The cost of your burger may remain the same but the increased costs will be passed on to someone or something else. That someone is invariably not the owner of the establishment. He or she will put the price onto your drink of soda or demand his suppliers cut their price of burger meat. Assuming the mark up price remains fairly constant at say roughly 30%. The 30% has to keep coming from somewhere. Either it comes from increased prices or reduced costs.
I cannot comment on your particular circumstances.
Getting people who are working full time off of government assistance, which is covertly subsidizing minimum wage jobs? Maybe it’s fine we do that, I am also willing to be persuaded.
Well, you could instead just cut off foodstamps/free medical for anyone who is working. Maybe when people realize they can’t feed themselves taking those jobs they’ll just stay home and raise rabbits and grow tomatoes until the free market lifts the wages until they go back to work.
You presume that the owner will insist on the same profit margin no matter what. That’s a big assumption.
Maybe the increased cost of labor will cause the owner to rake up prices across so his pockets will stay as flushed as always and his business strategy doesn’t have to change.
Or alternatively, he may decide that instead of selling his day old donuts for eight cents each, he’ll sell them for twelve cents, while keeping the same price on the fresh donuts.
Or he may decide to close his store each night at 9:30 PM instead of 11:30 PM. But he keeps prices the same.
Or he may decide to hire a cheaper landscaping company to cut the grass. But he keeps prices the same.
Or he may decide to just go with BBQ at the company Christmas party instead of the usual steak and lobster. While keeping the prices the same.
Everyone else manages to deal with increasing costs without demanding more pay. Why would it be any different for business owners? Why should it be any different for them, if we are (supposedly) only talking about a small number of workers anyway?
I did address this in my post about markup prices. That an employer will either increase prices or cut costs. Many of these cost reduction measures may entail less money or employment for others. Closing his doors at 9.30 instead of 11.30 will mean less hours of work for his employees. The landscaping company will be cutting corners somehow in comparison to the old company he employed. It will result in efficiencies being made for sure. What will not change, and it never really has changed, is the average markup rate. A healthy % of profit is required for any businessman to run his business. Increased costs in one area will always skew itself into another area of his business. Even if it is skewed towards increasing the price of yesterdays doughnuts.
If you do wish to change the markup rate the best solution is competition. This will result in marginal reductions in markups. However, the same broad rates usually apply. Sorry, but that is human nature im afraid. For a businessman to voluntarily create and run a business such markup rates are the general rule.
This may in fact be in the case, but such increased demand would have less effect in an open economy. Assuming each person gets $50 more per week. Some of that $50 will surely be spent on imports; some *will *be eaten up by inflation; some will be lost due to unemployment. As a temporary measure, yes, it probably will increase demand in the short term. This is why Keynesianism, if it has any benefit, is in the short term.
If anyone doubts that the minimum wage can have an adverse affect on unemployment why is it that millions of manufacturing jobs are now in Asia rather than the US or Europe? I assume Asian skill sets are not superior to American or European skill sets. No matter where posters are reading this in the West; there will be one former industry near you that has upped and left to Asia. Again, this movement will not be due to greater skills of your average Taiwanese worker.
And people will continue to buy yesterday’s donuts, whether they are priced at eight cents each or fifty cents. Just as we will continue to buy hamburgers whether they are $1.00 or $1.25.
Just like we continue to drive all over creation, despite the steep increases in gas prices and stagnating wages.
As I said before, prices for a lot of consumer goods are simply bullshit. We don’t know the true value of anything. When I brought in that box of those day old donuts to work, everyone wondered why they were so cheap as they gobbled them up. They should have been wondering why the hell they are normally so expensive, but the consumer mind doesn’t work like this.
The marketing genius of the “sales discount” can’t be overstated, but that doesn’t mean the 300% markup is the natural order of things. If there was no dollar menu at McDonald’s, would people keep their dollars in their pockets? Or would they just spend their dollars on something else? And why should I worry more about McDonald’s profit margin than the ability of the family next door to keep their children fed and healthy? The latter affects me much more directly than the former does.
When ObamaCare was initiated there was an outcry from the business community complaining that increased costs would result in increased prices. It didn’t happen, and in some cases ObamaCare decreased the cost of health care. (Connecticut consumers got a price decrease from Anthem Blue Cross for 2015)
Capitalism forces competition, and competition regulates prices far more effectively than labor costs.
Papa John had to find a way to make ends meet on $7 million a year instead of $7.1 million. Especially since customers are not inclined to buy their pizza from a place where the guy making the dough potentially has hepatitis because Papa John refused to provide health insurance.
50 years ago General Motors was the nations biggest employer with an average salary of $50/hour in today’s dollars, and that included health and pension benefits. Today the nations biggest employer sells mostly food and the average salary is $9/hour, no pension, minimal health benefits. The Waltons are worth BILLIONS, and complain they can’t afford to pay an extra 30% for labor. Their workforce is buying food with government (taxpayer) money. So all of us are subsidizing their tremendous wealth. Walmart profited $16 Billion in 2013. They can easily afford to pay a significantly higher minimum wage without increasing prices, or pass along a modest 1% increase. Walmart spends $7.6 billion buying back stock every year. That ALONE will pay for an increase in wages to $15/hour average.
An increase in minimum wage translates to an increase in consumer spending worth approximately $4 billion retail dollars, which is a tremendous shot in the arm to the economy. Better to spend it locally then have the wealthy squirrel it away in the Caymans or Switzerland.
