Posted by Dinah on November 23, 2005, at 22:30:57
In reply to Re: just one more... » AuntieMel, posted by alexandra_k on November 23, 2005, at 15:01:08
Economics is rarely simple. A major raise in the minimum wage has many effects, not all the intended ones. For one thing, you just can't take one group of people and raise their hourly rate without a ripple effect in the rest of the employees of the region. Those who now make the minimum wage + $5, or +$10, or +$25, would likely expect a raise in their wages as well. This would all mean added costs to a company. Companies rarely absorb cost without action. There are two possible actions. Cutting costs (by perhaps cutting employees or perhaps by outsourcing to areas with lower labor costs) or raising prices (causing a raise in inflation and reducing the actual buying power of the raise in the minimum wage). The actual inflation rate could increase by more than the increased cost. Since most small companies, at least, judge their bottom line by percentages rather than strict dollars. So they want x% gross profit, x% net profit. So a $5 increase in cost either means a $5 cut in other costs or a $5+5% profit increase in prices. Not to even mention the countless other costs that are based on the $ amount of payroll. Workers comp insurance comes easily to mind.
By the way, most big businesses are owned by regular folk. Their stock is held in retirement accounts everywhere, and savings for retirees, and middle class people. It's rarely helpful to the economy at large to assume that "big business" will absorb the cost of anything without also remembering that. Certainly, I suppose a lot of raises could be absorbed by the those exorbitant executive salaries that we all hear about. But honestly, is that likely to happen in the real world?
And the owners of small businesses? Well, a lot of them are my heroes. Putting their entire wealth on the line on shaky prospects. Often earning less than their employees, when times are lean. I hesitate to think what raising the minimum wage substantially, and the resulting higher salary demands by people all up the pay scale, would mean to those people who are trying to make ends meet in the current business climate where increased insurance costs alone... Well, dont' get me started on that.
I'm assuming you're proposing a rather drastic increase in the minimum wage?
The only way you can control one element of the economy without countless other elements also being shifted is in an economy controlled by the government. But that style of economy clearly has drawbacks as well.
poster:Dinah
thread:578654
URL: http://www.dr-bob.org/babble/poli/20051121/msgs/581767.html