Will raising the minimum wage result in higher costs for consumers as companies struggle to cover the payroll difference?

  • Minimum wage does not increase wealth

    It's important to understand that an "amount" increase in wealth does not necessarily translate to an increase in value of wealth. If the minimum wage were to lets say, be increased from $10 to $15, then companies would lose a lot of money since they need to pay their employees more. Since that is taking place, the employer will do a variety of things.

    1. Decrease the number of employees

    Since the wages of my employees have gone up, I can counter-act that by firing some employees. For an example, if I have a $100 budget every hour for employees, I can hire 10 employees. However if the minimum wage is increased to $15, then I can only hire 6 employees as my $100 budget divided by the minimum wage of $15 results in 6.667.

    However, this action has consequences, as now since I have less employees, my productivity goes down, ergo I don't produce as much and I can't satisfy my consumer base ergo I don't make as much money. (depending on the company)

    2. Increase prices

    From observation, this seems like the most popular idea. If there were a 50% increase of wages from $10 to $15, then I'm going to have to increase prices to compensate, since I make money from my goods/services, I have to compensate from my loss of wages to an increase in prices and therefore revenue.

    Often, these price increases are higher than the increase of minimum wage. For an example, in my State of Massachusetts, where the minimum wage went from $10 to $11, I saw an increase of prices.

    Little Caesars increased their prices from $5.30 per cheese pizza, to $5.99. This means that with a $1 increase in my wage, I saw an increase of spending by $0.69. This means that I'm only making an increase of $0.31.

    That's not all. Because the quantity of money I'm making has increased, I need to pay more in taxes. Mass.Gov says that the income tax is 5.1%. A simple bit of calculation is in need of display.

    A 5.1% tax rate for $10 is $0.51
    A 5,1% tax rate for $11 is $0.561 (let's say 56)

    Now my increase in revenue is only $0.26

    However, now I need to do a sales tax calculation. Mass.Gov lists it at a 6.25% (even though my receipts always say 7%, so I'll just do 7%)

    A 7% sales tax rate for $5.30 is $0.371 (let's say 37)
    A 7% sales tax rate for $5.99 is $0.4193 (let's say 42)

    My revenue is now only $0.21

    ficatax.Org States that the FICA tax in Massachusetts is 15.3%

    A 15.3% tax rate for $10 is $1.53
    A 15.3% tax rate for $11 is $1.683 (let's say 1.68)

    Now my minimum wage increase is $0.11.

    But remember, this is only for ONE Cheese Pizza that is considered CHEAP. If I want 2 Cheese pizzas or something more expensive than around $7, I'm in the negatives.

    I'm out of typingspace.

  • Raising minimum wage will hurt us economically.

    While raising minimum wage may help some of American citizens that are working minimum wage jobs, we must keep in mind that in order to still maintain a profit, companies will have to fire some of their employees. It was estimated that raising federal minimum wage to $8 would result in the termination of around half a million employee's jobs. This does not seem like a feasible option and because of this minimum wage should be kept at the current rate.

  • Increased minimum wage equals higher costs and lost jobs.

    Raising the minimum wage will result in higher costs for consumers as companies struggle to cover the payroll difference. There is no use in paying people a higher minimum wage when the costs of goods and services will have to immediately increase. These changes will cost more people their jobs and put necessities out of financial reach.

  • Yes I think that this is possible,

    Especially in the beginning when minimum wage is raised and the Federal Government tries to figure out how they will be able to sustain the economy and inflation with the raising of the minimum wage. It will be difficult but hopefully overtime the economy will be able to adapt to the change in minimum wage and businesses as well.

  • No, increasing minimum wage stimulates the economy by increasing corporate profit.

    No, increasing minimum wage will not result in higher costs for consumers. In fact, one would expect the opposite to be true. With increased buying power, workers who make an elevated minimum wage would be more likely to purchase goods and services they might otherwise be unable to afford. The increased demands for these goods would result in increased profit for companies and potentially reduce the overall cost for consumers.

  • American companies do not sell to American consumers.

    The argument that increasing the minimum wage will increase consumer costs would be viable if American consumers were buying American products. How much American product does the average American buy? Clothes are foreign made, food is foreign grown, oil is foreign drilled and our movies are foreign made. What in America is truly American? Even American automobiles are made overseas.

  • Products produced by minimum wage workers are often highly inelastic in demand

    As an example, imagine a whole state increases the minimum wage in the catering industry. The increase in costs can be passed directly onto the consumer since cross price elasticity will not be an issue if all firms are forced to rise wages. The proportion of income and lack of substitutes will mean the higher wage burden will fall on the higher income consumer. Tax revenue will rise, both through ad valorem tax and income tax on more highly paid worhers, hence less need for business tax payments, and less social support needed by the state for these workers. The higher level of health and education enjoyed by the workers will create a more productive future workforce, pushing down aggregate supply costs and slowing inflation. This in turn will prevent proces rising for the consumer.

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