And of course, doubling prices makes less sales, so doesn't double revenue, it might even reduce revenue.
Re reverse: you said "above taxes paid" for roads, which I didn't mean to imply.
Regarding your "break even" idea: suppose the most someone's labor is worth is $22500 a year. Suppose the minimum required to live is $30000. The government has decided that nobody should starve, and so any outcomes where this person starves are not to be considered. There are two options: allow them to work for $22500 or less, whatever the market will pay, and pay $7500 from welfare, or forbid them from working, and pay them $30000. I don't see how the second is preferable to the first.
So if you believe that raising minimum wage hurts jobs (an empirical question that has economists on both sides), then you shouldn't support.
The other model you could have is:
Value of labor is $30000, but there's so much labor available that the market will only pay $22500. Then, mandating a minimum wage does raise the amount paid, although it can still have negative effects elsewhere.
Probably both models are correct for different jobs, and the question is which one is more often correct. I'm also neglecting inflation, part time, disincentives to work, and so on.
As I understand it deficits have been shrinking. Where are you getting the growing stat from?
I wonder if we're starting to talk past one another. I'm just a layperson here, but I believe I got the meaning of revenue (http://www.investopedia.com/terms/r/revenue.asp) and net income (http://www.investopedia.com/terms/n/netincome.asp) right. So, revenue is all the money coming in, and revenue per employee really is all money coming in divided by the number of employees. If more money is needed to cover a wage increase, one needs an increase in revenue. Apparently, profit is sometimes synonymous with net income, and sometimes it means what's left of net income after taxes and dividends are paid. In any case, it is not impossible for profit to stay about the same while revenue is increased; that all is dependent on where you're at on your supply-and-demand curve on whether sales are terribly affected by a price increase. E.g., remember when gasoline approached $3.50/gal (http://www.statista.com/statistics/204740/retail-price-of-ga... didn't effect sales by much (http://www.statista.com/statistics/189424/us-alternative-and...). I'm willing to bet that burgers and white socks will move about the same.
>As I understand it deficits have been shrinking
I get where you're coming from, in the past few years deficits have decreased, and considering the mess that revealed itself months before President Obama's inauguration, one would certainly hope dramatic decreases would come and soon. However, I've been around long enough (ok, alive in the 1970's) to remember when deficits began to be so on the minds of people generally and be a general concern. Check out https://www.whitehouse.gov/omb/budget/Historicals, and http://mediamatters.org/research/2015/10/19/new-data-debunks.... Aside from several good years in the Clinton administration, it's been mostly deficits at substantial or significant levels. Pick a reasonable window of time between now and 10 years or 20 years or 30 years ago, and fit a trend line. You'll find the trend is still highly suggestive of increasing deficits (no matter if Obamacare makes these future increases smaller, https://www.cbo.gov/publication/50252 and https://www.cbo.gov/publication/49892 and https://www.cbo.gov/sites/default/files/51118-2016-03-Budget...).
>Regarding your "break even" idea
Yep, it's just my conjecture. But your counterpoint conveniently side steps on just how the government produces the $7500 in your example. Raising taxes? Issuing more Treasury bonds? Perhaps you could elaborate on this?
If that's the case, then Walmart could double their profit now by raising prices. I doubt this.
If you assume revenue goes up without an increase in costs, then yes, but there's little reason to assume that. Walmart carries millions of products, and to assume they can raise the price and not lose sales is wrong.
> But your counterpoint conveniently side steps on just how the government produces the $7500 in your example. Raising taxes?
I had in mind using taxes. I didn't discuss a shift in policy which requires a change in revenue, I was describing the end result. Government raises funds and spends it.
T-bonds are just spending future tax money.
>If you assume revenue goes up without an increase in costs, then yes, but there's little reason to assume that.
Well, let's review, and please check out my math below. I did some more googling and copy-pasted what I found.
(copy-paste:) Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold.
Hence revenue is an amount independent of costs. Two ways to raise revenue, by definition, is to raise prices or increase sales.
(copy-paste:) Profit is a financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained goes to the business's owners, who may or may not decide to spend it on the business.
Hence profit (and not revenue) is the amount that is dependent on costs. Note that net income is often considered the same as profit.
Raising wages raises costs. Without a respective increase in revenue, profit is impacted.
(copy-paste:) Profit margin represents the percentage of revenue that a company keeps as profit after accounting for fixed and variable costs. It is calculated by dividing net income by revenue. The profit margin is mainly used for internal comparisons, because acceptable profit margins vary between industries.
For Walmart, quarterly profit margin is about 3.5% (https://ycharts.com/companies/MCD/profit_margin).
For McDonalds, about 19% (https://ycharts.com/companies/MCD/profit_margin).
