Originally published at: https://boingboing.net/2019/08/12/chez-starvation-wage.html
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A local coffee house in San Diego lowered the cost on their menu items and raised the minimum pay to $11.00 per hour. Guess what happened? There’s a line out the door every time I go, no BS, it really is a good idea to pay humans a living wage.
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Well, there’s not enough data to draw conclusions, but there’s certainly an explanatory mechanic: those new $15/hour service workers aren’t living and spending their new dollars in Manhattan, that’s for sure…
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I am trying to get my head around how anyone ever bought into the idea that higher pay for the lowest paid workers would do anything other than boost the economy. But then, I guess there is a whole internet subculture devoted to the health benefits of drinking your own urine… so really when it comes to convincing people of things the sky is the limit.
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I’m not sure those 3 things are all related. Maybe indirectly. Assuming they kept the product quality the same, the lower price may have driven more business all by itself. Or, the increased wage may have created better service, driving more business all by itself. If they manged to lower costs and increase service at the same time, that should increase business.
Or, maybe all their customers are employees and they’re paying them enough to buy stuff now.
Paying people a living wage is definitely a good idea. It will definitely increase aggregate commerce, as more people have more money to spend.
That’s not the same as saying it’s good for a single specific business though.
Do people say that, or do they say that it causes problems for specific businesses? Since the two aren’t remotely the same.
I can see where a business that’s operating on the margin of profitability where it can’t raise prices and can’t reduce non labor costs, raising the minimum wage will hurt them. But, then, I would argue that they should probably fold as not being well run. If your business depend on keeping costs down by exploiting workers and not paying them a living wage, it’s not a good business.
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Next you’ll be telling us that people having disposable income they can buy shit with is good for the economy.
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The two things are taken as one and the same by popular economics, I think. All progressive change is opposed by arguing that some particular business industry would suffer, and therefore the people working in that industry would suffer, and therefore the entire economy would suffer.
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Wait a minute. Are you telling me that the dire predictions from Libertarian think-tank pundits over the past decades have been wrong? How can this be? And could it be that they’re (gasp) wrong about the other “natural laws” of economics they’ve been flogging for the last four decades?
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I’d like to point out that $15/hour is only $30K/year (assuming 2000 hours worked). In any major city, that’s still awful.
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Right? But it’s that short term thinking. They can’t cut costs from other places, so labor is always where they squeeze. Which is ridiculous. If you can’t cut on other necessities to run your business, how can you justify it for labor.
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I don’t think that dynamic is what’s being suggested.
Its a well known dynamic in restaurant management that lowering prices can increase volume, and often does so enough to increase net profit. Simply higher volume at lower margin brings in more real dollars than lower volume at a larger margin. Because of how tight margins are in restaurants is quite simple to make this happen, and its a reliable enough tool that the rule is a restaurant experiencing financial pressure due to volume should never raise prices to compensate.
You raise prices if costs are the pressure, or if you’re attempting to jump market segments to pursue a better margin.
So the price cut generated better sales volume, and the better net income from that payed for the wage increase.
That’s important because it undermines claims that higher wages would increase prices enough to suppress sales volume and hurt businesses. Or price large segments of the population out, thus doing the same.
They primarily argue that it will force businesses to close, or reduce the number of jobs (often by pursuing automation). Thus hurting the ecconomy.
Which ignores that more people with more money to spend is the bigger diver for demand in labor markets than the cost of that labor.
Its within about a grand of the poverty line in NY State. And well above the national poverty line.
And frankly people don’t work a 40 hour week anymore, and never did in the restaurant business.
I would argue its still inadequate. But everywhere but our most expensive cities this is a living wage or close to it. And its certainly in line with what the minimum wage was meant to be.
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I agree with everything you said.
It can do all these things too, but, and it’s a HUGE “but”, those businesses that it forces to close because the labor cost becomes to high and cannot be made up for another way and were already on a thin margin, probably should close. They’re bad businesses. They were not helping the economy to begin with by depending on exploiting workers. These same businesses are only one shock away from closing anyway and not really helping the economy to begin with.
Automation may replace some jobs, as a way to reduce labor costs, where it works (or everywhere for everybody if you read recent press, should have been a plumber, they look safe from automation…). But, that could still increase overall economic production. Allowing workers to be deployed to other new businesses. Still sucks rotten eggs if you’re in the displaced group. But, that’s a local micro impact vs a macro economic development.
Business is hard, lots of them fail all the time. They should still pay a living wage.
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That’s why restaurants almost always become the sticking point on this.
Restaurant margins are rediculously low, national average hit an all time peak at around 6% last year.
Eta: hit post before I finished.
In the industry 10% is considered stable, once you hit 5% you’re in serious danger of failing. Below that is closure within a year or two. So margins are fairly razor thin there in the best of times.
But that doesn’t account for a couple of things. Chain restaurants and hotels sit at the top of the margin food chain for the restaurant business. With numbers well above average and more than enough to cover increased labor cost. Rents and real estate costs eclipsed labor as the number one expense for all restaurants a long time ago. And a major reason margins are so low in the US is the way the tipping system has artificially suppressed pricing, such that the public is often unwilling to pay the real cost of a meal that would provide for a stable margin and fair pay.
Other countries without our tipping system generally pay restaurant employees a living wage and their industries operate on less “are you fucking crazy” margins. Closure rates are lower, net income is higher and everything including the jobs are far more stable. And these days a meal in a restaurant in a country with a comparable standard of living to the US isn’t routinely more expensive, though certain items might be. Usually alcohol.
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Yup.
If “Business is hard” is an average of all businesses. Then, “Restaurantes are unbelievably hard, the superstars of a hard to run business that is most likely to fail”.
In my old town, we had a storefront that was 4 or 5 different restaurants during the 8 years we lived there. I don’t think paying their workers crap would have saved them though. A few of them were quite good and we missed them when they were gone.
“Temporarily embarrassed millionaires” find it easy to believe that giving lots of money to rich people amd companies somehow will make them rich too.
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A six-month sample of one of the wealthiest areas in the world, during one of the strongest economic periods, is hardly enough to build policy on. But it is an interesting data point.
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meanwhile in El Paso they pay $10/hour if someone will hang 24 chickens per minute for an 8 hour day, seriously, not making that up it was in an interview today - so that seems fair, not, this country is just so insane
And yet it’s more to build policy on than half-baked extensions of an 18th-century philosopher with trust issues.
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A well paid service worker is a happy worker. Happy service workers create happy customers. Happy customers tend to come back to the places that made them feel that way. This is why this worked.
