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Originally Posted by Rekna
Ever consider that maybe the effect of minimum wage is non-linear? Like most optimization problems there is a sweet spot for the minimum wage where it balances the needs of the people with the needs of the businesses. The argument is where is that sweet spot. Obviously the dems feel it is higher than we currently are and the republicans feel it is lower than we currently are.
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I think minimum wage legislation is a lose/lose proposition. If the minimum wage is set below market wages, no one will benefit because people are making more than the minimum. If the minimum wage is set above market wages, something in the market has to change - either prices go up or the demand for labor goes down. If there is another possibility, I am open to looking into it. In some of the data DC posted we have to look at the tail. I agree that if we raise the minimum wage today, that today some workers benefit and it will take some time for the market to respond to the newly mandated wage. But the market will respond.
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Where the minimum wage should be is a very complex problem that no one understands completely because there are too many variables to measure and predict. The minimum wage may hurt one aspect of the economy while helping another. In this case the question comes down to is the tradeoff worth it. When you say why not just raise it to $20 an hour you are over simplifying the problem and incorrectly representing the democratic position on minimum wage.
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This is one reason why we should spend at least a small amount of time and go outside the beltway and talk to business owners.
Let's say you own a fast food service restaurant grossing $1 million per year. Let's say your employee costs (most at minimum wage) is $600,000, and after the other costs your net profit is $50,000 (5% net profit margin). Then they raise the minimum wage 10% and that increases your employee cost to $660,000 an increase of $60,000.
What are you going to do?
Your $50,000 net profit is now a $10,000 net loss, do you go out of business and fire your employees?
Do you try to raise prices?
Do you ask fewer employees to do more work to keep your costs at $600,000?
Do you automate activities so you need fewer employees?
Do you cut back services to you customer risking the loss of sales?
No matter how you answer these questions there are going to be two results - inflation or job loss.