First, the University of Missouri, where the SJWs, with the help of a professor who didn’t think much of the 1st Amendment and was fine with committing battery to deny it, is having a rough year. Consequences from this bit of nonsense have really hit the bottom line:
Following a drop in students applying for housing, the University of Missouri will not be placing students in two dorms for the fall 2016 semester.
Mizzou will be closing the Respect and Excellence halls (ironic names, given the circumstances) in order to utilize dorm space “in the most efficient manner” to keep costs down.
In March, the university announced that it saw a sharp drop in admissions for the coming school year, and will have 1,500 fewer students. This will lead to a $32 million budget shortfall for the school, prompting the need to close the dorms in order to save money.
“Dear university community,” wrote interim chancellor Hank Foley in an email to the school back in March. “I am writing to you today to confirm that we project a very significant budget shortfall due to an unexpected sharp decline in first-year enrollments and student retention this coming fall. I wish I had better news.”
You see, those who are looking for a college have alternatives. And when they see a college or university that they perceive, right or wrong, to be out of control, they are likely to take their business elsewhere. Afterall, they’re paying the bill. So, take note all you institutions of higher learning who tend to fold like a wet paper box when a few students protest, you too may end up closing a couple of dorms if it goes the way of Mizzou. Fair warning.
Oh, and speaking of alternatives, New York government has decided to be “wonderful” with other people’s money and has hiked the minimum wage to $15 (over a time period). That’s double the wage of today. White Castle, an NY institution, isn’t taking that well since it will have a very heavy impact on their profitability (they make a 1 to 2% profit after expenses, including labor). White Castle’s CEO says there are few alternatives. If it was about price increases only, they’d have to increase their prices by 50%. He’s pretty sure that’s a no-go because of competition for dining out dollars. So, what’s he left with?
In the hyper-competitive restaurant industry, margins are slim — Richardson says that, in a typical year, White Castle hopes to achieve a net profit of between 1 and 2 percent — and if labor costs go up, many restaurants will turn toward labor-cost-cutting automation or business models that don’t require many employees. That means a lot of kids won’t get that first job. After decades of baggage check-in kiosks at airports, ATMs, and self-check-out lines at the supermarket, is it really so hard to imagine automation replacing the kid behind the counter at burger joints?
And what is lost to more young, inexperienced and thereby low-wage workers?
“We know that Millennials aren’t thinking they’ll stay at White Castle for 30 years,” Richardson says. “We view it as the start of the path. That’s true if you stay at White Castle or move on to something else. The skills you gain, you can take to the next role: learning how to apply for and get a job, learning how to show up, learning a work ethic, making a paycheck, and having fun.”
But this is about more than wages — White Castle has offered benefits and retirement programs for decades. It’s about the opportunity to work, to take the first step up the ladder of life, to get started.
“Out-of-work kids who don’t have an opportunity to work get in trouble. We want to offer kids jobs, offer kids work,” Richardson says. “There’s dignity in that.”
Somehow, though, the concept of starter jobs that pay low wages (and with the minimum wage, it’s usually more than they are worth) has become lost in all of this and we see government stepping in to make them “career” jobs for some idiotic and economically unsound reason. The result is predictable, although it will likely be hidden. You won’t see numbers because the numbers in question are those who are never hired because the wage floor is too high. And they’re going to be the “out-of-work” kids who don’t get that first chance to experience a job and what it takes to succeed.
Instead an alternative will do the work. A kiosk will greet the customer, takes his order and money and do so at a price point well below a $15 an hour worker. This isn’t rocket science and the math isn’t hard at all – $15 times 0 hours equals what?
It’s closer than you think. Last Friday I put a bit up in Stray Voltage about Dominos testing a robot delivery service in New Zealand. And I intimated that that sort of automation would be something that would displace labor if labor got too expensive – like $15 for the minimum wage.
Over the weekend I happened across a couple of more articles. One featured the CEO of Hardee’s and Carl Jr.’s talking about an automated restaurant he’d seen in San Francisco. And, sure enough, his focus was on labor savings ($15 minimum wages specifically):
The CEO of Carl’s Jr. and Hardee’s has visited the 100%-automated restaurant Eatsa — and it’s given him some ideas on how to deal with rising minimum wages.
