Posted on 12/05/2017 5:03:52 AM PST by reaganaut1
That is studied by Renkin, Montialoux, and Siegenthaler in a recent paper, which is also a job market paper for Tobias Renkin from the University of Zurich. Here is the abstract:
We study the impact of increases in local minimum wages on the dynamics of prices in local grocery stores in the US during the 2001-2012 period. We find a signifi cant impact of increasing minimum wages on prices in grocery stores. Our baseline estimate of the minimum wage elasticity of grocery prices is 0.02. This magnitude is consistent with a full pass-through of cost increases into prices. We show that price adjustments occur mostly in the months following the passage of minimum wage legislation rather than at the actual implementation of higher minimum wages. This forward-looking pattern of price adjustments is qualitatively consistent with pricing models that feature nominal rigidities. We fi nd no differential price effect for products consumed by poorer and richer households, and no evidence for demand effects. Our results suggest that consumers rather than firms bear the cost of minimum wage increases. Moreover, poor households are most negatively affected by the price response. Price increases in grocery stores alone offset at least 10% of the nominal income gains of the poorest households.
Of course this also would suggest the sector is relatively competitive. And if you are wondering, here is the full slate of job candidates from Zurich.
It is nice to see a study described in an actual academic paper.
The idea that raising the cost of labor causes a domino effect on other budget items should be predictable. Unfortunately, too many leftists who cannot grasp the fundamental laws of cause and effect believe that the minimum wage happens in a complete vacuum. And those same leftists make policy.
isn’t this basic economics, Adam Smith level of stuff?
Why do people have such a hard time realizing that raising the wages of burger flippers will make burgers more expensive, meaning I will go to a different place for my burger. Or not go at all.
So the tax plan voted on in Congress is touted as raising wages for all Americans. Won't that rise in labor costs also cause an impact on prices?
“Our results suggest that consumers rather than firms bear the cost of minimum wage increases.”
Really, wow, a bolt out of the blue on that one. Supermarkets work on a very narrow margin. Any increase has to be passed on in some fashion to the consumer or the store will simply go bankrupt.
Reminds me of a story from my old accounting class. A company had been called in to do an audit at a grocery store that had been losing money. They tried everything to find the loss: spot counts at check out; surveillance to ensure stuff was not being stolen; double checking all paid invoices for accuracy. Everything but they could not figure out how they were losing about 10%. Finally one of the junior accountants asked “how many check out registers are they supposed to have?” They were supposed to have eight but they had nine...the ninth one’s receipts went directly into the store managers pocket! From what I gather every grocery store audit plan has at its first step: verify the number of registers.
Are they next going to do a study to see how much corporate taxes are incorporated into retail prices?
“Won’t that rise in labor costs also cause an impact on prices?” In theory it will raise the prices of everything as cheaper valued money will be used to pay for goods. Also interest rates should rise according to theory.
Some call debasing the currency monetizing the debt. So, older stronger backed debt will be paid off with cheaper valued currency. I believe that may be why the stock market is running up so much these days too, IMO of course.
Not just retail prices, either. Thanks to the minimum wage, in parts of NYS, a server in a restaurant is likely making more than a starting pharmacy tech. That’s not likely to encourage folks to be pharmacy techs unless prices go up to pay for higher salaries. Here again, the poor are hurt the worst.
In the first case, the "pie" remains the same size; in the second case, the "pie" is getting larger, which subsumes the wage increases.
Low profit margins make for one-to-one pass through of lower productivity per dollar of wage expense which is what an artificially induced rise in the minimum wage is. It raises the price of food to the workers or raises the amount they feel they have to steal from their employers.
I wonder how much ‘this study’ cost to produce an answer any business could have told them in less than 10 minutes of interviewing???
Trump needs to put a stop to all the free money that is given for ‘studies’ & ‘research’. It is a big game to prove COMMON SENSE.
“Won’t that rise in labor costs also cause an impact on prices?”
There is no rise in labor costs associated with a tax decrease. The raising of wages comes from a decrease in the amount of money confiscated by the government from its citizens.
Trump was in Missouri last week and said that the tax plan would result in a $2000 cut in the average middle class worker's taxes and a $4000 increase in wages.
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Raising the minimum wage costs jobs and boosts prices, making the country worse off overall.
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Govt doesn’t care the constraints of the Constitution to nullify their illegal meddling via ‘min. wage’, but some more verbose ‘academia paper’ is going to change hearts & minds?!
The idea isn’t even THEORY anymore, it’s been proven time and time again. Not even REALITY matters to the elected.
That's pretty much what I was getting at by describing the apparent liberal belief that minimum wage hikes occur in a vacuum. They imagine that companies have some bottomless pot of money that will magically absorb the arbitrary wage increases without affecting any other line item in the store's budget. Of course, no company has free money just lying around until some liberal gets it in their noggin to force them to give it away on minimum wage increases.
It probably cost significantly less than the [federally funded] studies I oversee in medical research. And I am not going to begrudge the money spent on this study, because it puts into academic terms what should be common sense.
Too many "academics" in the social "sciences" use their academic credentials not to study real world causes and effects, but to cherry-pick data to "prove" that their particular far-left pipe dreams can be made real. Or they simply go off into spouting nonsense. A bona-fide study in the social "sciences" is a rare thing, and should be encouraged.
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