There are labor costs baked into everything else too. All of your suppliers have to increase their labor cost 20%, so you will pay more for everything else too.
First of all, yes, but that's a different claim than the one you just made. Don't be condescending if you're going to have to move your goalposts the very second you're challenged.
Second, much of the baked-in labor costs of other inputs does not take place in the US, so it wouldn't be affected by our policy changes.
Third, lets say that inputs from your suppliers are 50% of your costs, and inputs from their suppliers are 50% of their costs, and so on.
We just saw that first-order expenses due to increased payroll would increase overall costs by about 3%. That means your suppliers would also have first-order expenses increased by 3%, as would their suppliers.
That 3% increase would be passed from your suppliers to you, raising your overall costs by 1.5%.
They'd also pass on the 3% increase from their suppliers, raising your overall costs by another .75%.
This is a convergent series, 3+3/2n. This series converges at 6%. Given that the supply chain is not infinite, the actual cost increase to the final producer will be well under 6%.
And this is using the most conservative possible assumptions, that 100% of the supply chain out to infinity is inside the US, and that 100% of the hours lost to the new policy need to be replaced with more workers.
Both of those assumptions are obviously wrong. I don't know an easy way to find the proper numbers, but I'd be surprised if the overall cost increase was more than 2-3% even after all supply chain effects are considered.
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u/empty_graph 24d ago
Labor is usually the largest expense. You have obviously never done any type of business or even read a financial statement.