“I want to try it,” CEO Andy Puzder told Business Insider of his automated restaurant plans. “We could have a restaurant that’s focused on all-natural products and is much like an Eatsa, where you order on a kiosk, you pay with a credit or debit card, your order pops up, and you never see a person.”
Pudzer’s interest in an employee-free restaurant, which he says would only be possible if the company found time as Hardee’s works on its northeastern expansion, has been driven by rising minimum wages across the US.
“With government driving up the cost of labour, it’s driving down the number of jobs,” he says. “You’re going to see automation not just in airports and grocery stores, but in restaurants.”
Good old government. Helping out again, aren’t they (another way to make you more dependent on them)? As Pudzer says:
“This is the problem with Bernie Sanders, and Hillary Clinton, and progressives who push very hard to raise the minimum wage,” says Pudzer. “Does it really help if Sally makes $3 more an hour if Suzie has no job?”
Well no, it doesn’t. And then there’s this:
“If you’re making labour more expensive, and automation less expensive — this is not rocket science,” says Pudzer.
Well no, it’s not – er, except to Bernie supporters. But then it isn’t necessarily easy to automate everyone’s jobs either. But it is getting easier as technology develops.
Take the restaurant that Pudzer was talking about:
“I would call it different than a restaurant,” said David Friedberg, a software entrepreneur who founded Eatsa. “It’s more like a food delivery system.”
Last week, I was in a fast-moving line and browsed on a flat-screen monitor the menu of eight quinoa bowls, each costing $6.95 (burrito bowl, bento bowl, balsamic beet). Then I approached an iPad, where I tapped in my order, customized it and paid. My name, taken from my credit card, appeared on another screen, and when my food was ready, a number showed up next to it.
It corresponded to a cubby where my food would soon appear. The cubbies are behind transparent LCD screens that go black when the food is deposited, so no signs of human involvement are visible. With two taps of my finger, my cubby opened and my food was waiting.
The quinoa — stir-fried, with arugula, parsnips and red curry — tasted quite good.
And he saw no one other than other customers. Says the author of the article:
Whether a restaurant that employs few people is good for the economy is another question. Restaurants, especially fast-food restaurants, have traditionally been a place where low-skilled workers can find employment. Most of the workers are not paid much, though in San Francisco employers of a certain size must pay health benefits and in 2018 a minimum wage of $15.
Ironic, isn’t it? That the prototype “food delivery system” is established in a city in which government has decided it will set the wages. The laws of economics, or “rocket science” for the Bernie supporters, begs to differ. There’s no real advantage in terms of labor savings, if the market sets the minimum wage, but mandated wages? Well, then it comes down to viable alternatives – and cost-wise, this is suddenly viable. The lower wage job holders of America say – thanks government.
And beyond the obvious, there are advantages to automating:
By not hiring people to work in the front of the restaurant, he said, they save money on payroll and real estate. (There will always be at least one person available to help people navigate the iPads and to clean up.) The kitchen is also automated, though he declined to reveal how, and the company is experimenting with how to further automate food preparation and delivery.
And, fewer to call in sick, give benefits, sick days and paid vacations too. Make an employer’s job easier, more efficient and more enjoyable and the employer will take that route every time.
“We can sit and debate all day what the implications are for low-wage workers at restaurants, but I don’t think that’s fair. If increased productivity means cost savings get passed to consumers, consumers are going to have a lot more to spend on lots of things.”
Consumers have a choice – spend more for the same thing to help someone else have more money or spend less for the same thing and have more to spend on other things they want or need. Wal-Mart says they will choose the latter. So do those pesky laws of economics.
The food industry isn’t the only industry that’s going to see this though:
Automation is transforming every industry. Business owners look to substitute machines for human labor. It happened to blue-collar workers in factories and white-collar workers in banks and even law firms. With self-driving vehicles, it may happen in the taxi and trucking industries. Robots and artificial intelligence machines are expected to transform health care.
Coming sooner rather than later … possibly sooner than we think.
