[hellojesus]

Basic economics can be reduced to: Operate while marginal_revenue >= marginal_cost (mr >= mc).

In this example, marginal cost just increased by some delta, d, to get to $20. This means that anyone currently working in such fashion that d > (mr - mc) now provides negative value to their employer.

Furthermore, in any future venture, people will only be hired if they can provide >= $20 in hourly revenue.

Likely fast food restaurants will raise prices to cover the increased mc, so this ultimately gets passed on to the consumer.

I don't understand why this is controversial.

[aaomidi]

Because you’re not changing the service you’re providing and a “worse” worker doesn’t decrease the throughput of the store in any measurable fashion.

This increase will get passed onto the consumer, and it will also create more competition in who can maintain the constraint of $20/hr for pay while decreasing the rest of their costs to compete with the McDonald’s and KFCs.

For example, reducing the profit margin.

[hellojesus]

> Because you’re not changing the service you’re providing and a “worse” worker doesn’t decrease the throughput of the store in any measurable fashion.

I dont think either assertion is true.

Maybe a business finds ways to cut costs to offset the wage increases leading to a worse product for the consumer.

If I have a worker that is able to produce 150% of the tacos per hour compared to another worker, there is definitely a difference in throughput and therefore a difference in value.

> This increase will get passed onto the consumer... reducing the profit margin

I agree. There are three outcomes:

1. Pass the costs to the consumer

2. Reduce profit margins

3. Go out of business (this happens when 1 and 2 fail)

The policy now has forcably changed the market equilibrium for labor by reducing supply in jobs comparable to fast food. The government has now mandated the consumer must pay more than the market equilibrium price. It has mandated that entrepreneurs reduce their income.

[aaomidi]

The government has mandated that a business should be paying its working a living wage.

All the other things are secondary consequences that may, or may not, happen.

If a company can not keep up with the rising cost of labor, they’re more than welcome to secede ground to their competitors who can.

[claytongulick]

A high school kid needs to make a "living wage"?

This is the absurd argument I see made all over the place in favor of high minimum wages.

If $20 per hour is ok, why not $30? Or $50? Or $100? It would make everyone rich, right?

What's the problem?

Command economies don't work.

Laws like this are short sighted and the only effect is to devalue our currency even more.

[aaomidi]

> Command economies don't work.

Command economies were literally one of the golden ages of the American middle class. So no they do actually work.

Anyone who is working deserves a living wage. Otherwise we’re now helping companies hire people and not pay them enough for the work they do. These people don’t go away, they end up costing all tax payers more $.

Also, next time you go to a fast food place look and see how many of them are high schoolers. Maybe that’ll stop the strawman arguments.

[hellojesus]

> Also, next time you go to a fast food place look and see how many of them are high schoolers. Maybe that’ll stop the strawman arguments.

Have you considered that by increasing minimum wage so dramatically, high schoolers now need to compete with adults for the same positions, and they are now crowded out because they have less flexibility with their hours and schedules?

High schoolers may be willing to accept a lower wage for the same work, which would give them an advantage in hiring, but now they are barred from seeking it.

[leothecool]

Its controversial because if the market could bear a price increase, it would already bear it. The left hand side of your inequality is already at a local maximum, and can not be raised to pass on costs to the consumer.

[hellojesus]

If that is the case, that means that prices are fixed so either profits will decrease, service will diminish to cut costs to counteract the rising cost of labor, or both.

Companies whose costs can't be cut to cover the rising labor and profits shrink to zero will go out of business.

Why are we mandating that people go out of business when they have people voluntarily trading their labor for a set price?

Why are we reducing the roi of producers of capital which will lead to fewer investments?

Is this a play to reduce fast food for the sake of public wellbeing?

Is there a 5A argument here that the government has passed a law for the public benefit and that law invalidated labor contracts, so now the government owes just compensation for the delta between what their labor cost them prior to the new minimum wage? I would say yes.