In my opinion, he overengineered his entire post because what he is saying is your product and the labor making the product are two separate markets. You are not the only employer in town, if another employer pays more then your employees are not going to stick around to produce <insert_cheap_trinket_here>. Meanwhile customers are in a different market, only willing to pay the current price, so raising prices will just decrease demand.

I think it's where it gets interesting. Imagine a situation on the market where margins somehow are lowering for everyone (all employees demand higher salaries, natural disaster, anything).

All businesses in the market raise their prices, except one, which keeps operating at a lower margin. It is easy to see what would happen next - the company that didn't raise prices makes much more than before and all competitors suffer losses.

What if businesses collaborate to raise prices all at once? That would be price fixing which is illegal.

So margins tend to become lower and lower over time. That leads to a very important problem - Tendency of the rate of profit to fall [0]

[0] - https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit...

I'm not sure 'demanding a raise' even has any meaning without further context?

People are always up for more money. The question is, I guess, what they would be doing different if they got that raise or not. (Ie stay on or quit, or join one vs another company etc.)

Sorry for poor wording - my idea was just to propose a situation where you have to pay your employees more somehow, like for example your lead engineer quit and new hire as a substitute will cost you 20% more.

The real question is how the business can mitigate rising salary (and lowering of margins) and whether there is relation between labour cost and price of goods.