Nowhere is the potential for job automation so obvious as it is in the on-demand economy, where many startups have grown fat with venture capital despite poor unit-economics. Uber is spending heavily to hasten the development of driverless cars. Instacart, Postmates, and other delivery-heavy startups are unlikely to stick with humans once machines—which don’t take sick days, need bathroom breaks, or threaten to unionize—can do the same jobs.
But even if you don’t work in the on-demand economy, chances are high that you or someone you know will eventually be in the same position as Fox-Hartin. Machines already exist that can flip burgers and prepare salads, learn and perform warehouse tasks, and check guests into hotels. Companies like WorkFusion offer software that observes and eventually automates repetitive tasks done by human workers. And automation has also crept into knowledge-based professions like law and reporting. When in 2013 researchers at Oxford assessed whether 702 different occupations could be computerized, they concluded that 47% of U.S. employment was at risk of being lost to machines.
The more I watch this ignorant populist desire to raise the minimum wage (as far as I’m concerned, the minimum wage is $0) to $15 dollars, the more I wonder why people don’t actually think about the issue and its ramifications before staking out a position “for” the hike.
Oh, wait … think. Yeah, never mind. It simply doesn’t happen anymore. And by the way, the thinking one must do isn’t rocket brain surgery. It’s pretty much common sense. So, given the local burger flipper wants $15 bucks an hour to keep flipping those burgers, what is at risk. Well, mostly, his or her job:
Many chains are already at work looking for ingenious ways to take humans out of the picture, threatening workers in an industry that employs 2.4 million wait staffers, nearly 3 million cooks and food preparers and many of the nation’s 3.3 million cashiers.
Of course they are. Why?
“When I first started at McDonald’s making 85 cents an hour, everything we made was by hand,” Rensi said — from cutting the shortcakes to stirring syrups into the milk for shakes. Over the years, though, ingredients started to arrive packaged and pre-mixed, ready to be heated up, bagged and handed out the window.
So what does that mean?
Crowded. That’s how Ed Rensi remembers what life was like working at McDonald’s in 1966. There were about double the number of people working in the store — 70 or 80, as opposed to the 30 or 40 there today — because preparing the food just took a lot more doing.
That’s right, as automation and packaging and pre-mix advanced, fewer workers were needed. It had nothing to do with wages, per se, it had to do with efficiency. What produced the most money for the work involved.
How does one make a profit? Well one way is by being efficient. I.e. producing product at a lower cost than your competition. So how is the fast food business doing in that department? Not so hot.
The market research company IBISWorld has calculated that the average number of employees at fast-food restaurants declined by fewer than two people over the past decade, from 17.16 employees to 15.28. And restaurants tend to rely more on labor than other food outlets: According to the National Restaurant Association, dining establishments average $84,000 in sales per worker, compared with $304,000 for grocery stores and $855,000 for gas stations.
So, raise double the wage and what happens to the already poor efficiency? Right, it goes down.
Then add to that the fact that no manager is going to work for the same wages as his employees. So if management is earning $15 an hour now, what does that have to go to in order to keep good people (it is one of the primary reasons unions back all minimum wage increases – because they get an increase too)? And what does that do to the price of a burger?
It makes it skyrocket.
Given that, what will employers in an already inefficient market likely choose to do? Well right up at the top of the list is a note to reduce staff. And then there’s “introduce efficiencies” to keep costs down.
The labor-saving technology that has so far been rolled out most extensively — kiosk and tablet-based ordering — could be used to replace cashiers and the part of the wait staff’s job that involves taking orders and bringing checks. Olive Garden said earlier this year that it would roll out the Ziosk system at all its restaurants, which means that all a server has to do is bring out the food.
Robots can even help cut down on the need for high-skilled workers such as sushi chefs. A number of high-end restaurants use machines for rolling rice out on sheets of nori, a relatively menial task that takes lots of time. Even though sushi chefs tend to make more than $15 an hour, they could be on the chopping block if servers need to make $15 an hour, too.
A service contract is much less costly than payroll benefits and there’s no sick leave or missed days involved.
As technology advances, even more jobs will be eliminated. Not necessarily because employers want to eliminate them, but because bird-brained idiots want to force them to pay $15 for a $5 job. Who gets hurt? 2.4 million wait staff, 3 million cooks and 3.3 million cashiers. Yes, that’s right, the stupidly conceived push for a $15 minimum wage will jeopardize 8.7 million jobs.
