Top Economists Are Backing Sen. Bernie Sanders on Establishing a $15 an Hour Minimum Wage

originally posted by: Gryphon66
So, in the businesses you managed, you never had to make adjustments for unforeseen cost increases? You just raised prices until the business went bankrupt?

My restaurants did not go bankrupt. Short term costs can be absorbed; extra snow removal, spike in meat prices. Long term increases; utilities, labor, insurance were always passed on, that is the nature of business.

You're presenting one absolutist side of a complicated subject, in my opinion. The answers aren't always that easy or that straightforward.

Thanks for your answers though!

To me they are that straightforward. Increasing costs have to be passed on, when a business requires a certain margin to be viable any additional costs are not sustainable.

a reply to: Edumakated

So, in your example, if the old businesses can't make things work out at an increased minimum wage, other businesses will fill the gap that can? The factor that no one on the right wants to admit is that in most but not all businesses, there is the option or the necessity to redistribute expected profits, or, adjust soft costs.

a reply to: AugustusMasonicus

I hear you and understand where you're coming from.

I too have been in business in several fields for over 30 years.

There are other factors in making the decision to raise prices that can be considered.

Perhaps you did not consider them; perhaps you didn't need to because you never faced a considerable increase in hard costs.

Thanks,

originally posted by: Gryphon66
So, in your example, if the old businesses can't make things work out at an increased minimum wage, other businesses will fill the gap that can?

I would like to answer this questions as well.

I think many can but at the cost of passing that increase on to the end user. The ultimate payer of this increase is the middle class since they comprise the largest sector of the economy. When people say, 'the businesses can afford this' they are being rather short sighted as the final costs will be borne by them.

originally posted by: Gryphon66
a reply to: Edumakated

So, in your example, if the old businesses can't make things work out at an increased minimum wage, other businesses will fill the gap that can? The factor that no one on the right wants to admit is that in most but not all businesses, there is the option or the necessity to redistribute expected profits, or, adjust soft costs.

The math has to work though. For most of these small businesses, the math simply does not work. So yes, a business may figure out how to make things work with 5 employees making $15/hr versus having 10 employees making $7.25/hr. The end result is the same for the business when it comes to their operating margins, but five jobs have been eliminated (which of course, none of the progressives pushing this living wage malarkey will every investigate).

What a lot of you don't realize is that a lot of these businesses are actually small businesses because they are franchises. People love to talk about McDonald's but most of the stores are individually owned franchises. McDonald's corporate does not set local wages at their stores. The store owner does that.

What will probably happen is that businesses will figure out how to pass the cost on indirectly. Most consumers are too stupid to notice. My guess is they will hide the price increases in the drinks since everyone knows drinks are the profit center for restaurants. Free refills will probably get eliminated.

originally posted by: Gryphon66
There are other factors in making the decision to raise prices that can be considered.

Perhaps you did not consider them; perhaps you didn't need to because you never faced a considerable increase in hard costs.

There are certainly other aspects of market dynamics to consider but most of the short term and long term costs I experienced by fairly consistent in my industry. If I were paying $5.00 for beef I could pretty much know so was my competition. Utilities and labor were also nearly exact.

When all these factors are nearly equal, and you have set yourself apart from the competition by some form of uniqueness, in the face of increased costs you can either trim margins (a short term solution) or raise prices (which is what I did over 13 years). There is no way I could have stayed in business for that long using 1995 budgets in 2007.

a reply to: Subaeruginosa

Interesting. In Australia they force business to raise ALL their employees wages and they also force the owners to swallow the cost. Somehow I don't buy it.

a reply to: AugustusMasonicus

So ... you're saying that there is only one way to run a given business, and the "new' business will basically have to do the same thing that the "old" business did.

There are different paradigms of approach to just about any industry.

You are making a statement that is generally true, but not absolutely true.

a reply to: AugustusMasonicus

I think many can but at the cost of passing that increase on to the end user. The ultimate payer of this increase is the middle class since they comprise the largest sector of the economy. When people say, 'the businesses can afford this' they are being rather short sighted as the final costs will be borne by them.

I've never once heard my dad (who owns several hotels) complain about needing to pass the high minimum wage prices onto consumers.

Only thing he complains about, is being forced to pay his employee's double time on the weekend's, which means he has to refuse them work. But that's a completely different issue to the rate of basic minimum wage.

a reply to: Edumakated

Small businesses? Wait, are we talking McDonald's, Burger King and Wendy's, or something else.

There are both franchisees and corporate stores. Don't assume that people don't understand the basics.

Even as a franchisee, the profit is around 10% of sales. Gross sales depend on the market. In their investment materials, the average sales are listed out at $2.2 Million. So, franchisees profit would be 220,000.

Are you saying that there is no way that a franchisee will do the math and discover that their volume will likely increase when less affluent workers have more disposable income?

There's just ... no chance of any plan in which that can work?

originally posted by: Subaeruginosa
a reply to: rockpaperhammock

Raising the minimum wage to 15 dollars screws over people who had to learn or pay for a particular set of skills.

You're completely incorrect!

Paying $15 an hour as a minimum wage would just force employer's to pay more to keep there skilled workers. Which they can obviously afford and would more than happy to pay, if forced to do so.

Ok I agree to that...as long as the more skilled workers get a pay increase as well...no argument there....key point once again...is IF they pay the skilled workers more.

a reply to: Edumakated

I give you a bonus for looking at the world in a half full glass but its still not full.

Eventually, a new market entrant will turn them on their head.

