[Barrin92]

if you mandate higher wages by making firms compete with welfare all you do is create wage-push inflation, because to fund the higher wages companies will have to raise prices. Your average business where low-paid people work, like services or retail or hairdressers don't have some crazy margins where you can magically conjure up money out of the ether.

[TheOtherHobbes]

Big companies can also lower profits.

I know it's a shocking idea, but it is possible.

Sometimes when that happens more money ends up in the local economy and hairdressers etc can charge more and pay more without pricing themselves out of the market.

It's the difference between an optimistic and inclusive economy and a depressive and retentive one which tries to minimise shared opportunity.

[Barrin92]

There's not a lot of big, profitable business in Montana (in fact apparently the largest company in the state has about 10k employees). What you're talking about is monopsony power which yes, can depress wages, but as the article points out Montana has an unemployment rate of 3.8 percent and every sector has labour shortages. It's a tight, competitive labour market, not a loose one.

There is no magic here. If everyone charges more and pays more you have, on aggregate, gained nothing. That's the point, if merely raising nominal wages would make everyone better off we'd have a magic button to solve poverty.

[yarcob]

> If everyone charges more and pays more you have, on aggregate, gained nothing

You would reduce income inequality. People who earn money from labour would now earn more vs. people who earn money from capital gains. It would also incentivise investing into production companies rather than passive investments like real estate.

[koolba]

> It would also incentivise investing into production companies rather than passive investments like real estate.

It would do the opposite. Investments with low to no labor costs would see increased investment as the returns are protected against rising labor costs.

High labor costs also incentivize automation of low level tasks traditional performed by low wage labor. Anybody who’s used a self checkout kiosk knows how that works.

[intended]

Automation is coming anyway. A kiosk costs many many magnitudes lower than even an unpaid human. The unpaid human still has to go to the loo.

This is not an argument to keeping people underpaid.

[bluefirebrand]

Kiosks break down requiring service calls. They need software teams to keep them updated, and a not-insignificant portion of the population still just refuse to engage with them. That's why almost all of the ones you see around in stores have attendants still.

[sokoloff]

How would reducing the profitability of productive companies incentivize investing in them? If I knew this was coming I’d try to move my own investments (time and money) into activities which didn’t require high-priced inputs (like labor) to things which didn’t (like IP and real estate and maybe even crypto).

[prepend]

Actually it increases income inequality. Raising wages affects the lowest wage workers most, the same who are impacted by raising prices. The wealthy and ultra rich don’t benefit from increased wages, aren’t harmed by raised prices, but they earn an income on increased prices so result in higher income.

Think of it as the owner has a percentage of revenue. So prices go up, they make more even if most of it is given as wages. Obviously, firms want to raise prices but are limited by the market because of competition. If everyone must raise prices then the competition element is removed.

[badpun]

How? Higher minimum wages make owning a business less atractive.

[intended]

Minimum wages in America are so low, that an increase in minimum wages goes to spending on consumption goods. This drives economic activity.

Eventually inflation catches up and we are back here again.

To be fair the real issue is the wealth gap.

More money in the hands of poorer people means more money circulation and demand.

Money in rich people’s hands means more investment.

Currently far more is in the hands of rich people so we have incredible amounts of investment dry powder waiting to be deployed, and riskier and less healthy ideas being funded.

Optimum consumption and investment is the ideal way forward, and everyone gets a bigger pie (except the environment)

[mindslight]

> If everyone charges more and pays more you have, on aggregate, gained nothing.

Except for the rampant price inflation in housing, healthcare, education, which has happened over the past few decades. The higher unemployment benefits reflect the actual cost of living. Wages (and service industry prices) rising are unfortunately more of a trailing correction than a leading cause.

[ABeeSea]

>It is a tight competitive labor market

So raise wages enough to convince people to move to Montana.

[yarcob]

The logic is a bit misleading, because you implicitly assume that goods and services should be as cheap as possible, while rents and real estate prices are rising to all time highs.

If rents were lower, and goods and services were more expensive, then many people would earn more (since many low paying jobs are in retail and personal services). And it would be a lot easier to lower living expenses by just consuming less.

[sokoloff]

How does giving people more money lower rents though? If UBI became likely, I’d expect investments in the low-end of the housing market to do better based on the prospect of a rising rental market and more steady payments of rents owed.

[jonnycomputer]

I'd guess that if low-end housing were a more profitable segment of the market, then supply would increase, driving down the price.

[jonnycomputer]

This seems to be just a recipe for defeatism. It essentially argues that there will always be poor, that anything you do to fix it will just make them poorer. I just don't buy it.

And if its true, then tear the damn system down, because its failing us.

[jollybean]

"all you do is" ... there are are lot of possible side-effects.

[imtringued]

I honestly don't see the problem. Abnormally low inflation is a problem, unless a government cunningly takes advantage of the labor force to get ahead of other nations there is no benefit, it merely indicates that the private sector is not competitive enough and rising asset prices are just an indicator of an increasingly unstable economy.

Just think about it, China gives you free shit, you take advantage of the free shit to make your nation grow faster. Trump says, we don't want your free shit (trade war). Biden says, thanks to your free shit we can grow our economy (infrastructure).

Of course if you do neither, the free shit piles up in your country, prices for everything go down and people are unemployed as a result.