And as we’ve been asking for a long time, what is $15 x 0?
Or at least that’s the thesis of one Allen Clifton.
Which brings me to President Obama. While I’m not calling him a genius, I do think he’s extremely intelligent. I also believe that his tendency to use “big picture” thinking while drafting policy is something most Republican voters simply can’t understand.
Now understand it this comes from orthodoxy central, aka a site called “Forward Progressives”. And this is apparently considered “forward thinking”. We just are too stupid to get it.
He uses Obamacare as an example of us not getting it:
While many Republicans want to look at the “now” aspect of the Affordable Care Act, they seem unable to grasp the reality that as more Americans get health insurance, giving them access to preventable care, this lowers expenses down the road for everyone. If people can prevent very costly heart attacks, strokes or other debilitating health issues now, that’s an overall savings for practically everyone from consumers to health insurers to doctors who now have more patients. Quite literally, improving the overall health of Americans will improve the health of this country. It even makes sense for our economy. If workers are healthier, because they have access to quality health care, that means there will be fewer people calling in sick to work, showing up sick to work (putting other employees at risk) or relying on government programs because their health conditions (that were preventable) render them unable to work at all.
But to see all of that requires “big picture” thinking and Republicans seem unable to understand anything beyond the spoon-fed bumper sticker talking points they’re given by the GOP and the conservative media.
We could spend 5,000 words and countless hours expounding on how clueless this is. Health care doesn’t get less expensive if you “subsidize” it by penalizing those who work and earn by making them pay for those who don’t. Period. Wealth is something earned by individuals, not governments. When government’s take other’s wealth to pay for government priorities, it leaves less for the individual who earned it to spend on their priorities. This isn’t a hard concept to grasp, but seems beyond Mr. Clifton and our brilliant president. While all the pie in the sky BS about a healthier American work force sounds wonderful, for the most part it isn’t the workforce that’s benefiting from this subsidy. So while you may want to see this as a “far reaching” plus, it isn’t. There are certainly ways to approach the lack of insurance, but this isn’t one of them.
Mr. Clifton then doubles down on his ignorance of economies with this “Underpants Gnomes” paragraph:
Minimum wage is another issue you see this with. Republicans constantly paint it as a “job killer” (it’s not) while also rallying against the millions of people who are on government assistance. Funny thing though, a good portion of the Americans who are on government assistance have jobs. If we made sure that no American working full-time had to rely on government programs just to survive, instantly we would save our country hundreds of billions of dollars over the years. Not only that, but when Americans have more money, they have more to spend. And what’s the biggest driver of economic growth? Consumer spending. More consumer spending means higher profits and higher demand, which means – more jobs.
But once again, when it comes to Republicans and explaining job creation, anything outside of “tax cuts create jobs” is often too complex for many of them to understand.
So, where again does the money come from to pay that $15 minimum wage? The earnings of the business. And what will a business have to do if it has to pay that wage? Well it has some choices – raise prices, lay off workers, go out of business, etc.
Would someone have more money to spend? Yes, if they weren’t laid off or their business didn’t close their doors.
And how big of a jump in spending money would they have? Well initially a bit. But then prices would adjust, because, you see, as the price of labor goes up, so do the prices of commodities and goods. In other words, if they still have a job and they’re earning $15 an hour, fairly quickly prices will catch up with their gain and their purchasing power will be about the same as they previously enjoyed. Meanwhile, businesses who can keep the doors open are raising prices and laying off workers, or considering automation as a replacement for workers.
Apparently this too is beyond the grasp of Mr. Clinton and the brilliant president. Half the story, in both cases, is where Clifton stops. And this is considered just freaking brilliant by the boob.
And you wonder why the left lives in a fantasy world? This isn’t rocket science nor is there a dearth of examples proving these points. They are everywhere, throughout history. Look them up? Oh, hell no … let’s continue to live in our fantasy orthodoxy and call everyone else stupid.
See climate change for further proof of this nonsense.
You can’t make this stuff up. It is a story that the Onion should be writing, but instead, we see it in the LA Times. You’ve read about the new $15 minimum wage the city is imposing on employers? And you’ve also likely heard that unions were big backers of its imposition.
