Everywhere I look I see this question. I cannot believe this question can be honestly asked. Did no one have economics class in high school but me? First, lets look at how a business makes money and what determines profits.

Profit= Income-Overhead-Taxes For those that think taxes come on the other side of the equal sign, your are gravely mistaken as to how business works. The profit for the company is always considered after tax profit with no mind paid to before tax gross profit because it means something. Now taxes on business’s take a few forms. First, they pay half of the payroll tax (Medicare, Social security) for every employee they hire. Second, they pay a corporate income tax that varies widely depending on what industry they are in, and whether the current congress and president likes them or not.

So with that in mind what does that mean for this discussion? Taxes are made up particularly by large corporations who have near monopolies on their products and services in the cost of the product. Not just from the retailer, but the wholesaler, and the importer/manufacturer of those products. Not to mention that there is often distributors and other middle men there too. Shipping from place to place. You got the picture. All of this shows up on the bottom line of the company selling you that product and they cannot dip below a place where they start losing money, because even a slight loss sustained for a period of time makes it hard to survive (ask Solyndra about that even with a 50M$ loan and subsidies). A big part of overhead is employee wages. If you make a profit margin of 3% increasing wages across the board without raising prices or increasing efficiency leads to an unhealthy business. The market sets the wage, and the market sets the price of the product in a perfect capitalistic system, but with regulations and mandates piling up amounting to well over 100k pages in regulations we are far from a perfect capitalistic system.

I’ll explain to you in numbers. You do a job. That job grosses you as a business 1k$. Two people work on that job. One works for 20 hours and the other 10 doing the same amount of work. So in this job you have invested 30 hours of wages. 30 hours into 1k$ is 33.33/hr of production for your two workers. But you had to spend 100$ in materials to get this job done, and payroll taxes eat into it as well depending on the pay rate you give your workers (the more you pay the more you pay the government too). So you have 900$ you made on this job. Thats 30 dollars an hour to break even isn’t it? Actually no its not. You then must pay payroll taxes and of course you are paying unemployment insurance and workers compensation insurance and many other potential insurances in case of property damage to the customers property you are working on. Lets just ignore the insurance for now tho. Between the two people in this universe you must pay them between the two is about 28$ an hour. So. In a universe with equal pay they both would make 14$ an hour. Thats to break even. We know business’s don’t survive without any profit. So lets say 12$ an hour allows them a good profit margin to survive. What happens if you give them that 2$ pay raise? Well, you no longer are making a profit if everything stays as is. So, in order to make the same profit you’ve decided is necessary to keep the company healthy you must attempt to raise your prices on that service. What happens if another provider of that same service has the same rate as you at a similar quality? You lose your customers to that other company, losing the ability to employ both people you have to cut down to 1 person to sustain the pay raise. You cannot just arbitrarily force companies or expect companies to raise wages across the board without having consequences in other areas either in cost or in overall employment numbers.

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