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The proper concern of society is the preservation of individual freedom; the proper concern of the individual is the harmony of society.
"Who would be free, themselves must strike the blow." - Byron
"Who overcomes by force, hath overcome but half his foe." - Milton
You are wrong about this also. Do you think that when the government issues some stupid proclamation that increases the cost of doing business the owners take the money out of their own pockets? "Sorry kids, no college for you. The government raised the minimum wage and I have to use my savings to pay it." You are deluded. Or perhaps you think businesses can pay the extra wages out of their fat profits? Wrong. The reality is that most businesses operate on razor-thin profit margins. To pay higher wages they must raise prices or fire marginal workers, or both.
So the money that goes to pay the increased MW comes out of the salary of terminated marginal workers or out of the paycheck of all consumers through higher prices. Every extra dollar in the hands of the employees now getting a higher wage must be subtracted from the hands of other potential consumers.
The MW will not stand up to the slightest analytical scrutiny.
Last edited by Acala; 04-15-2014 at 02:27 PM.
The proper concern of society is the preservation of individual freedom; the proper concern of the individual is the harmony of society.
"Who would be free, themselves must strike the blow." - Byron
"Who overcomes by force, hath overcome but half his foe." - Milton
I will concede that it's possible that a minimum wage increase could temporarily aid in stimulus on a macro level (though there are plenty of factors at play, so it may not and regardless, leads to long-term issues we continue to face from it), but it's definitely not as simple of a relationship as you make it out to be on the micro level. People having more money does not necessarily mean that all producers will benefit. Only some will, others may see their profit margins shrink, be forced to sell at higher prices, etc, while not seeing a significant enough up-peak in sales to be any better off.
Who benefits? Well, it is clearly the big conglomerates who are already eliminating costly labor with technology and outsourcing. So what if you make them overpay for a few button-pushers, if it means they gain a bigger share of the market, and can better set prices with less competition to drive prices down.
How does it eliminate competition from smaller companies and hurt them? Well, it's simple. Most smaller companies are operating on thin profit margins already, so they only have a few choices when wages rise:
1) Raise prices - certainly not what they want to do unless the supply/demand/cost curves determines that this is profit maximization, but they may not have a choice, because they must maintain a profit.
2) Do more with less employees - by either replacing them with technology (if they can afford it), or by hiring more productive employees at higher wages. Though employees can only do so much, and in many cases cannot compensate for the production of employees lost. You need to be able to pay labor at a reasoable rate for what they can produce for them. They have to.
Thus, it may not even be possible for most companies to overpay for labor, as it simply kills their profit margin no matter what. Small businesses are most vulnerable, and I assume that you realize that these people not making money is going to hurt, perhaps even moreso than the marginal rise in wages.
How will it hurt? Well, the obvious reason is if their business goes belly up rather than succeeding, you take their money out of the market. But also, as I mentioned earlier, less competition is worse for everyone but the few big companies who are actively eliminating employment in favor of technology.
Last edited by TheGrinch; 04-15-2014 at 02:43 PM.
I'd rather be a free man in my grave, than be living as a puppet or a slave - Peter Tosh
The kids they dance and shake their bones,
While the politicians are throwing stones,
And it's all too clear we're on our own,
Singing ashes, ashes, all fall down...
I think this gets to the heart of your limited thinking. You seem to believe that rich business owners that are hoarding money in the bank will be forced to withdraw that money and give it to the poor workers. This is not reality. In fact it's not even close. What you think you know just isn't so.
You are presuming that all or at least most business owners are sitting on large hoards of cash. Now your common sense should tell you that business owners are all in different places financially. So are doing fantastic, some are getting by and some are struggling. Any businesses that are struggling or just getting by don't have any hoards of cash sitting around in the bank.
Those businesses that are doing well usually have plans to put their capital, aka hoards of cash, into some kind of action that will grow their business and make them more money. This is much smarter than keeping it in the bank and earning 1% interest that doesn't even keep up with inflation. Usually those plans to grow their business has a component of hiring more people.
So at a minimum you are proposing that companies reduce hiring so that those dollars can be reallocated to existing workers. Those new employees would have gotten money from pot A that they could have spent, but not under your plan. You apparently think taking that money and giving to the existing workers will somehow create spending that the new workers would not have.
Now that the hiring has been reduced under your plan, more people will have to look longer and harder for employment. Likely those people will need government assistance because you have made it harder for them to get a job. Will you now demand that the government raise taxes on the businesses that you believe are hoarding cash, so they can pay for government assistance to the poor people that are out of work?
Citizen of Arizona
@cleaner4d4
I am a libertarian. I am advocating everyone enjoy maximum freedom on both personal and economic issues as long as they do not bring violence unto others.
Despite the OP's intent, this thread has provided valuable insight into economic understanding. The OP can ignore the thoughtful arguments place here, but readers can see with clarity what reasoned logic concludes. Overall a good thread.
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