Some businesses might fail, but the ones who do will be the ones who are making so little profit that they can't absorb the increase in wages by reducing their profits, they can't increase their prices because of competition from more efficient companies. This is what is called "creative destruction" and it is both an inescapable and a desirable feature of capitalism.
No, you don't understand what's happening.
The destruction of the least efficient companies is a good thing because they will be replaced by more competent competitors.
However, in a situation like this where the destruction is due to a shifting of the equilibrium there will be no replacement. The jobs are simply gone.
It is the same thing that happens when raw material prices go up. Some marginal companies go bankrupt but more efficient companies step in to claim the market share that the failed business had, sometimes even to the point of buying the production facilities of the failed business, at a steep discount, and employing the same workers. In fact, it is more likely that stronger more efficient companies will buyout the weaker less efficient companies long before the failing company into bankruptcy. Especially if the economy is strong, a point I will return to below.
Except the new equilibrium will have fewer jobs and less production than the old.
This brings us to another point, the so-called free market capitalists profess to believe in capitalism as the best economic system, by far. But it doesn't take long to realize that they don't appreciate capitalism ultimate strength, its ability to adapt to changing conditions. The free market capitalist views capitalistic economies as fragile clockwork mechanisms that are easily disrupted, when in truth they are robust and they adapt quickly to different conditions. You only have to look at the many different capitalistic economies that are running successfully in the world and the changes that they have made throughout history to see that this is true.
We understand that it's good at adapting. What you don't understand is that when you shift the equilibrium the result doesn't return to the original.
Raise the minimum wage and you see the market shift towards automation rather than human labor.
Also, it seems that in discussions like this one about the minimum wage free market capitalists treat the economy as a zero sum game, or worse. But it isn't. The more workers there are and the more money that they have from wages, the larger the economy will be. The fewer workers there are who have jobs and the lower that wages and salaries are the smaller the economy will be.
Yeah--and your world will have fewer jobs for the marginal workers.
You are letting your imagination run away with you. We have had frequent increases in the minimum wage and none have produced the problems that you want to assign to it. There is nothing in the literature to even come close to what you are predicting.
The minimum wage increases have not completely offset inflation, thus we should not expect to see effects as the true minimum wage has been declining. Furthermore, most studies look at the unemployment rate--a very poor yardstick as only about 1% of US workers actually make minimum wage. A change that resulted in 10% of them losing their job would thus raise the unemployment rate by .1%--and without far more data points than we have this is undetectable.
This is part of why the Seattle study is so relevant--it tracked workers rather than the overall unemployment rate. Thus it didn't suffer the 99% noise ratio that looking at the unemployment rate does.
(I favor a confiscatory level inheritance tax.)
In other words, a system where nobody can strike it rich with new innovation. In other words, a world with very little new innovation because there's little upside to taking the risk.
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Well then, as long as people keep hiring employees when they no longer make profit from doing so we should be fine.
Corporate profits have doubled under our neoliberal economic policies since 1980, as a portion of GDP, to where they are more than five times the amount of corporate capital investment, up from twice in 1980. They continue to climb year after year. There is a lot of profits to convert into wages before we threaten to eliminate profits, don't you agree?
I assume from the brevity of your response that this is the only point I presented that you had a problem with?
You sure do want to dine on golden goose!
For a clear indication of the outcome of your approach look at Venezuela.
