June 21 issue of National Review, says that “The victualer specializing in diminutive hamburgers reports that the punitive feature of Obamacare will cut its income–in half. Very likely, that lost income will be recouped in part through cutting labor costs, meaning fewer jobs and lower wages for White Castle employees.”
How true is this? Is this typical of businesses with lots of low-wage employees? Why does it affect White Castle so much? Explain.
I’ve just started to look at this, and it’s all because of a press release from John Boehner(R-OH) about the White Castle chain, based in Ohio.
Here’s a quick link from an NPR post which would kinda dispute the figures.
I’ll look for more.
White Castle apparently is claiming that its profits would be cut in half–not its “gross” or its “income.”
From samclem’s link:
Not that NPR wouldn’t give a fair and balanced (;)) assessment, but just in an effort to provide another drive by link from the other side of the fence (plus, it was the second link on Google right under the NPR one), here is what the Heritage Foundation has to say on the subject:
No idea which side is right (I suspect that both are spinning things for effect), but my guess is that WC will have to raise their prices (no doubt only ‘by a few cents to pay for health insurance for their workers’…though ‘a few cents’ could be a dime, or it could be a couple of bucks, depending on your use of ‘few’)…and I doubt they will be the only ones. I don’t know if that’s necessarily a bad thing, all things considered…just something people will have to accept, that prices on more than just some mini-hamburgers might go up. A ‘few cents’ here, a ‘few cents’ there, here a cent, there a cent, everywhere a cent cent…
-XT
AFAICT, the two quoted excerpts aren’t necessarily contradictory. Both seem to agree that the health care reform requirements could end up costing employers money, and neither seems to support the claim that the costs would actually amount to 50% of profits.
In any case, it doesn’t surprise me at all that some companies may have to raise prices somewhat to cover the costs of the new requirements for employee insurance. Remember, one of the goals of HCR was to reduce the number of workers who don’t have health insurance at all: that is, to have a system that successfully insures more people. Well, insuring more people intrinsically costs more than insuring fewer people.
We might have avoided some of these costs with the lower overheads in a single-payer plan, but that wasn’t going to happen due to political feasibility issues, so we’ll make the best of the compromise we’ve got.
We will have to make do with a compromise, no doubt about that.
No, they don’t seem to be contradictory, just spinning the story differently. I seriously doubt that WC will take a 50% hit to their profit (possibly no hit at all, if they increase prices and reduce costs). I really just offered that quote tongue in cheek, to be honest
-XT
So they have to pay $3000-(cost of old policy) per year, right? What does the average employer contribution to insurance premiums run? I’m guessing some significant chunk of $3000, so if that were the case we’re talking about a few extra hundred bucks per employee per year. Are they running on such thin margins that that cuts their profits in half?
I suspect they’re spinning the numbers by not including that “-(cost of old policy)” part
“John Boehner(R-OH)”
I thought John Boehner was a Texan…are there two of them?
As to the premise of the debate here, I say “So what?” All the competing burger joints are going to face the same circumstances, a level playing field if you will.
The entire fast food industry has engaged in a race to the bottom in terms of treatment of their labor force, and if “Obamacare” throws a wrench in that, then that is just one more positive outcome.
And if prices overall rise so much that Americans patronize fast food places less, then you only need look at our fat asses to see that this is yet another benefit of the legislation.
But the profit of the chain has not been presented here, so we have no idea. If WC made a profit of $10,000 last year, and that was cut in half by covering all their employees with health insurance, I’d say that’s a pretty good deal for everyone.
Does this mean the fast food joints of the country will start hiring suburban high school kids, since they probably are on their parents’ health care?
I have the misfortune to reside in John Boehner’s congressional district – the 8th District of Ohio. One is quite bad enough.
Cut their employees wages…scoff
Minimum wage laws are in effect, right? Hard to cut a minimum wage workers wages…
I’d also be interested in what their ‘health insurance’ plan is for these workers. I’d be shocked if their rank and file workers could even afford it.
Maybe they could offshore to India?
Cost of old policy for rank and file workers was probably … zero.
I doubt it. I have excellent benefits, and the cost to me for health insurance is definitely non-zero.
Now, it is true that the cost of offering coverage is 50% higher than the cost of not offering coverage. But the workers get coverage. And workers without coverage are no longer a burden to emergency rooms and hospitals. The costs of health care are being transferred back to where they belong.
I like the fact that when they contemplate wage cuts they think first of the minimum wage workers and not the execs.
But you havecoverage. If the coverage White Castle offers employees costs White Castle $5000 per year, but most employees don’t take the coverage because they can’t afford their share of the premium, then White Castle’s cost is zero for those employees and they are the ones who are likely to be eligible for the government subsidies, causing White Castle to pay the penalty.
The bigger picture is that Boehner is right about the hidden costs of HCR, directly paid by others but ultimately passed along to consumers, employees and state taxpayers. These were largely ignored in favor of the focus on the direct net costs to the federal government. Also about the fact that that the legislation will have an enormous indirect impact on many people - piously ignored by Obama who repeatedly declared that “no one will be impacted …” referring to the direct legal impact only.
That said, “percentage of profits” is a completely bogus statistic. A lot of companies are not profitable altogether - does that mean that the costs of HCR - a negative percentage of profits - is itself a profit? Even some companies that are profitable are barely so. Profit is the difference between two big numbers - revenue and expenses - and it’s a very volatile number.
In sum, the costs are what they are, and how they relate to profits of a specific company is not a good measure of anything.
This is an error.
Or maybe they could make the food in Mexico. This site rates the frozen ones better than the food outlet.
Income wold presumably be short for Net Income, which of course is synonomous with Net Profit (Loss). The word Income is usually not used when a person means Revenue.