Effects of Minimum Wage

If we are to assume revenue = cost (in its fullest), then yes the cost will be passed along to the consumer. However, if revenue does not equal cost, the amount passed along to the consumer is completely arbitrary.

Minimum wage is primarily wealth reallocation. It really doesn't affect international trade much, as you're not changing the resources of a country simply how the fruit of the labor is allocated.

So greater buying power for someone who previously earned minimum wage and now earns a higher wage. For those who make more reduced buying power (until inflation evens it out, at which point they raise minimum wage again. Or they tie minimum wage to inflation like in WA state and inflation never catches up.)

Greater unemployment to some level, but not an extreme change. Most of the minimum wage positions are labor intensive jobs that can't easily be outsourced. They're not going to put videophone registers at McDonalds so that they can have someone in China take your order, or cook the burgers in China.

Higher prices for products heavily dependent on labor. But not as much as the minimum wage increase. If labor costs 25% (pretty normal in the fast food industry) then doubling the cost of labor would only increase the costs of the goods by 1/4. 200% wage but only 125% more expensive cost. (Doesn't stop businesses from using it as an excuse to raise prices above that in order to increase profits by blaming the minimum wage increase.)

Competition on world markets wouldn't really happen. While it's easy to assume if US labor becomes more expensive foreign labor is now cheaper and everything will be outsourced, that ignores some basic economics. If you did for example outsource things you skew the trade balance such that you increase our trade deficit. Which reduces the value of the dollar which makes the foreign labor now more expensive. Ultimately the resources available within our country do not change. Our potential GDP does not change.

People in higher income tax brackets - sort of. The brackets actually change every year due to inflation. So really, it wouldn't affect it in the long term. If it does inflate wages the standard deductions and tax brackets change to compensate.

More jobs going overseas, not really. Due to how difficult it is to oursource minimum wage jobs and the trade deficit/affect on US currency value.

Benefits middle income workers - no, probably the opposite (but not significantly.)

Goldenboy219 said:

If we are to assume revenue = cost (in its fullest), then yes the cost will be passed along to the consumer. However, if revenue does not equal cost, the amount passed along to the consumer is completely arbitrary.

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How about proportional?

phattonez said:

How about proportional?

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You mean if consumer demand and producer supply have equal slopes (in terms of absolute value)? If so, then the increased costs are split equally among the consumer and producer.

Goldenboy219 said:

You mean if consumer demand and producer supply have equal slopes (in terms of absolute value)? If so, then the increased costs are split equally among the consumer and producer.

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Let's say that revenue does not equal cost. If this is true, then there is some other revenue or cost is covered through another method. So then, minimum wage (higher cost) could be somewhat absorbed by those other things, but price would still go up proportionally.

phattonez said:

Let's say that revenue does not equal cost. If this is true, then there is some other revenue or cost is covered through another method. So then, minimum wage (higher cost) could be somewhat absorbed by those other things, but price would still go up proportionally.

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The extent of the price increase is determined by the slope of the demand curve. The larger the slope (in terms of absolute value) the more the consumer bares the increase in cost.

For instance, when a good is highly inelastic such as gasoline, the consumer bares the majority burden of increased cost.