Quote:
Originally Posted by AGDee
Honestly, the prices of everything would just skyrocket and the people being paid the lowest amount would still be relatively poor.
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Yes.
There are essentially three options for a firm when wage floors are above market equilibrium.
1.) Raise prices on goods, thus negating most gains by minimum wage workers.
2.) Cut employees which may further marginalize the poor.
3.) Take a cut in profits.
While many will say that these corporations should simply cut profits (no matter how illogical it may be) this may be absolutely dangerous for small firms who operate on razor thin profits.
If they're small enough, it may be impossible to cut employees. If the marketplace is competitive enough, raising the prices will mean a lack of buyers for products thus destroying the business. And if profits are razor-thin, well it won't be too long till they're under.