This argument is BS because these businesses are local and are not competing with any other business that does not have the same labor rates.
No it isn’t, you just don’t understand the argument. The initial assertion was that requiring business owners to increase their payroll dramatically was no problem because of some blind assertion that business owners will figure out how to deal with it profitably. I highlighted the fact that it was this notion that was at the heart of why the US business environment (the US business environment, not the local Seattle MW market) was struggling.
The problem is the blind faith that any action can be taken against the profitability of a company because somehow it will work out in the end. It’s why i put the effort into discussing profit margins, because that puts a hard limit on the amount a company’s profits can be squeezed, assuming it can’t pass on costs entirely to consumers or cut expenses, before the company has to close up shop.
The minimum rate is a blanket rate that all must pay. If one business needs to raise prices to cover labor costs, so does all of your competition.
Not sure why you highlighted your own post.
Yes, it’s true that to the extent you’re competing with other companies who also pay minimum wage, their payroll costs will rise as well, but that’s not the entire picture. Two things come to mind. First, your competitor may be an international multi-billion dollar conglomerate of chain restaurants, one who is much more able than the rest of these local businesses to absorb the shock of increased payroll by deferring any number of other expenses. Such a company could merely cut their marketing back, maybe stop sponsoring some Nascar driver, which would allow them the leeway to raise their prices less than the local business. Also, higher wages increasingly make the investment in automation more cost-effective, and these large companies are more able to handle such an investment. There are a hundred different ways they would be able to more easily deal with the increased costs.
Second, let’s say all your competitors are similarly situated to you and are no more or less able to handle wage increases without raising prices. In that case, you may not be out-competed, but your business will very likely suffer the effects an artificial price floor. Take a look at this simple supply and demand curve.
Let’s say this represents the supply of goods and services provided by these MW businesses, and the demand of consumers for the product. At higher prices, business are willing to provide higher supply, but demand is lower, with the opposite being true for lower prices. Supply and demand meet in the middle, the equilibrium point, and that’s where the market-determined price for a good/service is found. Now look at what happens when you introduce a price floor, which is analogous to the current situation in that businesses are forced to raise their prices higher than the market equilibrium is selecting for. At the price floor, the supply offered is much higher because prices have been raised, but demand has fallen sharply. This is simple macroeconomics, it’s why price controls are pretty much never a good idea because they distort the natural balance of supple and demand.
So yes, all your competitors may have been forced to raise their prices as well, but you’re ignoring the market forces that will act on consumers to lower the demand for goods and services for these companies.
If paying the minimum is too expensive for a business then they are poorly run.
That’s a bumper sticker throwaway line, with no backing. Businesses don’t control market forces other than through modulating the prices of their products. The most well run business in the world will fold if forced to raise its costs too much without commensurate increase in revenue.
I own a business and no employee makes less than double minimum wage. If you want quality workers pay them a fair wage.
That’s good for you. Honestly.
Clearly you work in a field with profit margins high enough to support such high wages. But come on, you know that most businesses that pay their employees minimum wage don’t operate on those kinds of margins. You also know that even for those businesses that do have higher margins, there will be some positions in the company that simply don’t warrant high wages. The skills an employee brings to the table determine their wages, and easily replaced employees don’t command higher wages. This is what gets lost in the whole “fight for $15” thing, and framing the discussion in terms of “people deserve dignity at work and a living wage”. Does anyone really think that the skills a Walmart greeter brings to work warrant $15/hr when they can be replaced in 30 mins flat?
As to your last line, i think that’s generally true, but doesn’t apply nearly so well at the bottom of the market. Generally speaking, in mid and upper level jobs, paying better will land you higher quality employees, who in turn are able to help your company provide a better product or service (or simply more of it) to your customers, which brings in more money for the company. That connection doesn’t necessarily exist in many low skilled jobs. A higher paid janitor doesn’t bring the company more money than his lower paid counterpart for example.
I think businesses should treat and pay their employees well, always aiming for retention. Their goals and aspirations should be supported by their employer to the extent that they’re able, they should be treated with dignity. However, at the end of the day the only reason any business exists is to make money, and a company only has the freedom to treat their employees in such a manner if the profit margins exist to do so.
