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Old 08-22-2013, 12:51 PM   #40
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Join Date: Jul 2006
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Originally Posted by Arkie View Post
Fixing the labor market at higher costs does two things. It makes the selling cost of products and services go up, and it creates more nominal income for consumers. Naturally, the free market side will try to re-balance with higher prices and a higher cost of living. The only way to stop this is with price controls. Might as well fix the entire market instead of keeping one side free. Then the confused people couldn't blame the negative outcomes on a free market that doesn't exist.

Past research on how business costs rise with minimum wage hikes indicates that a 10-percent minimum wage hike can be expected to produce a cost increase for the average business of less than one-tenth of one percent of their sales revenue. This cost figure includes three components. First, mandated raises: the raises employers must give their workers to meet the new wage floor. Second, “ripple-effect” raises: the raises employers give some workers to put their pay rates a bit above the new minimum in order to preserve the same wage hierarchy before and after minimum wage hike. And third, the higher payroll taxes employers must pay on their now-larger wage bill. If the average businesses wanted to completely cover the cost increase from a 10-percent minimum wage hike through higher prices, they would need to raise their prices by less than 0.1 percent.[1] A price increase of this size amounts to marking up a $100 price tag to $100.10...

This basic conclusion is supported by a 2008 study that reviewed the economic studies on the impact of minimum wage hikes on prices and inflation.[3] The estimates from these studies cover a relatively wide range, suggesting that a 10-percent increase in the minimum causes overall prices to rise somewhere between 0.2 percent and 2.16 percent, with most estimates falling below 0.4 percent. These estimates are larger, but in the range of how much businesses’ costs increase as discussed above. Even the higher estimate of a 0.4 percent rise in price level with a 10 percent minimum wage hike suggests that a typical COLA adjustment to the minimum wage rate would only push up the price level by 0.1 percent.[4] Recall that this amounts to adding just one dime to a $100 price tag.
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