Comment by gerbal | Hacker News Reader

Comment by gerbal | Hacker News Reader

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First off, most of what follows is anecdotal.

I've worked at a couple of mom-and-pop businesses. Most of our customers at a couple of the places were people working at or just above minimum wage.

Were our customers to have their income doubled it would be great for the business. More customers with much more disposable income? That sounds fantastic. And in turn the cost of higher wages for the employees is smaller than the reward from a more prosperous customer base. On a $2 cup of coffee for instance, the wage cost is somewhere between $0.15 and $0.50.

A customer making $8/hour would balk at a $3 cup of coffee, but a customer making $16/hour would have no issue with it. Even accounting for a 15% to 25% increase in cost all the way down our supply chain, we would still come out the better for it. As would most businesses.

Even businesses were wages are the majority of the expenses wouldn't be hurt. If the cost of a service is 75% labor wages, and that cost doubles, you need to raise the price of that service by 35%, right? But your lowest income customers have a 100% increase in income. Probably a multi-times increase in disposable income. That's good for business.

The problem with competing with walmart has little to nothing to do with labor and wage costs. It has to do with Walmart's highly optimized supply chain and one-stop-shopping at very low prices. Doubling of wages would have very little impact on the dynamic between Walmart and smaller businesses.

Though smaller businesses may benefit from a consumer base with more disposable income having to be less price conscious and not having to shop at walmart out of economic necessity.

Well, it seems many people's logic about small businesses disagrees with your example about customers at or slightly above minimum wage. With the "if Wal-Mart raised their prices then small shops could compete better" kind of thing. Not that I'm saying your wrong or anything, just pointing out obvious problems with such examples. My own included.

How do you know there would be a 15% to 25% increase in costs in the supply chain? Could it be more? Could it be less? Would it be possible that with a minimum wage hike that the individual costs for some parts of the supply chain the rise in costs could be much higher? Depends on the businesses involved. Meaning, what's good for one business is not necessarily good for every business.

What if a store has to raise their prices not by 35%, but more like 60% because of increased costs from their supply chain. That figure seems to only assume the prices are raised only to cover increased wage costs, and not considering new costs across the board. But hey, they still come out ahead right? What about taxes? Anybody getting this new increase in pay going to get hit with more taxes? I never see any of these articles discuss that aspect of it at all.

I'm sorry, but your logic seems overly simplified because it would seem to support the notion that since raising the minimum wage is good for everybody then why not just raise it to $50 an hour or $100 an hour? The original essay argues against that because it's a complicated issue.

Speaking for myself and my wife. We debated for years whether to get a house cleaner. Finally, we have made the leap and have somebody come over once every two weeks to clean. However, if that house cleaning company were to raise their rates 35% to compensate for increased wages, we would go back to cleaning our own house, without question.

I suspect that kind of thing could quickly make some businesses that had been viable, no longer viable.

Many of their potential customers would also benefit from increased wages as well though, so while you may have to drop the services, there are potentially many others who are now willing to purchase it.

For many small businesses, increasing the minimum wage would increase the cost of their employees but not increase the income of their customers. These businesses would see an increase in expenses but none of the benefits of a consumer base with more disposable income.

Walmart wants a higher minimum wage because their consumer base includes minimum wage employees.

54% of the US workers make less than $30,000 a year [1]. at a $14.50 minimum wage, the income floor for a full time employee becomes $30,000. You're telling me that a substantial income increase for >50% of the US working population would be bad for small businesses?

[1] http://www.census.gov/hhes/www/cpstables/032011/perinc/new01...

It would be bad for small businesses who have a significant cost of labor, and who's customers are larger businesses.

Not saying it "would" be bad, saying it "could" be bad.

Most of these articles rarely speak of potential negative consequences but only of potential positive results. That's the point of my first post.

It's not a bad idea to openly discuss potential negative consequences which most proponents of a minimum wage hike seem to do their best to avoid.

For instance, you are assuming that such an increase would only involve that 50% of the country. I'm assuming that such an increase would affect nearly everybody across the board, something more like 80%. That's not necessarily a good thing. But it could be a good thing, it's just that it's rare for a discussion to take place.

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