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175 sats \ 1 reply \ @grayruby 1 Apr 2024 \ on: It’s Economic Logic: Increasing the Minimum Wage Creates More Unemployment econ
Anecdotal but throughout the course of running my business we dealt with numerous increases in minimum wage. The largest being when min wage in Ontario jumped from 12.75 to 14. We never paid min wage but some employees made a couple dollars more than min wage but those employees would expect increases too. We never eliminated any jobs over min wage increases. Our strategy would always be to try to increase our rates where we could to reflect the additional labour cost and if that wasn't possible or enough we would try to find efficiencies and reduce labour hours. Also, if we had long standing employees who were making 5 or 6 dollars per hour more than min wage, if they left we would promote from within for their roles but pay a little less and then hire underneath closer to the min wage level.
A rough example: say we had a supervisor making 20 an hour who left for another job, we would aim to replace them with someone currently making around 17 who would be happy with a raise to 18.50 or 19 and then fill their vacant role with someone making 16.
And sometimes if none of these options were feasible we just had to suck it up and eat it out of the profit margin.
That's very interesting. In labor economics, we know shockingly little about how companies actually manage all this stuff internally. (It turns out no one wants to open themselves up to the liability that would come with letting researchers comb through all their records.
My advisor had done some work on the effect you're talking about. We say that the minimum wage compresses the wage distribution. I think there are still measurable effects pretty far above minimum wage, since you have to keep everyone's relative position stable.
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