Quote:
Originally Posted by GiantBuddha
I think someone mentioned the presence of "virtually infinite outside influences." When 42% of the population gets a raise, there's a good chance that you'll sell more of whatever you're selling, making it easier to pay a higher wage. If Walmart pays its employees more, it's also paying its customers more.
That's not to say that the research on the subject is compelling in either direction. Economics are complex. I tend to think opinions and theories should be stated more as probabilities than certainties. Contending that making Change A will necessarily lead to Consequence B strikes me as absurd. Proposing that Change A will likely (maybe like 70%) lead to Consequence B sounds like something that can be reasonably put forth.
My premise was that the minimum wage leads to higher unemployment. I don't see how some consumers now having more purchasing power changes this.
When the minimum wage is increased, some companies will be able to keep their employees because their margins are enough that they could pay the higher wage and still make enough profit that the business is worthwhile for the owners. And those employees will now be able to consume more from the businesses where they are a customer. But in these situations, you are basically transferring wealth from the shareholders to the employees. I think the net effect will be neutral. Walmart employees have more purchasing power but people who owned Walmart stock have less.
But in other situations, the business will be unable to retain the employees at the new wage and still make a profit. Some businesses may be able to raise prices to maintain a profit, but now the higher wages the employees/consumers enjoy are offset by the higher prices they pay for goods. And some businesses won't be able to be profitable regardless of where they set prices so they will either automate the processes, go out of business, or trim the parts of their business that required labor below the new minimum wage to be profitable. Any of these situations will result in lost jobs and an overall detriment to the economy.
Now you can say you think it is just that wealth should be transferred from the shareholders who presumably are better off than the employees it is transferred to. But you can't target a minimum wage increase just towards those companies that could handle the increase. There will be some amount of economic activity that will no longer take place.