$10.10 Minimum Wage Would Actually Create New Jobs: Study

his competition has the same cost increase, i really doubt the whole industry will decide to take a hit on their margins. do u have a link?

 

Business, regulatory, and technological conditions and change drive these things. Retail grocers, for example, once had much higher margins, now I believe they're about the lowest margin business one can be in.

 

right, regulations and govt mandates are a big part of the reason the economy has turned to suck, like in other socialist countries. but private companies set their own prices and they tend to pass new costs on to their customers, like good capitalists. this raises the cost of living in exchange for 'fairness', the idea is complete shit, especially when the lazy can just stay on govt welfare and make the same amount of $$, or more.

do u have a link ricter? i feel like you're making this up.

 

They might piggy. Competition doesn't work that simple. I have a business and when my costs go up my prices don't always go up in sync with costs. I still have to compete. In fact the competition is what drives my pricing not my costs. Right now I'm working in an area where my profit is 40% more than back home with labor and material costs being the same and I've also worked where my profit is quite a bit less than normal. It's hard to figure where the price point is. If costs go up marginally then some businesses will use this to try and gain market share by not increasing prices. Eventually if costs go up enough the final price to the customer will also. I don't know if a 10.10 minimum wage would raise costs enough to have an effect or not.

 

i get how it works, but you wouldn't just say "we'll take the loss" BEFORE even seeing what your comp does, would you? I would vote to shit can a ceo that said that (and meant it).

 

Not sure I can find the one specific CEO interview anymore, but analyses of the effects of a minimum wage increase are all over the web right now and you can easily find discussion of the tradeoff between prices, margin, and staffing levels. Even in the same sector some businesses can and will respond differently.

 

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true but their costs are all still going up equally. those that will employ fewer people or raise prices, or whatever.. are trying to keep their margins in line. just stating 'we'll eat the cost' is lazy and stupid, from the companies perspective.

 

To answer PiggyBank's question, Grocers used to have higher margins but they were never considered a "high margin" business. However these higher margins existed in a era when there were smaller neighborhood grocery stores, and fewer large chains. Usually an owner would own 5 or 6 stores in a local area.

Now most grocery stores are large regional chains. They have to compete with Walmart, have to contend with large scale use of coupons, and have to compete with internet groceries. This has all caused margins to sink to the floor in the grocery business even with utilization large-scale wholesale sourcing to get the food in at record low prices from distribution chains.

It is impossible for a small grocer in the U.S. to compete today unless they are in an ethnic food niche (e.g. Indian grocery) or are located in a remote place with no competitors.

 

The minimum wage proposal is based on an economic model. But there's just one problem.

Economic models often fail because they're bound by assumptions that don't measure "unintended consequences."

Here's a classic example:

When a good idea isn't such a good idea

In the late 1980s the idea of a “luxury tax” on yachts had 80% support from the public. College professors all across America clamored for the tax, claiming their economic models showed it would raise tens of millions in tax revenues while making the rich pay their "fair share." A few brave souls dared to mention the problem of “unintended consequences,” but they were quickly shouted down.

Under sustained public pressure, Congress enacted the luxury tax in the fall of 1990. But what seemed like a good idea at the time quickly turned into an economic nightmare when people simply stopped buying boats.

The yachting industry tumbled into an irreversible decline. American boat sales fell by half. Over 35,000 middle-class boat-building workers, sales people, administrative staff and managers lost their jobs. Over 50,000 people who worked for companies that supplied yacht parts and raw materials also found themselves in the unemployment lines. Factories that had been filled with American workers manufacturing high-quality products were suddenly empty. In less than two years, the luxury tax on yachts destroyed tens of thousands of middle-class jobs.

Adding insult to injury, the luxury tax also resulted in a net loss to the US Treasury. In other words, the lost income taxes from the workers and boat businesses plus the cost of unemployment benefits paid by the government was tens of millions of dollars more than the amount of luxury tax collected.

In 1993 the luxury tax was repealed by Congress, but not before the damage had been done. Almost a hundred thousand jobs were lost and scores of boating businesses were bankrupt or irreparably damaged.