margin you are wrong.

I think the margin is the wrong way to view this - yes, there are companies where losing a dollar will make it uneconomic - but I will be amazed if that company is otherwise a strong, scalable and robust business model, instead of a crippled business limping along till something kills it off.

Hiring decisions are made at the margin though. Even strong companies stop hiring when the additional cost of an additional worker is less than the additional value to the business.

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