You can argue that those at the very top spend far, far less of a percent of their income on consumer goods and services provided by minimum wage earners and that's totally fair. But it's not credible to claim that a minimum wage increase will do nothing at all for people after a price increase.
This is pretty much what the future of fast food restaurants is like when you raise the minimum wage:
http://www.businessinsider.com.au/mcdonalds-australias-upsca...
McDonalds is usually able to adapt better to changing market conditions than other restaurants.
Many restaurants do go out of business when their prices rise, which is why they hate the idea of raising the minimum wage so much. However, those restaurants are quickly replaced by other restaurants, which is why employment is never affected.
Yeah, I've tried those they're pretty gross. You can also buy a Big Mac for the same price as in the US.
>When you earn $15/hr, you now have to work 19.5/15 hrs to earn a burger.
A much, much better burger.
And you've got more disposable income too.
5.5/15 doesn't beat 1/7.25, but it's a lot more competitive than 19.5/15, and I imagine the Big Mac isn't the cheapest burger on the menu.
For one thing, labor costs are only one part of the larger economic picture. For another, labor costs at the bottom end of the pay scale are only a portion of overall labor costs. So if you raise the minimum wage by ten percent for five percent of the workforce, you have not raised it by ten percent for everyone. Even if you do raise it by ten percent for the whole workforce, you have not raised business expenditures by ten percent because there are other costs as well.
Why would prices increase by the same amount as minimum wage was increased by?
Pay the attendant 5% more and the total cost of obtaining, refining and delivering gas doesn't increase by 5%.
Difference between a business owner and an economics professor is the later writes equations down to describe how he thinks thinks business should work. And then blathers about hedonistic adjustments. A business owner stares at his books every week and thinks 'my problem is my customers have no money' Really easy for a business owner or accountant to get that customers with more to spend outweighs small increase in payroll expenses.
Academic Economists know pretty much nothing of Macro.
Minimum wage can be an attempt to fight income inequality. Not that it's necessarily the best approach for that though (as mentioned elsewhere in these comments).
That is a pretty big assumption. If you are a high wage worker and your favorite supermarkets, restaurants and resorts all raised their prices, wouldn't you feel you are less high-wage than before? Wouldn't you demand to restore the buying power of your wages - or, alternatively, wouldn't you switch to a company that offers you such restored power? High wages are not something valued for the numbers, it's valued for what you can afford. And a lot of places that you want to afford are in service industry - which is highly dependent on labor costs, and even if they did not pay minimum wage, once minimum wage raises they'd have to raise pay too - because otherwise they would be now paying minimum wage or very near to it, and the workers would not tolerate being paid minimum wage now while only year ago they were paid 150% of it.
>> at the cost of slightly degrading that of the high-wage workers
How do you know it would be slight? And how do you know high-wage workers - which are high-wage for a reason, they probably command some economic power, otherwise they wouldn't be able to demand high wages and would agree to work for minimum wage - would tolerate it and would not attempt to restore their buying power? For example, some union contracts have CPI/cost of living increases baked in. Would you expect them to give up those for the sake of their lower paid brethren?
>> Minimum wage can be an attempt to fight income inequality.
Quite a bad one. If you are secure in belief of it affecting only minimum wage workers, you at best can influence 5% of the workers (that's how many get minimum wage), and even if you assume all of them get the pay raise and not the pink slip the effect still will be rather small. If you however (correctly) believe the effect would be much bigger, then pay differentials would be preserved, because they are reflection of many structural and market conditions, none of which would be improved by it.
Yes, it is - I am not at all confident in my understanding of the subject (so thanks for sharing your views with me).
>> at the cost of slightly degrading that of the high-wage workers
> How do you know it would be slight?
"Slight" was a bit of a red herring. Whether the impact on high-wage workers is slight of not, so long as it's negative, it is causing incomes to be more equal.
> If you however (correctly) believe the effect would be much bigger, then pay differentials would be preserved, because they are reflection of many structural and market conditions, none of which would be improved by it.
If these assumptions hold, does that mean that pretty much any attempt at leveling the wage distribution within a capitalist system is destined to failure? i.e. negative income tax, basic income, etc. would also do nothing, as the wage distribution would adjust itself to revert the effects? The only workaround (in which workers are compensated only in cash) is to outright fix wages across the board? (Not that I am suggesting this). Or am I misinterpreting this?
> If these assumptions hold, does that mean that pretty much any attempt at leveling the wage distribution within a capitalist system is destined to failure?
Yes. As much as one relies on voluntarist decrees to override the economic laws, it is destined to fail. Of course, the decrees would affect the wage distribution, at least for a time, and they may temporary improve income for some specific people, but ultimately since the labor price differentials are not product of absence of a decree banning them but of myriad of market conditions, these conditions would cause the prices to readjust or, if proper pricing is prohibited, to go to the gray or black market or be replaced. I.e. cheap fast food places may automate ordering and get rid of those minimal wage cashiers. Or hire just one instead of two and make them work more. Etc.
> i.e. negative income tax, basic income, etc. would also do nothing
Oh, those would definitely do something. Just maybe not the thing you expect them to do. If you institute basic income equal, say, to the salary of a teacher - which is not an easy job - then many people now employed as a teachers may choose to get the same money but instead pursue their leisure or some other less stressful activities. If you still need teachers, you'd have to offer them more to compensate them for giving up their leisure and endure the stress of the job.
Now, these extra money have to come from somewhere - so something has to be made more expensive. People that consume this something would try to keep their consumption level - if successful, they'd get raises too, if failing - they'd consume less, thus influencing those who produced that something and requiring them to be either compensated or find another employment. And so on, and so forth - the ripples are numerous.