Raising Floor for Minimum Wage Pushes Economy into the Unknown

Here's my logic, maybe you can help me find the flaws in it: businesses are trying to maximize sales and minimize costs, which means they have the smallest possible workforce required to support their current sales. Less staff means less sales. They are also making some profit. As long as the wage increases are less than their profit margin, they have no reason to fire anyone. They lose revenue if they fire anyone, or they would've already done it.

So to me he relevant question is: what is the ratio between profit and minimum wages at most companies? I looked at Wal-Mart as an example and they make way more in profit than they spend on wages.

You assume we are already paying everyone fairly for the value they create. That's... possible, but it's also possible that a lot of people are paid far less than the value they create; raising minimum wage makes the job less profitable but not unprofitable.

These large businesses are the ones paying employees the federal minimum wage. Only thing that happens is their profit margin shrinks a tiny amount. As long as the profit margin is in the black the business will continue to operate.

It puts more money into the pockets of consumers, who are the drivers of the economy.

Businesses don't have to cut jobs either. They just have to move them.

Edit2: Costumers can also shift to lower cost alternatives. Online retailers have less overhead and lower labor costs. If you make Walmart more expensive than Amazon, Walmart will shutter stores laying massive numbers of people off.

Edit: Some economists have argued that past raises in min wage have not made noticeable impacts in employment. But this is way outsides of a normal rise in minimum wage. Going to 9 or 10 makes a lot sense. 15 dollars will put people in most of the country out of work.

Minimum wage has to do with marginal cost of producing an extra product. Marginal cost generally increases after a while. So producing that last additional unit usually costs more than the one before. When you increase cost in the form of the price of human capital, the marginal cost of producing a unit will increase and the intersection with the marginal revenue (price of the unit) will drop to a lower quantity supplied and higher price.

So yes, prices will go up but the business will also sell less units. Since less units are sold, there will be less capital that will need to be utilized.

Prices aren't arbitrarily set and increase in price will result in less units being sold and less employment. This isn't as controversial as journalists make it out to be.

Pre-political Paul Krugman does a great job explaining it:

> So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This theoretical prediction has, however, been hard to confirm with actual data. Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages “do,” in fact, reduce employment, but that the effects are small and swamped by other forces.

> What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda–for arguing that living wages “can play an important role in reversing the 25-year decline in wages experienced by most working people in America” (as this book’s back cover has it). Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects.[0]

[0] http://www.forbes.com/sites/timworstall/2015/03/02/paul-krug...

You state that as if it's a fact when it is not. Prices may increase for some goods/services. But many goods/services prices are not set by the costs involved but by what the market will bear. The other option is that profit margins will narrow. Or, as is more typical, a combination of both.

How many of these high-paying CEO jobs are there? Not many! The same is true of sports--there are only so many jobs to go around, and if you're one of the rare people who can do the job, you get paid a LOT of money. Comparing salaries of highest and lowest paid people doesn't really seem useful in any way.

Minimum wage hikes first eat into profits before increasing prices. It is primarily a transfer of wealth from the wealthiest to the poorest.

Minimum wage hikes do not always increase prices, either. Especially not meager increases.

I don't see any obvious reason why this should be the case or would be remotely beneficial - it's not as if Walmart or Amazon deserve a lower quality CEO than Goldman.

Further, this would create huge disincentives for companies to take on new lines of business which involve low skill labor and would create incentives for managers to eliminate low skill labor. I.e., Steve Jobs and other execs would have the personal incentive to NOT open up apple stores, even though opening up such stores would be beneficial for both shareholders and those who would otherwise be employed by such stores.

Instead of raising minimum wage (which is a short-term bandaid, because inflation will eventually catch up), we should be focusing on educating those that can only get a minimum wage job.

The doomsaying about minimum wage increases occurs every time this is discussed in the US, and the doom fails to materialize every time. This isn't an issue about the people doing to doomsaying not learning from what other countries are doing; they are ignoring the US as much as any other country.

Its true that, if you assume no impact on spending behavior (and, therefore, on demand), minimum wage increases will be expected, in net, to make certain jobs that are currently net benefits to employers into net losses, resulting in them being eliminated, without any compensating effects.

OTOH, the contention of those that support any particular minimum wage increase is that, in the range actually proposed, the increased pay to those whose jobs remain net benefits to their employers will increase demand in sectors which drive employment less than the reduced retained employer profits will decrease demand, such that demand will be increased enough in fields with sufficient impact on employment that the benefit provided by employees working will increase enough that, while their may be shifts in the sectors of employment, net employment will not decrease.

And the facts of historical minimum wage increases have never shown the fears sold by the doomsayers being realized.

The OP may be wrong, but it's hardly absurd. Let's stick to the substance.