Hacker News Reader

Comment by jacoblyles | Hacker News Reader

It's far less economically distorting to top up a family's income with an EITC than by mandating higher wages. For one thing, it avoids giving employers incentive to cut back on labor costs.

View on HN

Employers will not cut back on labor costs if there is demand and they're still making profits. They'll cry, bitch, whine and scream at congress because their profits took a hit, but they will not cut back if they're still making profits.

Lack of demand, on the other hand...

You're missing the word "enough" before profits. Employers are like any other investor. If returns on hiring more labor are less than buying new equipment or just forgoing expanding and investing back in the market, then they won't be hiring.

You forget substitute goods. You can substitute a cashier with a self-serve machine, you can buy and use machines to clean the store faster, you can reduce opening hours, you can plan the store so that fewer employees are needed, etc.

Yes capitalism is amoral so people will certainly be willing to pay to increase salary, but they are also willing to buy machines, outsource work, make customers do more and other things that reduce the need for employees.

If Wal-Mart raised their wages to CostCo levels, it wouldn't be the current Wal-Mart employees who benefit. Wal-Mart would replace their old workers with new workers, and start competing with CostCo for those higher wage workers.

But then you're subsidizing the labor costs of employers who pay low wages...

Ah so you expect the "stressed middle" like most of us to subsidize the walmarts of the world.

Where do you think the money for EITC/WTC comes from?

A tax on corporate profits?

Reply on news.ycombinator.com