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Minimum wage
24 October 2004 - Las Vegas Review-Journal

Letter-writer Katharyn Lyell asked how a minimum wage increase would cause unemployment, and thereís really a very simple answer. Forcing businesses to spend more on each employee would only mean that they can afford fewer employees in total. The same calculation takes place in a purchaserís head every time he encounters a price increase - he can use his $50 to buy 10 widgets at $5 apiece, but he can only buy 7 when the price goes up to $7.

Suppose a local mom & pop pizza place has a relatively steady expense/sales breakdown that allows them to keep three full-time employees, who have voluntarily agreed to do certain work for a certain wage (which to an employer is just another expense, like raw pizza dough). If the owners are forced to start paying each employee more, the only way to keep all three employees and not go out of business is to raise prices to offset their increased expenses - which could very well turn business away and result in lower total revenue.

Labor rates follow the supply-demand curve just like any other product - when the price goes up, a buyer will naturally buy less of it.

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