Thread: Los Angeles Raises Minimum Wage to $15 an Hour

Originally Posted by Chomsky

I'd like to see something supporting cause & effect here.

you posted it is already happening it will just become more prevalent.
why?

you can't justify paying a cashier 15 dollars an hour.
you can't justify paying a bag boy 15 dollars an hour
and the list goes on and on.

nothing they do justifies 15 dollars an hour.

Originally Posted by ludin

...there is also no evidence that they will spend it in that business.

This is a key point. Assuming a business seeks to pass its increased costs to customers by raising its prices, its supply curve shifts to the left (by the amount it has increased its prices). If demand for its products/services remains unchanged, fewer units are sold. Even with the increased price, some loss in revenue occurs.

Increased wages, though, can lead to the demand curve's shifting to the right. As a result, some of the revenue loss is mitigated. However, unless those receiving the wage increase are the firm's only customers and they spend all of their wage increase on that company's products/services, there is some revenue loss.

In actual market conditions, that assumption about customer base and customer spending does not hold. There are additional customers, not all of whom receive wage increases, so the demand curve does not shift sufficiently to the right to fully cover the cost increase. At the same time, there are substitute products/services and those competitors may not necessarily raise their prices. That would allow them to capture market share, further precluding a change in demand for the company's own products/services.

In the case of restaurants, some existing customers may opt to dine elsewhere or eat at home a little more frequently to deal with a price hike. At the same time, some workers who receive higher wages may opt for other leisure activities, meaning that other firms may experience an increase in demand rather than the restaurant. The result is that the restaurant would likely experience some loss in revenue from its price increase unless its competitors matched or exceeded its price increases, the price of substitutes also rose, and customer preferences remained unchanged.

Marginal businesses (those having low profit margins) would face much greater challenges than those with more competitive cost structures (e.g., through economies of scale) or larger profit margins resulting from differentiation. Those businesses would be in a financial position to absorb some share of the cost increases e.g., much less need to raise prices. In doing so, they could experience market share gains, with the increased sales more than offsetting the increased costs associated with wage hikes. As a result, some industry consolidation typically results with marginal businesses closing and the stronger businesses expanding. Such an outcome, of course, does not assure that all those who lose jobs would be hired by the stronger businesses, as the business models of those stronger businesses may not be as labor-intensive as those of the marginal ones.

The end result is that there is at least some economic dislocation from minimum wage increases, and that point shows up in the empirical literature. The magnitude varies from location to location, business-to-business, and industry-to-industry, and there are "winners" and "losers" so to speak.

If you raise minimum wage to $100 per hour, but state taxes and cost of living increase by 1000 percent, you're still way behind the eight ball.

It takes $15 an hour in California to be commensurate with $8 an hour in Texas. You can build a 6,000 square-foot home on an acre for $1 million most anywhere in Texas. That won't buy you crap in San Francisco.

Why don't liberals understand basic economics and mathematics?

Originally Posted by donsutherland1

This is a key point. Assuming a business seeks to pass its increased costs to customers by raising its prices, its supply curve shifts to the left (by the amount it has increased its prices). If demand for its products/services remains unchanged, fewer units are sold. Even with the increased price, some loss in revenue occurs.

There is loss of revenue while someone might be willing to pay 10 dollars for my burger they won't be willing to pay 15.

Increased wages, though, can lead to the demand curve's shifting to the right. As a result, some of the revenue loss is mitigated. However, unless those receiving the wage increase are the firm's only customers and they spend all of their wage increase on that company's products/services, there is some revenue loss.

this is nothing more than an assumption. there is no guarantee that just because wages go up I will sell more burgers.

In actual market conditions, that assumption about customer base and customer spending does not hold. There are additional customers, not all of whom receive wage increases, so the demand curve does not shift sufficiently to the right to fully cover the cost increase. At the same time, there are substitute products/services and those competitors may not necessarily raise their prices. That would allow them to capture market share, further precluding a change in demand for the company's own products/services.

they will raise their prices they always do. just look a the Mcdonalds 99 menu. most of the items are not 99 cents anymore.

In the case of restaurants, some existing customers may opt to dine elsewhere or eat at home a little more frequently to deal with a price hike. At the same time, some workers who receive higher wages may opt for other leisure activities, meaning that other firms may experience an increase in demand rather than the restaurant. The result is that the restaurant would likely experience some loss in revenue from its price increase unless its competitors matched or exceeded its price increases, the price of substitutes also rose, and customer preferences remained unchanged.

more assumptions. even if the prices at competitors rose it means less people will eat out.

Marginal businesses (those having low profit margins) would face much greater challenges than those with more competitive cost structures (e.g., through economies of scale) or larger profit margins resulting from differentiation. Those businesses would be in a financial position to absorb some share of the cost increases e.g., much less need to raise prices. In doing so, they could experience market share gains, with the increased sales more than offsetting the increased costs associated with wage hikes. As a result, some industry consolidation typically results with marginal businesses closing and the stronger businesses expanding. Such an outcome, of course, does not assure that all those who lose jobs would be hired by the stronger businesses, as the business models of those stronger businesses may not be as labor-intensive as those of the marginal ones.

You forget that the manager that was making 15 dollars isn't going to work for minimum wage. he is going to want a pay increase as well.
the tech guy that was making 15 dollar is going to want more than minimum wage as well.

you are not talking about driving wages up for just minimum wage workers but for everyone. that means a whole new set of costs that businesses have to face.
that or they don't increase other peoples pay and you devalue your other employee's which isn't a very good thing to do.

The end result is that there is at least some economic dislocation from minimum wage increases, and that point shows up in the empirical literature. The magnitude varies from location to location, business-to-business, and industry-to-industry, and there are "winners" and "losers" so to speak.

government shouldn't be picking winners and losers that sets a very dangerous course for the economy.

Originally Posted by jet57

San Francisco has had a $12 minimum wage for some time now and everything's fine.

https://www.aei.org/publication/the-...le-can-expect/

only if you ignore what is happening.