RE: Why we need a mandatory living wage:
September 3, 2014 at 9:24 am
(This post was last modified: September 3, 2014 at 9:26 am by Isun.)
There are many reasons that raising the minimum wage may or may not increase prices.
Labor is only a percent of the total cost of a product. For example labor may only represent 10% of the cost. If that is so, then if you maintain the same profits for the company then it only raises the cost 7% (example is from 9 to 15/hour). Not by the amount of the salary increase for the employee so it is a net benefit for the employee.
The reality is that the sales price is dependent on demand and supply. If they raise the cost and fewer buy, then they will lose business. So they will be forced to either produce less widgets or eat up the cost. This of course varies depending on the product, but it is often why company's during a recession will sell at a loss.
With people making more money, they will create more demand. That demand increases sales and production requiring more people to be hired. That decreases unemployment.
Labor is only a percent of the total cost of a product. For example labor may only represent 10% of the cost. If that is so, then if you maintain the same profits for the company then it only raises the cost 7% (example is from 9 to 15/hour). Not by the amount of the salary increase for the employee so it is a net benefit for the employee.
The reality is that the sales price is dependent on demand and supply. If they raise the cost and fewer buy, then they will lose business. So they will be forced to either produce less widgets or eat up the cost. This of course varies depending on the product, but it is often why company's during a recession will sell at a loss.
With people making more money, they will create more demand. That demand increases sales and production requiring more people to be hired. That decreases unemployment.
