Bit of a loaded question but I'm completely ignorant when it comes to economic matters but I've heard that raising the minimum wage would raise the price of basically everything else and it'd basically just level itself back out to where things are now - is that true?
Asking because I'm a moron, not because I'm trying to incite a political debate of any kind.
It's really a complex issue, but the answer is that it certainly can.
Businesses typically price goods and services at what it costs to provide said goods/services plus a profit (usually calculated as a profit margin percentage). So, if it costs $0.50 in materials and $1.50 in labor to produce a single good, you've got an item that costs $2.00 to get ready to sell. If the seller wants to realize a 20% profit margin on that particular item, he then sells it for $2.50.
If the minimum wage increase bumps his cost to produce up to $2.10, he has the following options:
1. Keep the $2.50 sales price the same and accept a reduced profit margin.
2. Bump the sales price up to approximately $2.52 to keep the profit margin at 20%, a roughly 1% increase in the price.
3. Reduce costs elsewhere to offset the $0.10 per-unit cost of producing goods. If he can't get that offset from the physical costs, he can get it from the labor costs by demanding the workers produce more items per hour, reducing the costs of benefits offered (maybe reduce vacation days, no longer provide coffee onsite, etc.), demanding the workers produce more items per hour plus reducing the hours they work to keep labor costs the same, etc.
So, it's complicated, but the general rule you can go by is that businesses will generally adapt in one way or another to a minimum wage increase by trying to control costs elsewhere or raising prices to offset it, although some may choose to absorb it with no other changes. If anyone insists to you that minimum wage increases have no negative impact, however, ask them why not then raise the min. wage to $50 . . .
