Sanders Introduces $15 Minimum Wage (cropped2)
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The essential goal of business management is to maximize profits by expanding the size of the business and reducing costs. These self-interest purposes are often in conflict with the goals of society. If wages are treated solely as a cost of doing business, like the cost of supplies and rents, etc., then the interests of the business may conflict with the objective of establishing a thriving society.
Take Walmart as an example. It is the world's largest employer. It's wage structure is such that many employees are encouraged to apply for federal assistance. So, society is paying part of the cost of what should be proper wages. And the workers have no surplus funds to feed back into the business community. Their lack of spending power translates into health and educational issues - even criminal issues - which further burden government.
If we take a casual tour of business operations, as the average citizen may see it, we might get the following picture of what would happen if minimum wages were arbitrarily raised. From the business owner's viewpoint, he would have to accept less profits or, if his business operated on a very slim margin he would have to raise prices of his product or services with the following consequences.
In the real world , things are not always that simple. The forces of competition are frequently skirted by various means. Persuasive advertising - the main tool of marketing - is the first recourse. That can establish customer loyalty to a business so that they will overlook price differences, especially among the more affluent buyers. I commonly see price differences of 25% to 50% on the same article in different supermarkets. These differences are usually related to business location. Also, in a diversified business with many products, such as a super market or large box outlet, the burden of increasing wages can be accommodated by selective price increases that could have minimal affect upon overall profits. Most of these recourses apply to larger businesses, and to the best of my knowledge, most proposals for raising the minimum wage, as a starter, exclude very small businesses. Businesses that have no other recourse than to offer less than living wages should disappear.
If the burden on the government of sub-living wages were compensated by taxing businesses, then business might see the wisdom of raising the minimum wage as an alternative. The thing to keep in mind is that it is the consumer - not the business - that ultimately bears the burden of raising minimum wages. Also, it is wages that fuel the economy by purchasing power.