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by surement
1466 days ago
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An employee that earns an employer $8 in revenue but gets paid $9 is a net loss of $1 to the employer. If x is -1 then $x is not better than $0. If the employer could raise prices and still be in business, then they would already be doing it. Same thing with lowering costs. As for employee efficiency, yes, if you're forced to pay someone $9 then you will want to get at least $9 out of them. That means you won't hire anyone that's not experienced enough. > Really what ends up happening in reality is increased costs just get passed along Not if the employer wants to remain competitive. There are plenty of bigger companies with greater economies of scale that will happily run them out of business. This isn't a nuanced problem. If you raise the price of something, demand drops. Whether the price in question is for things or labor is irrelevant. |
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There's a little nuance.
Some anecdata: When I tried charging $0 to get my feet wet in consulting I had zero takers. Raising my hourly rate to $100 drastically improved my success rate (nothing else changed, I was still just some kid in high school with a knack for programming at the time).
The real world doesn't have perfect information and is more than happy to use imperfect signals to save time and effort (in any constant-bounded time that's provably required to hit any fixed desired epsilon of error). The price somebody is asking for is often enough a useful signal that demand need not be monotonic.