So I was suggesting that increased labor costs could be balanced with increased revenue brought about by increased prices. For example, a 4% increase on a 10-pack of white socks that was $7.50 at Walmart is now $7.80. A 14% increase on a Big Mac that was $4.00 (http://www.fastfoodmenuprices.com/mcdonalds-prices/) is now $4.56. With some market research maybe we can figure out how many fewer socks and burgers get sold. But hey, at $4.56 a Big Mac it's still cheaper in the US than in Sweden and Norway (http://www.economist.com/content/big-mac-index).
An alternative to price increases is to accept a lower profit margin. Let M=Profit Margin, R=Revenue, C=Costs; hence M = (R - C)/R, straight from the definition of Profit Margin. We can show with some algebra that we can take R and C on a per-employee basis and M = (R - C)/R still works with per-employee numbers. Also, M = 1 - C/R. Via algebra, we can find the per-employee costs: C = R(1 - M).
Let W be whatever increase in labor costs to be considered (per employee).
Let C1 = C + W, the new cost from the increase in costs from labor.
Let M1 be the new profit margin after the more expensive labor takes it hit. Again via algebra, M1 = M - (W/R).
To keep the math easy, we'll consider a W where the hourly cost of labor increases $1 for the year (per employee): $1/hr 35 hr/wk * 50 wk = $1750. Now, a $5/hr increase to the employee would mean $5 plus FICA taxes etc. to the employer. So let's then consider a total increase of $6/hr of labor costs too.
For Walmart, then, every dollar to labor is a $1750/$209,622 hit to the profit margin, or barely one basis point (0.835 bps).
For McDonalds, it's $1750/$60,507, or 2.89 bps.
So if Walmart doesn't want to budge from their spot on their supply-and-demand curve (whatever that may be), i.e. doesn't change prices, then in absorbing an additional $6/hr labor cost would mean settling for a profit margin of 3.45% (=3.5 - 6 * 0.835 / 100).
And now McDonalds, for them it would be 18.8% (=19 - 6 * 2.89 / 100).
So how'd I do?
209k is revenue. Profit per employee is that times profit margin, which is around 7k. 6 times that $1750 figure is well above profit.
Or just take the 2 million employees they have, multiply by 8 thousand, and get 16 billion, more than their profit.
Redoing the math: Walmart, PM = -1.51% (=3.5 - 6 * 0.835); McDonalds, PM = 1.66% (=19 - 6 * 2.89). Clearly not tenable.
For the giggles, I then went I calc'd on price increases (putting aside supply-and-demand considerations) to cover $6/hr increase. PM and Markups came to 3.3% and 5% for Walmart; 16.2% and 17.4% for McDonalds. These are gross overestimations to be sure, since the approach is akin to giving every employee a huge wage boost, but really we need to know what proportion of employees would get the increase to meet some minimum wage level. Study at https://www.purdue.edu/newsroom/releases/2015/Q3/study-raisi... puts it around 4.3% for restaurants.
Anyway, plenty of good opinions on what we might see: http://www.usnews.com/news/articles/2015-12-22/minimum-wage-..., http://www.frbsf.org/economic-research/publications/economic..., http://evans.uw.edu/centers-and-projects/minimum-wage-study.
OK, this horse has been flogged pretty good.
I'm not sure what you mean by "My point was the reverse" - "public good" is not charity I guess?
I'm trying to wrap my head around how a less-than-living wage is a necessity for certain kinds of industry to function profitably, and that, furthermore, indirect government subsidies to them via handouts are essential enablers. Is it that consumers perpetually undervalue the products of retailers and restaurants? Or is it that without the subsidies many retailers and restaurants would face much "pent-up demand" (as economists may call it)?
Frankly, for money to have any meaning to it, this situation must somehow have a cash-flow that at minimum breaks even. I.e., if these industries are gainful, that gain should somehow be reflected in the tax revenue back to government, the compensations to executives, the dividends to shareholders, etc. Which means if this is a good deal for the government, does it at least breakeven on the handouts it has made? Not sure if that is happening - there's certainly plenty of think-tank whitepapers available that declare social programs as unsustainable (e.g. http://budget.house.gov/uploadedfiles/rectortestimony0417201...).
But here are some fun factoids: From http://www.marketwatch.com, I get for McDonald's a net income about $5 billion on revenue over $25 billion; for Walmart it's a net of $15 billion on revenue over $480 billion. marketwatch.com also shows revenue per employee of $60,507 for McDonald's, and $209,622 for Walmart. So there's money to be made in cheap food and cheap goods. So, let's see, a $5/hr increase for a 35 hr workweek and 50 workweeks in a year comes to a $8,750 hit to the revenue per employee amount. So maybe a 14% increase in the price of fast-food burgers and 4% increase in white socks?
So in light of growing government deficits, growing corporate profits (well, we'll see about 2016 - http://www.bea.gov/newsreleases/national/gdp/2016/gdp4q15_3r...), and reasonable (whitepaper-ishly anyway) suggestions on the unsustainability of the "public goods" collectively known as the "Welfare State", in this discussion on whether wages need to have some sort of mandatory minimum - well, what are we to make of this? Too many economically useless people?