SouthernDemocrat said:
First, I never said that costs were the only factor in prices. However, it is a factor. You cannot provide a service or sell a product for less money than it costs you to produce or provide it regardless of how much or little demand there is for the product.
This is an economic forum. Looking at issues from the perspective of the individual businessman is a fatal mistake that many economists have made over the past century. The cost-theories of value have been almost discredited, and it is important for us to understand that supply and demand are the only factors which determine money prices. These prices in turn determine costs, not the other way around. Stop using the PoV of a firm and look at all the interrelations in the economy before you start citing the cost theories of value again.
As far as your other arguments go. I used to work for a company that was a corporate headhunting company. For professional or skilled positions, pay rates are largely determined by market. For example, if ASP.Net programmers are highly in demand in a given market, then employers are forced to compete for ASP.Net programmers and salary’s for that position go up. The same is true for pretty much any professional or skilled position. Jobs that pay minimum wage or near minimum wage are not skilled or professional positions. Generally employers do not have to compete with each other to get a dishwasher or a busboy. So that employer will usually (not always some are more generous) pay the least amount of money that they have to pay someone in those positions. The only factor is paying someone enough so that they actually show up for work.
All makes sense. All buyers on the market will try to achieve the lowest price possible for any good, labor included.
Now, where my concentration of wealth and income argument comes in is here. For example, right now I am painting my home. As anyone knows, painting your home can be a real pain in the ass and an all summer project. Now, say I decide to hire me a couple of day laborers to help me paint my home and say I am a greedy person and just pay them minimum wage even though I could afford to pay them more. They work for me just the same because everyone else is just as greedy as I am (this is just an example, I really am not greedy). Now, say half way through the project, the minimum wage goes up a dollar. In this case, I am probably just going to pay them a dollar more an hour. I still need the labor, and I can more then afford to pay them another dollar an hour. If the minimum wage tripled instead of just rising a buck or two an hour, that would be different. But a small increase is easily absorbed in the end it would just be a little more money for them, and a little less for me. In the end, it might make them more productive to make a little more money.
First of all, you obviously do not know how wages are determined. The demand schedule for labor consists of the discounted marginal value products that each factor contributes to the firm. This curves downward from left to right. The DMVP is what determines the demand for labor, wealth concentration has
nothing to do with it. The amount of wealth in the hands of the people "at the top" will not affect the DMVP's of each laborer.
So you can imagine what my thoughts were when you started talking about wealth concentration - "What the hell does wealth concentration have to with
anything concerning the labor market?"
Second, it is a basic law deduced from supply and demand theory that at any given time, the curve above the market price will
always tend to be elastic, for the simple reason that no individual on the market will not try to take advantage of inelasticity, minimum wage laws or not.
For many corporations, the problem in labor costs is not people at the bottom being over paid, its people at the top being way over paid. I would argue that since there is no empirical evidence that shows that minimum wage increases resulted in higher unemployment, that it may well be that minimum wage increases only result in slightly more equitable pay in companies.
It's not that there's no empirical evidence. There is plenty of data out there, especially when you compare states and their minimum wages/UE rates. But even then, we cannot establish a causal relationship, just as we can't when it comes to times of low employment and hikes in the minimum wage. There are way too many factors involved and often the minimum wage increases are too small for the effects to be visible.
Another note - taking your theory to its extreme, this would certainly be an argument for other price controls. For if the wealthy's demand for goods is inelastic above the market price (like I said, impossible but let's assume it's true) then there's no harm done in instituting "minimum price controls" for certain commodites which rich people purchase often. No harm done, and helps the producers on the market. Right?
