Bard Goes Long-Form on "Living Wage" (TLDR warning)

Now let’s consider that the extra money to pay all those people has to come from somewhere and you can only cut so much from office supplies before you can’t do your job any longer. Where does that extra money come from?

Raising prices, cutting staff or both.

While your mileage on this may vary due to changes in inputs from location to location, that’s the average of it from a microeconomics stance (although with it being so generalized an argument can easily be made for it being macro).

“Buuuuuuuuut… wait, Mr. Smartypants! Wouldn’t all those people making extra money bring more business thus increasing profits,” you might be asking with macroeconomics in mind.. In a vacuum, sure, but it’s not a vacuum. It’s faaaaaaaar from a vacuum.

The first thing that happens is the increased cost to the business. Before a single new sale every business across the country will experience the similar*** increases in the cost of labor. Vastly increased costs before increased profits = layoffs, price increases or both because business can’t/won’t just eat those costs while hoping the market adjusts to cover it in time.

That’s a fancy way of describing the “velocity of money” in the economy. If we follow the Fisherian Theory which is: Money Supply x Velocity of Money = Average Price Level x Amount of Transactions in the Economy (or “M x V = P x T”). This can also be read as V = (P x T) / M. Price and Transactions usually have an inverse relationship so as one goes up, the other goes down. Because both sides of the equation have to equal out we know that the Money supply and Velocity also have an inverse relationship.

Velocity of Circulation - How Velocity of Circulation Causes Inflation

Transactions are the total amount of dollars being exchanged, Velocity is how often those transactions are happening. This means Transactions and Velocity rise and fall together, thus so must the Money supply and Price.

Now if Price goes up and Transactions go down, then the Money supply must go up and Velocity must go down, right?

So if we have government causing the Money supply to go up…



then we know Prices will rise (see: Inflation). Now if we also add into it that Price must rise due to the government-mandated Labor costs, then Transactions and Velocity must drop.

This also means those wanting to “tie the living wage to Inflation” are unknowingly saying “the bigger the fire gets, the more fuel you need to put on it to put it out”.

I know all this macro detail is awesome, but it doesn’t stop there!



The US Dollar is a fiat currency, meaning it’s value isn’t tied to the price of any one thing (like when it was tied to the price of gold when we were on the Gold Standard). Instead the USD is valued by a conglomeration of things, one being the Money supply.

TL;DR of this: the more money there is, the less value it has thus the higher Price goes to have the same value.

The long analogous version: Imagine you are starving. I don’t mean “oh-I-missed-lunch”, that’s just being hungry. I mean “I-haven’t-eaten-in-over-a-week” starving. Ya’ know… STARVING.

So you’re starving as you slowly trundle along a path, wondering if you’ll die soon. In the distance you see a store with a sign, “FREE ALL-YOU-CAN-EAT BURGER BUFFET: $1.00!” But you have no money at all, nothing to even barter.

And then you see it: a lone Dollar lying on the side of the road. How important to you is that Dollar at that moment? Pretty honkin’ important. It literally represents “life” for you will starve to death otherwise.

Now imagine that same scenario but instead of being broke you are pulling a wagon full of Dollars. How important is that roadside Dollar now? Does it have the same level of value to you as it did in the other scenario?

No, of course not. And that’s why too much Money supply can create Inflation.

So to mandate “a living wage” in our environment would create even more Inflation than we see now and that’s from both micro and macro levels.

Similar***: So if you remember earlier I highlighted this word and put asterisks. Why did I do that? Because it’s important.

We have quite a few companies which can eat those increased Labor costs. Easily. Companies like Amazon, Apple, Exxon-Mobile, etc. make quarterly net profits… no, wait…. QUARTERLY NET PROFITS OF OVER A BILLION DOLLARS. Net profits. Quarterly.

These companies can weather Labor cost increases, even with tens of thousands of employees.

For example, Apple has ~147,000 employees in the US. Let’s give all of them, regardless of their income, that same $5/hr raise mentioned earlier as the “living wage” increase. If they are all working 40 hours per week, that’s an extra $1.5B in payroll. Apple’s NET QUARTERLY PROFITS for the first quarter of this year was $23.63 billion.

Another example is WalMart. WalMart has 1.6 million employees in the US. For WalMart to do the same thing it would take an extra annual $16.64B, but WalMart has rarely had annual profits high enough for that. So instead they’ve increased pay their very bottom earners. WalMart also is able to offer great deals on goods because they buy so freaking much. Now compare their ability to sell goods cheaper and their “living wage” pay (or pay that’s closer to it) to the 99.9% of small businesses like we discussed above.

Now compare companies like these to the average small business in the US I laid out earlier. What happens to small businesses (99.9% of the businesses) versus what happens to large corporations when “a living wage” is mandated? The small, local businesses close or shrink while the massive corporations weather the storm. Eventually only sole proprietor and massive corporations businesses would be left.

You sliced off 25% for payroll ($1.08m to $810k), then you sliced off the full payroll AGAIN ($810k to $342k), in effect paying your employees $23.65/hr. Further, you have 15 employees but you're using the average revenue for a business with only 5-9 employees.

I wonder why your numbers don't look so great?

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You sliced off 25% for payroll ($1.08m to $810k), then you sliced off the full payroll AGAIN ($810k to $342k), in effect paying your employees $23.65/hr. Further, you have 15 employees but you're using the average revenue for a business with only 5-9 employees.

I wonder why your numbers don't look so great?

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Mother.
fricker.

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Gimme some cliffs notes on that baw

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Cliffs for the first post: Don't stop mid-writing to have lunch. If you do, when you come back make sure you go back over your work with a fine-toothed comb.


Cliffs for the 2nd post: forcing the Labor floor to rise while the Money supply is getting expanded would mean even more Inflation than we are seeing now.

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It's simple for me.... Hey politicians and govt, make the pay $100 per hour, it doesn't matter, I'll raise prices to match the margin needed to continue in business and so will everyone else. Your move

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Minimum wage is one of those things that makes how disingenuous the Left is come through loud and clear. Without doing something about labor supply/demand or labor efficiency, there is simply no way to change labor's economic outcome outside of divvying up the pie differently, and history proves that (again) outside of a fundamental shift in supply/demand or efficiency, the more unskilled/inexperienced you are the less power you have to claw real wage growth from the others with their fingers in the pie (managers, owners). So then you look at the southern border it becomes obvious the rhetoric from the Left on wages is complete bullshite to mask the fact that their importing millions and millions more unskilled/low skilled labor absolutely makes hopeless the prospects of the American unskilled worker. In fact, the Left's southern border policy is a transfer of wealth from the American underclass upwards. That's a fact.