Comment by bko | Hacker News Reader

Comment by bko | Hacker News Reader

> Their evidence rests largely on comparisons between neighboring areas with different minimum wages. The seminal study in this vein examined fast-food restaurants on both sides of the Pennsylvania-New Jersey border before and after New Jersey raised its minimum wage in the early 1990s. It found no evidence that employment there fell as a result.

This is often cited in publications that generally support a higher minimum wage. It is unfortunate that this is never challenged as there are studies that show that an increase in minimum wage does in fact result in lower employment:

> Raising the minimum wage would increase family income for many low-wage workers, moving some of them out of poverty. But some jobs for low-wage workers would probably be eliminated and the income of those workers would fall substantially. [0]

Logic itself would suggest that an increase in minimum wage would result in at least some unemployment:

No employer would hire you if you make them less than the amount that they have to pay you. There are people that make more than the old minimum wage and less than the new proposed minimum wage. Therefore, those employment opportunities will no longer exist. It may not happen overnight as there is some momentum, but you can't deny this effect. Also, you can't exactly measure the people that would have been hired with a lower minimum wage.

The other interesting this is how vernacular plays such a strong role in people's opinions. Imagine if "minimum wage" was replaced with "prohibition of employees whose contributions to employers is less than the mandated minimum amount of finding legal employment"

[0] https://www.cbo.gov/publication/44995

Your assertion may or may not be true, but there's no way I am willing to accept that as "logic". Your assumption is that the profit margin on labor is 0% which logic would suggest is pretty universally false.

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.

In traditional economics you want to look at marginal cost versus marginal revenue. If it costs you $10 to produce another widget you can sell at $10.01, you will in order to maximize profits.

You will hire people up until the point where the marginal revenue that employee provides is equal to that of the marginal cost of that employee.

Of course companies make profit, but that's because the marginal cost curve is upward past a certain point. So on average, the average cost is less than the marginal cost

A visual representation explains it well. When you talk about profits, you're talking about average cost. When you're talking about whether you should hire an extra worker, you're talking about marginal cost versus marginal revenue.

https://apecon3.wikispaces.com/Marginal+Revenue

> if you make them less than the amount that they have to pay you

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.

> You assume we are already paying everyone fairly for the value they create.

No, they are assuming that some employees are generate less than $15 of value per hour. They could be 'worth' $14 and currently paid $9.

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