That is one mechanism, sure. But you’ve done nothing to address the part where some businesses optimize productivity to remove positions, specifically in response to budget concerns brought about by wage increases.
Sure, but those are secondary effects, and the ability to do this depends on the specifics of the market. As soon as you move away from econ 101, specifics matter and we can’t really say what will happen with any certainty.
Regardless, for your specific example of McDonalds there is an obvious third option (beyond making do with fewer workers or raising prices) that you were neglecting- making less profit. McDonalds, in particular, is fairly well run and has decently evidence based price points and labor guidelines. Would you really expect McDonalds has failed to optimize labor and productivity to the extent that a minimum wage hike won’t primarily come out of franchise and corporate profits?
What happens in reality with a minimum wage increase will depend on the mix of businesses in that area and how well they are run. If a small town’s local employers are a Walmart logistics center and an amazon warehouse, increasing minimum wage is unlikely to result in much reduced employment, both companies are very well run and focused on both productivity and pricing. A state wide minimum wage increase may even result in MORE employment from increased Walmart/Amazon demand.
If a local area’s primary employment is poorly run local restaurants, companies may well make do with fewer workers, and employment will drop.
It is a truism among consultants that the default recommendation to a small business in need of more income is to simply raise prices by 10-15% across the board, before looking for other ways to improve the bottom line.
And when a consultant works with big employers, (say Walmart), you don’t recommend what they are already doing (relentlessly optimizing prices). Many (most in many areas) minimum wage employees work for large chains (which are reasonably well managed), so its not obvious which effect will be larger and it probably varies area to area.
I hope we can agree that raising the minimum wage will have some mix of employment effects and (essentially) wealth transfer to low income workers. I hope we can agree that in the real world, this mix is going to be very much dependent on specific economic factors.
Sure, but those are secondary effects, and the ability to do this depends on the specifics of the market. As soon as you move away from econ 101, specifics matter and we can’t really say what will happen with any certainty.
Regardless, for your specific example of McDonalds there is an obvious third option (beyond making do with fewer workers or raising prices) that you were neglecting- making less profit. McDonalds, in particular, is fairly well run and has decently evidence based price points and labor guidelines. Would you really expect McDonalds has failed to optimize labor and productivity to the extent that a minimum wage hike won’t primarily come out of franchise and corporate profits?
What happens in reality with a minimum wage increase will depend on the mix of businesses in that area and how well they are run. If a small town’s local employers are a Walmart logistics center and an amazon warehouse, increasing minimum wage is unlikely to result in much reduced employment, both companies are very well run and focused on both productivity and pricing. A state wide minimum wage increase may even result in MORE employment from increased Walmart/Amazon demand.
If a local area’s primary employment is poorly run local restaurants, companies may well make do with fewer workers, and employment will drop.
And when a consultant works with big employers, (say Walmart), you don’t recommend what they are already doing (relentlessly optimizing prices). Many (most in many areas) minimum wage employees work for large chains (which are reasonably well managed), so its not obvious which effect will be larger and it probably varies area to area.
I hope we can agree that raising the minimum wage will have some mix of employment effects and (essentially) wealth transfer to low income workers. I hope we can agree that in the real world, this mix is going to be very much dependent on specific economic factors.