| sc94597 said: A few things: 1. You are only thinking of the dichotomy of large businesses, with high profit margins versus. consumers. Small businesses which can't afford massive increases in the cost of labor will go out of business outright. This is especially true if they are in a perfectly competitive market, and are consequently price-takers. 2. I have never seen the argument that it will increase capitalization among the poor. In fact, the opposite argument (it will increase aggregate demand) is given. for why we should have higher minimum wage laws But if this were always true, why not indefinitely increase the minimum wage? Most people are not going to invest their new wages into capital. They are going to go buy video games, televisions, and new cell phones with a sizable minority who are currently not meeting their basic needs using that money on those needs. Think about the people who make minimum wage. They aren't future business owners who will accumulate capital, with the exception of the sizable portion of students making minimum wage. But they have supplementary income from other sources (financial aid or parents.) 3. There is very little evidence that aggregate demand will increase. While it is clear that average wages will increase, it is also clear that a percentage of the populaton will become unemployeable. That percentage will likely counter-balance any gains in the group who get higher wages. The last empirical statistic I had read was something like a 10% increase in minimum wages leads to a 1% increase in unemployment on average in cities and states that have instituted such policies. These tend to be places with high average wages already (like San Fransisco and LA.) Imagine the effects in places like the mid-west or south where the cost of living is much less, and overall the population is less productive, but they can use cheaper labor to theier advantage. More than anything else, it seems to me as if it will centralize capital to large cities, and only increase demand in large cities. |
These are very good discussion points and further proof of the fact that policymakers fail to have constructive dialogues. I'll address your concerns and clarify, point-by-point:
1. I am lookign at all businesses in this way: any business that offers a service will be subjects to consumers' price sensitivity. If more consumers are more capitalized, this should increase the consumer base that finds the services offered to not trigger said sensitivities. By extension, this should also increase the willingness of current customers to increase their consumption. Take a diner that has lost business to McDonald's lower price model, for example: they should see a migration of customers to them that no longer fidn their prices to be prohibitive. Additionally, McDonald's should see their consumer base eat even more of their garbage lol. There will always be the business that has no potential for growth (for many reasons), and their prerogative should be to find a way to become competitive.
2. To clarify my verbatim, I'm talking about pure capitalization and being empowered with the ability to purchase goods and services. Inclusive of the poor, Americans are generally debtors and not averse to outspeding their income. As such, we should expect anyone making more money to spend more money: call us conditioned, but it's what we do. With greater capitalization, there comes the greater ability to pay off debts and, consequently, build credit, obtain loans, invest, etc. The propagative effects of that are significant, as I am sure you are well aware. Similarly, higher wages mean greater tax responsibilities and decreased welfare needs: there are additional propagative effects, as well.
3. Regional sensitivities are a huge issue that are often overlooked, especially with regards to taxation. The minimum wage is directly related to that, even though the same mechanics apply. The ever-present counter to "cost of living is so cheap there" is "they pay you shit there." Realistically speaking, unless there is a very specific logistical reason for reduced costs (local center of production), labor costs should be uniform. If an energy company doesn't have the demand to make the revenue to justify the labor expenditures, they shouldn't be producing so much there. The increases in unemployment would only make sense, if the employers are trying to maintain margins with the current revenue model. If a significant portion of your community is now more capitalized, your revenue model should account for this. Ultimately, bad businesses (vinyl record or film development stores, for example) will probably just fail faster. As far as migration of workers is concerned, it might make sense to expect the opposite: if you can't make a livable wage in suburbia, it makes sense to seek employment in the city. If the wages are competitive, there's no reason to leave there, especially since living costs will most likely be lower.
My intention is not to oversimplify the issue: that's for the politicians to do and lie about, but there is a lot of context that never gets addressed in these conversations. Most especially, you never really hear about how the DoL usually reports inflation at half of the actual rate and how companies often use 3% as the benchmark for a cost-of-living increase (which is always less than DoL inflation). Since healthy economies thrive on consumption, it makes sense to find ways to capitalize more people and have them consume. Overemphasis on profit margins is the reason the wage, tax rate, and income inequality conversations have all become so relevant: if money pools up in one place, the economy stagnates.