Well, now that the new minimum wage has passed, guess who wants an exemption?
Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces.
The push to include an exception to the mandated wage increase for companies that let their employees collectively bargain was the latest unexpected detour as the city nears approval of its landmark legislation to raise the minimum wage to $15 an hour by 2020.
For much of the past eight months, labor activists have argued against special considerations for business owners, such as restaurateurs, who said they would have trouble complying with the mandated pay increase.
But Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.
Have you got that last part? Unions should have the leeway to negotiate a wage below the mandated minimum wage.
“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” Hicks said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”
Apparently only unions can do that sort of negotiation. The other dumb proles out there in fast food land, for instance, need the benevolent hand of government to mandate them out of a job.
The irony of that union boob’s statement is classic. Other than the minimum wage law, what would stand in the way of any business and any employee from doing that routinely on their own? Oh, yeah, nothing … well, except that absurd law, now.
But you have to hand it too the unions for having the absolute big brass ones to put this out there. They recognize the win-win nature of those sorts of negotiations – negotiations that in a free country would be unhampered by government interference. But they want to limit them … to themselves.
They also want a little political payback and a decided advantage when competing against non-unionized companies who might bid on jobs they want.
Big. Brassy. Bold.
And they don’t even try to hide it anymore.
A “told you so” follow up on that $15 minimum wage hike in Seattle (and coming to San Francisco soon):
Seattle’s $15 minimum wage law goes into effect on April 1, 2015. As that date approaches, restaurant across the city are making the financial decision to close shop. The Washington Policy Center writes that “closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.”
Of course, restaurants close for a variety of reasons. But, according to Seattle Magazine, the “impending minimum wage hike to $15 per hour” is playing a “major factor.” That’s not surprising, considering “about 36% of restaurant earnings go to paying labor costs.” Seattle Magazine,
“Washington Restaurant Association’s Anthony Anton puts it this way: “It’s not a political problem; it’s a math problem.”
“He estimates that a common budget breakdown among sustaining Seattle restaurants so far has been the following: 36 percent of funds are devoted to labor, 30 percent to food costs and 30 percent go to everything else (all other operational costs). The remaining 4 percent has been the profit margin, and as a result, in a $700,000 restaurant, he estimates that the average restauranteur in Seattle has been making $28,000 a year.
“With the minimum wage spike, however, he says that if restaurant owners made no changes, the labor cost in quick service restaurants would rise to 42 percent and in full service restaurants to 47 percent.”
Key quote: “It’s not a political problem; it’s a math problem.” Of course it is a “political problem” because it is clueless politics that pushed this. However, for the owners, it is indeed a “math problem”. And the math for staying open doesn’t add up.
Are there alternatives to closing. Sure. But they’re the same ones we’ve talked about for years:
Restaurant owners, expecting to operate on thinner margins, have tried to adapt in several ways including “higher menu prices, cheaper, lower-quality ingredients, reduced opening times, and cutting work hours and firing workers,” according to The Seattle Times and Seattle Eater magazine. As the Washington Policy Center points out, when these strategies are not enough, businesses close, “workers lose their jobs and the neighborhood loses a prized amenity.”
Welcome to the land of $17 dollar cheeseburger. And, as you can figure out fairly quickly, everything else will be more expensive too … which, of course, erodes the purchasing power of that $15 wage. More importantly, if you work for one of those establishments that is closing, your wage is $15 times zero hours, isn’t it?
So the citizens of San Francisco voted themselves an increase in prices, er, excuse me, a “$15 minimum wage” and thumb their noses at the laws of economics.
Reality hits back. Borderland Books, an iconic SF bookstore, provides the perfect two-fold example with this announcement:
In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018. Although all of us at Borderlands support the concept of a living wage in principal and we believe that it’s possible that the new law will be good for San Francisco — Borderlands Books as it exists is not a financially viable business if subject to that minimum wage. Consequently we will be closing our doors no later than March 31st. The cafe will continue to operate until at least the end of this year.