It can happen but its not very often that if it occurs. The only time it occurs is when you have Opposing Oligopolies with conflicting business models. However, it still supports my point which you reinforced: that the Oligopolies control both the consumers and the market. Hence they will pass the increase in cost to the consumer because the consumer has no option to take it.

The established oligopolies are in control:

Think how Uber has completely exposed the taxi industry's cronyism.

la.curbed.com...
Uber needs to get the heck out of California and pay a $7.3-million fine, says a judge;

Or how Tesla is changing the auto industries protectionist policies.

Why Tesla Motors can't sell cars in most of the United States
www.engadget.com...
This past March, New Jersey Governor Chris Christie signed into law a bill that specifically makes direct-to-consumer car sales illegal.

Many consumers are now using services other than cable companies... Netflix?

This is a valid example but that had nothing todo with the consumers it had to do with two oligopolies with opposing business models. The telecom successfully extorted money from netflix when they successfully killed net neutrality. This was stopped only because the online Oligopoly [GOOGLE, AMAZON, NETFLIX ] were directly impacted by the Telecom ruling , which would have made the Telecom the controllers of the internet. So the online oligopoly lobbied against the telecom lobbyist to force net neutrality principles to be enforced, out of survival. The consumer had very little to do with it.

Bottom line as I stated before the country is run by Oligopolies and competition only happens at the oligopoly level, for the most part. Hence if they raise the minimum wage they will ensure that the consumers bares the cost and not them. Its silly to expect greedy corporations to swallow the cost.

originally posted by: Edumakated


Prices will absolutely go up. I work in a very competitive and highly regulated industry. Progressives are constantly pushing more regulations down my industry's throat. Most of the regulations come with increased costs and we absolutely pass every single penny on to the consumer indirectly. The consumer doesn't see an itemized fee necessarily, but prices absolutely go up as a result of the increased cost.

If prices don't go up, cost will be eliminated somewhere else. In most cases, businesses will probably eliminate some employees and experiment with technology to increase productivity of the remaining employees. What is better? 10 employees flipping burgers at $7.25/hr or 5 employees flipping burger at $15/hr?

Prices go up anyway and automation is already taking the place of employees; so the real question is do you want those 5 employees making the current min wage or $15

Help me understand how you envision that raising the minimum wage will work using the following example:

Today’s prices and wages as an example with selected arbitrary price and wages :
$1 for a Gallon of milk today

$10 an hr wage for the middle class employee. [10% of their hourly income]

$6 an hr wage for the minimum employee. [17% of their hourly income]


What to do you envision and expect to happen once the minimum wage happens:

$? for a Gallon of milk today

$? an hr wage for the middle class employee. [?% of their hourly income]

$? an hr wage for the minimum wage employee. [?%of their hourly income]

a reply to: AlaskanDad

What is better? 10 employees flipping burgers at $7.25/hr or 5 employees flipping burger at $15/hr?

That's not a scenario you need to consider for a large corporation like McDonald's. Since they will always employ the amount of employee's it takes to achieve the shortest turn over time us possible.

a reply to: Subaeruginosa

That is the scenario. Any business owner with two brain cells faced with the the prospect of having to pay $15/hr will seek to eliminate employees and increase productivity elsewhere. They will get rid of the 5 employees who aren't worth $15/hr and keep the five who are while investing in technology to make up for the productivity loss from the five employees they let go.

Many fast food restaurants are already experimenting with self-ordering kiosks, etc. Google it.

I live in one of the most liberal progressive communities anywhere. We always get socialist talking this living wage garbage and they are trying to get our village to raise it to $15/hr. Of course, people finally woke up and figured out that it means teenagers are going to be making $15/hr which is threatening the ability of many of the after school activities because a lot of the chaparones, etc are high school students. Also, a lot of the non-profits don't pay $15/hr to their employees either.

The other issue is that as minimum wage goes up, all the other employees who are making more than minimum wage will now demand higher salaries too. The real reason progressives are behind this is their Union buddies contract's are often indexed to minimum wage. So if minimum wage goes up, so do union rates.

a reply to: Edumakated

Many fast food restaurants are already experimenting with self-ordering kiosks, etc. Google it.

So they are already cutting jobs with the current low min wage, so it would seem to be a better idea to raise wages since they plan to cut the jobs anyway!

One thing many people forget is before the current mega corporation took over the burger industry it was composed of small business's. The mega corps ran the mom and pop business's right out of cities then towns across the country, putting more jobs under corporate control.

a reply to: Edumakated

That is the scenario. Any business owner with two brain cells faced with the the prospect of having to pay $15/hr will seek to eliminate employees and increase productivity elsewhere. They will get rid of the 5 employees who aren't worth $15/hr and keep the five who are while investing in technology to make up for the productivity loss from the five employees they let go.

Paying $15 an hour is going to cost the employer under 15 thousand extra a year per employee. Where as purchasing technology that would eliminate the need for said employee would cost hundreds of thousands of dollars, then also endless thousands for servicing and up keep.

Trust me, most employers would rather pay a little extra for there human drones, than fork out the hundreds of thousands of dollars it would take to purchase technology that would do the job of humans.

originally posted by: Gryphon66
So ... you're saying that there is only one way to run a given business...

On a macro scale, yes.

...and the "new' business will basically have to do the same thing that the "old" business did.

Unless it has some sort of innovative approach to the industry, yes.

There are different paradigms of approach to just about any industry.

You are making a statement that is generally true, but not absolutely true.

The fact that it applies in most cases is what I am driving at.

originally posted by: Subaeruginosa
I've never once heard my dad (who owns several hotels) complain about needing to pass the high minimum wage prices onto consumers.

Are you saying that because your dad does not complain about his labor charges they are not factored into the overall gross margin calculation?