Apparently a lot of people dont understand why people argue that prices of products will go up when the minimum wage is raised. They post things like differences in other countries as if the exact same thing can happen here. I figured Id post a little hypothetical to explain this. Lets pretend that Im a capitalist and I own a burger restaurant. My restaurant costs me $500 a month to keep in operation. This cost can be broken up into two things: Fixed and Variable expenses (or Capital). The Fixed expenses (F) refer to the cost of things like building maintenance, rent, and upkeep on the cooking utilities. Variable expenses (V) refer to the costs of things like my workforce (because it is variable as to how many people are working) and the supplies for the food (which can also vary by market supply/demand). My burger joint sells burgers for $5. This price is created by combining F + V + S. S stands for Surplus-Value, or the amount of money that becomes profit. When a business owner makes a Surplus off the values he sells, this value is known as the positive return (PR). The PR becomes the standard value for what the business expects as profit. If the PR goes down, the business is said to be losing money. If the PR goes up, the business is said to be making money. A raise in the minimum wage directly affects my V (variable expenses) by causing them to go up. When they go up, the PR goes down if the price of the product remains the same. Thus in order to keep my PR at its previous rate (since I, as a capitalist, dont want to lose money)...I raise the price of the product to return the same PR by accounting for the increase in V. So it all boils down to the fact that capitalists do not want to see their positive return affected by laws. It has nothing to do with the fact that I may still be making a profit (surplus) off the entire process. For example, if the original cost of F + V = $3, and the burger was sold at $5, the Surplus is $2, thus giving a PR of $2 for every burger sold. If however the V is raised so that the equation F + V = $4, then suddenly the PR shifts to $1 per burger. NOTE: There is still a profit being made! The difference is the rate of profit (RoP) being made. Thus when a capitalist argues that he must raise his prices, hes lying if he says that it is intended to keep the business alive. Its purpose is to maintain the previously-set positive RoP. Their logic can be found almost anywhere: A hotel manager will tell you that his empty rooms are costing him money. But are they really? Sure its costing him Fixed capital, but is that the rest of the worlds problem that he made the choice to spend money in such a way? Certainly not. Despite this, the manager will use that as an excuse to raise the hotels overall rates during certain times of the year. The same thing happens with airplane tickets and many other commodities in our society. The problem with all this is that there is no way to combat it short of attempting to physically dismantle the economic order that allows it to happen. If the minimum wage is increased, businesses WILL raise their prices. Thats just a fact. It doesnt matter if they can afford the increase; because as I already explained...they care more about the RATE OF PROFIT, than they care about PROFIT in general. Hope this clarified some things.
Posted on: Sun, 03 Aug 2014 15:06:48 +0000
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