Divemedic: The real minimum wage is zero. Once the minimum wage reaches a certain point, businesses simply stop hiring. They do so either by not expanding or by eliminating jobs by automating.
In the meantime, they will simply increase prices to cover the extra expenditures.
A liberal responds: when wages increase, people on the bottom spectrum spend it (unlike tax breaks for wealthy, who find ways to save it or invest it in multinational organizations that don’t impact us). If poor people spend it, the question is, where? They like to eat out, go to the movies, hit the arcade, bowling, and buy crap at local stores. This is well established.
So if a local business doubles its sales, why would they stop hiring?
Divemedic: Because the cost per unit has increased. If you increase wages, the labor cost, which is the largest expense of any business other than cost of goods sold, is higher. A worker is limited in how many units they can produce per hour, so increasing hourly wage results in a higher unit cost. The business must respond by either increasing prices or decreasing costs, in order to stay profitable.
Increasing prices can only be done to a small extent if the company is to remain competitive. The only option left is to reduce costs. This is where automation comes in- once labor costs are more than the cost of automation, the company will automate jobs out of existence. Automation decreases unit cost by increasing the number of units an employee can produce. We are already seeing that with the ordering kiosks and self checkouts in stores. Some companies will resort to hiring illegal immigrants who will work for less than minimum wage. Either way, the American worker suffers..
Your comparison of increased labor to tax cuts is invalid- a business has very little option of cutting its own taxes.
Liberal: That's why I feel there should be a cap on prices or else everything will continue to go up and we’ll be back in the same boat as before except at a higher priced level.