You might have heard about the Great Recession? It was in all the papers. Massive decrease in employment, no change to minimum wage.
Since the minimum wage in constant dollars is historically low today, by your metrics we should be seeing an increase in employment as employers rush to hire all that cheap labor. Why not?
Well you should be concerned with the profit margin of your average small and medium sized businesses. These businesses still employ about half of all private sector jobs. Even places such as McDonalds have franchise owners; owners who need their profits. It is these people who help keep your neighbours clothed and fed. Plus, todays small companies very occassionally turn into tomorrows big companies.
With your comment about McDonald’s however you seem to be confusing economics with politics.
I suspect this is one of the problems with the movement - they’ve gone extreme too fast. I get phone calls all the time asking me to support a minimum wage hike to $15 and give them money to lobby for it. But I don’t support such an extreme jump at once.
You got a cite or are you rejecting the cited study because you don’t like what it says? Economics may be imprecise, but the math my daughter took as an econ major at Chicago was a lot scarier than the math I took as an engineer/computer scientist at MIT.
Maybe, assuming constant sales - and neglecting elasticity. But what if a large part of the cost of making burgers was fixed costs - machinery, rent, taxes, etc. If a minimum wage increase put more money in the pockets of the customers of fast food, lower fixed costs per burger could more than make up for higher labor costs - which would also decrease if volume went up.
I bet a janitor provides more value to the restaurant in not driving away customers than he earns, before or after MW increase. Those who don’t consider the value of workers of course think they are paid too much.
Many reasons; red tape, welfare, poor macro-economic factors and so on. Of course your scenario is not applicable. There is a minimum wage. Wages are currently artificially set, they are not at a market driven rate.
No cite. This is the type of stuff that will have numerous studies on it. All with different assumptions and conclusions. Thats why two competing nobel prize winning economists can have vastly different theories in the same discipline.
If you doubt the affect a minimum wage can have. Why have so many manufacturing jobs moved from Europe and the US to Asia? Lets take one industry; shipbuilding. Half of my hometown was employed in shipbuilding at one stage. Now, the industry employs almost no-one. Where are you from? Im sure you can cite a similar industry that has declined, almost certainly moving to the Asian continent. Not one of these jobs will have moved because Asians are more skilled than us in the West.
Skilled people aren’t going to work for shit wages. MW is shit wage, it’s summer job, burger flipping, come to work hungover and fake your way through it wage. Increases in the MW hasn’t stopped it from being shit wages.
You want some guy to build a ship for you, being paid $7.25/hr? For 2,000 hours a year he’s pulling down a cool $14,500. Be a skilled ship builder, and earn enough money to rent a room in a flophouse!
Yeah, I know, but its a dangerous strategy. You’ve taken the constituents who think its a great idea and gotten their hopes up. You’ve made a bunch of people in the middle suspect you are idiots. And you’ve cause heels to get dug in among your enemies. And $7 something to $10 is still too big a jump all at once - I’m being asked to consider it, and I’m coming up with my own mental conclusions about what a reasonable jump at a time is - $1 a year - maybe a little more. What they are doing is putting them in a position where they don’t get $15, pissing off the left, they probably won’t get $10 either - and they can’t backtrack down to the $1 or $2 with subsequent increases over the next few years they could get support for now. I suspect that with a $15 an hour number, they’ve set themselves back several years.
A lot of businesses have been outsourced to places like India, true.
But have you ever been to India? The country where half the population doesn’t own a toilet?
If we do away with the minimum wage, will those businesses come back?
Do you want to live in a place where your neighbors are paid to build ships, but they’ve got to wade through sewage to get to work because no one can afford a pot to piss in?
I’d rather live like they do in Norway than they do in India, thankyouverymuch.
Here is my problem with this line of reasoning and why i think Minimum Wage is an improper tool to help elevate people out of poverty:
This will never happen. The people who are making at or near MW right now are below the water line financially. Even single people in many areas of the country working at $12.50 an hour ($25K) aren’t really making it. The basic expenses eat pretty much all of the income a person has. Just rent ($650/mo), health care (~$150/mo), and grocery items (not just food, but TP toothpaste, etc ~$50/wk) is $12,200 per year or half of your pay. Note that this is without getting sick (insurance copays), without buying additional basics (basic phone, basic clothes, bus pass instead of a car, etc etc). No social life, and, really, no nothing is how this works for a single person. It’s pretty much a joke to anyone with any sort of commitment, like say college loan repayments.
A rise to $15.00/hr won’t really do much for them, not even our Jesuit monk of an example above, and they won’t contribute much to the economy by going out to white castle or such more often. They will go to in-place debts (credit cards, etc). It’s the same thing that happened to the Bush refund checks that everyone got after 2001’s collapse. The money they got back when to creditors and not economic stimulation.
Is the cause of poverty really not having enough money, or is it that we have saddled pretty much all individuals in our economy with so much debt that they will never see the water level? How many college graduates are still struggling? They could make $20 an hour and still barely make ends meet in a lot of cases.
This is why I don’t support the minimum wage hike. Some politicians will claim themselves a moral victory for righteousness and the poor will get a little bit of extra money for two to three years that they’ll use primarily for debt while inflation catches up. We need actual, real, useful and most likely systematic changes to how the federal government and it’s programs work to help those suffering from poverty and not just driving to pay them more time and time again.
How many times have we raised minimum wage? How many people are still poor in the US? Clearly, we aren’t solving the problem.