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Old 06-27-2013, 09:02 PM   #89
TonyR
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Join Date: Apr 2008
Location: Mid-Atlantic
Posts: 19,776
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Quote:
Originally Posted by Pony Boy View Post
There is a very simple rule that I follow. I maintain a constant profit margin and if there is a raise in the minimum wage or any other increase in the cost of good or services, I pass them directly to my customers.
I don't know what kind of business you run or how you run it. So I also don't know what type of customers you have so I don't know how an increase in the minimum wage would potentially impact demand for your product. But is it possible such an increase would increase the demand for your product? If not directly then indirectly? Most increases at the low end of the wage scale are spent, so that means there is more spending, more consumption, and more demand in the market in general. If demand for your product goes up then you sell more of your product and you therefore potentially make more money. Even though the profit per unit of product you sell may go down because of the increase in wages, you could possibly still make as much or more money. So, in this scenario you wouldn't necessarily have to increase the price of your product. That is some of the theory behind such a wage increase. Our economy currently has a demand problem because people don't make enough money. The lower you go down the wage scale, the higher the percentage of every extra dollar earned that will be spent. Thus, such a wage increase has a high potential to be stimulative. It won't work for everyone and everything, and thus not for everybody. But if you have the right product and run your business the right way it could potentially work for you. In other words, the equation isn't as simple as you make it out to be.
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