It is a lie that raising minimum wage increases prices proportionately so that there is no benefit.

Businesses have a competitive motive to not raise prices unless absolutely necessary.

Most businesses don’t operate entirely dependent on minimum wage labor. So raising the minimum wage will not force them to raise prices.

Most businesses that depend on minimum wage labor do not operate at such low profit margins that they cannot eat into owner/shareholder profits, expansion spending, or executive compensation, to share profits with their workers in the form of higher wages.

The few industries that have both low profit margins and depend on minimum wage labor are mostly industries which minimum wage workers cannot afford to pay for right now anyway. Leisure, hospitality, restaurants, cleaning services, and childcare services.

So if those businesses raise prices it will not negatively affect the minimum wage earner. The burden will be on the wealthier middle and upper classes who can afford to part with more of their money, transferring it to the hands of the lower classes who serve them in these businesses.

Almost no industries would see a rise in price that minimum wage consumers are obligated to buy from.

Some segments of agriculture (but not all). Food that is picked by hand as opposed to by machines.

Most meat processing jobs pay above minimum wage.

Most employees at grocery stores are not on minimum wage due to unions.

That leaves retail stores without unions that sell essential goods. But you will never see a 1 to 1 increase in cost. You will not see toilet paper double in price because the minimum wage doubled.

Because not all of the cost of selling that to you goes to pay for minimum wage retail labor. The products themselves aren't becoming more expensive to manufacture or transport to the store - only the cost of the labor to run the end user storefront. Which is not even the majority of costs associated with maintaining a storefront.

So the net effect is that a minimum wage earner’s bills will not double if their their wage doubles. Some bills might increase, but most won’t.

So the end result is that a minimum wage earner has more wealth and a better standard of living because the profit has been forcibly shared from the business owners and redistributed from the upper economic consumers towards low class wage earners.

Jobadvisor

The statement you provided argues that raising the minimum wage does not lead to proportionate price increases, and that there are benefits to minimum wage earners. Let's break down the arguments presented:

• Competitive Motive: The text suggests businesses are reluctant to raise prices due to competition. This is a common economic principle, as businesses fear losing market share if they price themselves out of the market.
• Dependence on Minimum Wage Labor: It's argued that most businesses don't rely entirely on minimum wage labor, thus limiting the impact of a wage hike on their overall costs and prices.
• Profit Margins and Redistribution: The text asserts that many businesses relying on minimum wage labor have sufficient profit margins to absorb wage increases by drawing from owner/shareholder profits, expansion spending, or executive compensation, effectively sharing profits with workers. This touches on the debate about profit distribution and corporate responsibility.
• Industries with Low Margins and Minimum Wage Dependence: For industries like leisure, hospitality, restaurants, cleaning, and childcare, where both low profit margins and reliance on minimum wage labor might exist, the argument is that minimum wage earners are not currently major consumers of these services. Therefore, any price increases would primarily affect wealthier individuals, leading to a redistribution of wealth from higher to lower economic classes.
• Impact on Essential Goods: The text claims that almost no industries selling essential goods would see significant price increases that disproportionately affect minimum wage earners. It specifically addresses agriculture (hand-picked produce), meat processing (mostly above minimum wage), and grocery stores (unionized, less minimum wage reliance).
• Retail and Proportionate Price Increases: For retail stores selling essential goods, the argument is that a minimum wage increase would not lead to a 1:1 price hike (e.g., toilet paper doubling in price if minimum wage doubles). This is because minimum wage labor is only one component of the overall cost of a product and running a storefront, not the majority.
• Net Effect on Minimum Wage Earners: The conclusion is that a minimum wage earner's overall bills would not double even if their wages did. Some bills might increase, but most would not, leading to increased wealth and a better standard of living for minimum wage earners due to a forced redistribution of profit from business owners and upper-class consumers to lower-class wage earners.

Economic Perspectives on Minimum Wage and Price Increases:

Economists hold varying views on the effects of minimum wage increases.

• Arguments for price increases (and disemployment): Some economists argue that increasing the minimum wage above the market-clearing wage can lead to:
  • Cost-push inflation: Businesses facing higher labor costs may pass these costs on to consumers in the form of higher prices.
  • Reduced employment: If businesses cannot absorb the higher labor costs or pass them on to consumers, they may reduce staff, cut hours, or slow hiring.
  • Reduced competitiveness: Businesses in areas with higher minimum wages might be at a disadvantage compared to those in areas with lower wages.
  • Substitution of capital for labor: Businesses might invest more in automation or technology to reduce their reliance on human labor.
• Arguments for limited price increases (and other benefits): Other economists and research suggest that the price effects might be minimal due to:
  • Low labor cost share: As your statement suggests, labor costs, especially minimum wage labor, might be a small fraction of overall costs for many businesses.
  • Increased productivity: Higher wages can lead to increased worker morale, reduced turnover, and improved productivity, offsetting some of the cost increase.
  • Increased demand: Minimum wage earners have more disposable income, leading to increased consumer spending, which can stimulate the economy and offset some business costs.
  • Profit absorption: Businesses may absorb some of the costs through reduced profits, as you noted.
  • Monopsony power: Some economists argue that in certain labor markets, employers have monopsony power (buyer's power), meaning they can pay wages below a worker's marginal productivity. A minimum wage can correct this market failure, leading to higher wages without significant negative employment effects.

Empirical Evidence:

The actual impact of minimum wage increases on prices and employment is a subject of ongoing empirical research, with studies yielding mixed results depending on the specific industry, region, and magnitude of the wage increase. Some studies have found little to no impact on prices or employment, while others have found more noticeable effects.

In summary, your statement presents a specific perspective on the effects of minimum wage increases, emphasizing that proportionate price hikes are not inevitable and that benefits accrue to minimum wage earners through a redistribution of wealth. This perspective aligns with arguments that highlight factors like competitive pressures, profit absorption, and the limited scope of minimum wage labor in many industries.