I actually think raising the minimum wage will end up raising the hourly wage of a lot of workers who make more than the minimum. The minimum wage here in Arkansas is $11.00 an hour and the lowest entry level positions at my company start at around $16.00 per hour. Right now, we’re not really fishing from the same candidate pool as McDonald’s to fill those positions. If the minimum wage were $15.00 then we’d likely have to raise the hourly wage in order to attract the quality of candidates we’d like.
Raising it? Definitely. But if some kind of mass delusion hit, and we moved it down to $5 for some insane reason, the jobs that already are paying say… $7.75 wouldn’t be much affected.
We aren’t just talking about people who make MW, we are talking about the people who make less than the new MW. That’s a much higher percentage of workers.
Well, you asked why McD’s doesn’t just raise the price of their burgers as if you were not taking into account the fact that they have competition. Do you agree that the fact that they have competition is one of the primary reasons that they don’t raise their prices?
The reason that McD’s and Burger King and Wendy’s don’t raise their prices all together is because cartels like that are both unstable and illegal.
Why wouldn’t it? New highers would be put in at that lower wage, and those making more would be pushed out.
Presumably if they’re already paying $7.75 instead of some lower number, say $7.25, they’re not able to get the desired employees at anything less to work those jobs.
I mean, why aren’t they just already bringing in new hires at 7.25 and pushing out the 7.75 people by your description? Whatever reason that is, is why their wages wouldn’t drop.
Yes, but probably not by the same amount the MW rose. I’ve seen starting wages (way, way above MW) go up much faster than average raises. Why don’t people quit and get a new and better starting wage? Inertia. Being uncomfortable with change. Lots of reasons, many of them good.
…did you not read my post?
Wages are just a cost of doing business. I can do very little about the legislative process except vote for another government or pay a lobbyist to do some lobbying.
And in the real world that I live in there isn’t going to be an increase of 82% in the minimum wage overnight. Because in the real world that I live in the minimum wage increased from $18.90 to $20.00 on April the 1st, our minimum wage has been increasing regularly here to match inflation. You can see that here.
In 2009 the minimum wage here in NZ was $12.50. 11 years later it is $20.00.
In 2009 the federal minimum wage in the USA was $7.25. 11 years later it is still $7.25.
Can you not see the difference? Do you not understand the scale of the problem?
We aren’t going to see an increase of 82% happen here in NZ. Nobody is advocating for an increase of 82%. But in the United States? Things have gotten so out-of-whack that in over-correction is required. 82% isn’t out of line at all.
Add to that the fact that restaurant employees can be paid under the minimum wage with the assumption that employers will top the wage up if the employee doesn’t make the minimum in tips (some employers don’t do this). Add to this the ever-increasing disparity between what the executives make and what the typical employee makes which has grown by 940% since 1979. Add to that private equity firms that are literally sucking the life out of formerly profitable businesses.
You can’t look at this in a vacuum. Wages are just a cost of doing business. And if government mandates an increase in wages then business just has to figure out how to do it. For the bigger corporations they can do this without batting an eyelid and probably marginal price increases, if at all. For smaller businesses it will be tougher. But that’s the reality of running a small business. If you want to succeed then you have to adapt. Maintaining the federal minimum wage at the same rate as it was eleven years ago is simply unsustainable.
This is “paralysis by analysis” style thinking. You are over-thinking it all. Right now I typically charge by the project and what I charge ultimately depends on how my client’s usage. But even in my hospitality days we wouldn’t be over-thinking this. You either absorb the wage increase, or you raise your prices, or you diversify your service and product range. You just deal with it.
But how it works here and how it would work in the US though are two different things. In the US things have been massively distorted. We shouldn’t pretend that the process of correcting that distortion won’t eventually have an impact on pricing in some sectors, at some level. But sometimes you just have to pull the bandage off. Things simply can’t continue as they have. You can’t allow millions of people to continue to be left behind because eventually they will simply say “enough is enough.”
They are saying ‘enough is enough’, hence this thread.
…when the people are at the stage where “enough is enough” then you are at the stage of nationwide strikes and walk outs. You aren’t at that point yet. Not even close. Amazon workers can’t even get enough traction to unionize.
They aren’t yelling “enough is enough” because the anti-worker propaganda machine is so strong in the USA that it shuts most of this down. So if it ever gets to the point where workers are walking off the job in wild-cat strikes or actions then you will see the anti-worker machine ramp up at the same time proportionately. And that would be uglier than most could imagine. You aren’t close to that yet.
There was some action from 2012-2015 in the fast food industry, which really put the whole fight for $15 in the national spotlight.
~Max
So four or five percent, not two? It’s a small percentage of workers. You can’t win back a wage increase by raising prices on the same people.
The “prices will go up to make up for the wage increase” is not going to happen. Prices will go up if the equilibrium price goes up.
You do know their prices have gone up before, though, right? And pretty much at the same rates? You can’t get a cheeseburger for a quarter anymore. As the profit-maximizing prices goes up, the prices go up. You’re confusing collusion with ordinary, everyday price increases that naturally follow inflation and market forces.
What level of MW are you positing? For example, in 2019 about twenty-eight percent of American workers earned less than $15/hour. In some particularly low-wage areas of the country, median wage isn’t much higher: only $15.73/hour in Mississippi, to name one.
Wow, a conservative slaver State would be most impacted by a MW increase?
Me, upon finding out this news:
No, wait, that’s not how I reacted.
Man, there’s a huge opportunity here for a group of friends who drive Uber and Lyft.
WalMart and Amazon are the two largest employers in the US. You don’t think that having TWO notably anti-union and living wage resistant companies sitting on top of the heap makes a big difference in overall wages? They don’t need to collude openly, they just need to be assholes who refuse to pay a living wage, furnish benefits and give PTO to their employees and hey presto, monopsony in employment in action.
Great OP, @JohnT . I’m still reading through the thread. Reading the news this morning, I saw this article that looks relevant, and reinforces what you and others have written:
A Pew Research Center survey this year found that 66 percent of the unemployed had “seriously considered” changing their field of work, a far greater percentage than during the Great Recession. People who used to work in restaurants or travel are finding higher-paying jobs in warehouses or real estate, for example. Or they want to a job that is more stable and less likely to be exposed to the coronavirus — or any other deadly virus down the road. Consider that grocery stores shed over 49,000 workers in April and nursing care facilities lost nearly 20,000.
The linked Pew poll looks interesting too but I’ve only skimmed it this far.
It’s not a small percent of workers. It’s about a quarter of workers. And it will also raise the pay of those who are making a bit over MW.
And the wage increase would increase the equilibrium price.
I really don’t think I am. I was responding to your question as to why McD’s doesn’t unilaterally increase their prices. You have chosen to take it down a tangent that it irrelevant to the answer to the question that you posed.
Funny how conservatives weren’t clutching their pearls about how increased operational costs would drive fast food restaurants out of business when the increased operational costs were the result of Trump’s retaliatory tariffs.
And the fast food industry survived it just fine…
And done. I didn’t see (or missed) any values for the fast food elasticity. The first google scholar result says:
Price elasticities for foods and nonalcoholic beverages ranged from 0.27 to 0.81 (absolute values), with food away from home, soft drinks, juice, and meats being most responsive to price changes (0.7–0.8).
The authors were focusing more on health outcomes.
It might a little, or it might not; the effect of such things can be unpredictable. What if low income workers making more money means they eat more healthy food? Will this reduce the demand for greasy garbage? It’s not impossible.
What IS true is “50% minimum wage hike means 50% more expensive Whoppers” is utter tripe.