Many businesses can make adjustments to allow for increased wages. The cafe side of Borderlands, for example, should have no difficulty at all. Viability is simply a matter of increasing prices. And, since all the other cafes in the city will be under the same pressure, all the prices will float upwards. But books are a special case because the price is set by the publisher and printed on the book. Furthermore, for years part of the challenge for brick-and-mortar bookstores is that companies like Amazon.com have made it difficult to get people to pay retail prices. So it is inconceivable to adjust our prices upwards to cover increased wages.
The change in minimum wage will mean our payroll will increase roughly 39%. That increase will in turn bring up our total operating expenses by 18%. To make up for that expense, we would need to increase our sales by a minimum of 20%. We do not believe that is a realistic possibility for a bookstore in San Francisco at this time.
Note the key lines. “The change in minimum wage will mean our payroll will increase roughly 39%.” Yet, there’s not 39% room in the earnings to weather that increase, because an 18% increase in operating costs puts them in the red. Borderland Books explains why – retail price is almost impossible to get anymore so they can’t increase the price of the product to cover the cost. Result? The workers in the bookstore will have a wage of $0 as of March 31. I’m sure they’re thrilled.
Meanwhile the cafe will stay open because it can do what? Pass the cost on to the customer. So in essence, those who voted for the increase in minimum wage voted dollars out of the pockets of those who opposed it as well as their own. While the workers in the cafe will get their $15 an hour minimum wage, it will be achieved in an increase in the price of the goods the cafe sells (about 20%). And if their experience is anything like Seattle’s (which also instituted a $15 minimum wage) tips will dry up to next to nothing, while perks (such as free meals, parking, etc.) will be discontinued now that the workers make enough money to pay for most of them.
Yes, economic illiteracy has a price – and here it is. Fewer jobs, higher prices, all a result of fools who thought they could magic “a living wage” out of a vote without that having any consequences to the workers or themselves.
Apparently we “underestimated” ebola and ISIS, but when it comes to the economy and our well being, our man in the White House did us proud, but we’re just not apt enough to realize that. From Obama’s “60 Minutes” interview:
Steve Kroft: You’ve got midterm elections coming up. Are you going to get shellacked?
President Obama: Well…
Steve Kroft: Or do you think that, I mean, are you optimistic? What are the issues and what are you going to tell the American people?
President Obama: Here’s what I’m going to tell the American people. When I came into office, our economy was in crisis. We had unemployment up at 10 percent. It’s now down to 6.1. We’ve had the longest run of uninterrupted private sector job growth in our history. We have seen deficits cut by more than half. Corporate balance sheets are probably the best they’ve been in the last several decades. We are producing more energy than we had before. We are producing more clean energy than we ever had before. I can put my record against any leader around the world in terms of digging ourselves out of a terrible, almost unprecedented financial crisis. Ronald Reagan used to ask the question, “Are you better off than you were four years ago?” In this case, are you better off than you were in six? And the answer is, the country is definitely better off than we were when I came into office, but now we have to make…
Steve Kroft: Do you think people will feel that?
President Obama: They don’t feel it. And the reason they don’t feel it is because incomes and wages are not going up. There are solutions to that. If we raise the minimum wage, if we make sure women are getting paid the same as men for doing the same work, if we are rebuilding our infrastructure, if we’re doing more to invest in job training so people are able to get the jobs that are out there right now, because manufacturing is coming back to this country. Not just the auto industry that we’ve saved, but you’re starting to see reinvestment here in the United States. Businesses around the world are saying for the first time in a long time, “The place to invest isn’t in China. It’s the United States.”
So there you go. When you ask the salient question (are you better off now than you were 6 years ago), you dumbasses always give the wrong answer. You ARE better off because our King says so. Screw the fact that “income and wages” are not going up, or the labor participation rates is at historic lows or real unemployment is considerably higher than the manipulated number! You’re better off, dammit! And government can fix the wage problem – you know, just raise the minimum wage for heaven sake.
Given that level of cluelessness, are you at all surprised this administration underestimated ISIS and ebola?
Nothing new here, but let’s repeat it for the umpteenth time so perhaps somewhere some lefty will actually figure out why minimum wages are a bad idea:
One of the results of the state and local minimum wage increases across the country is more young people out of work, according to Puzder. The more entry-level jobs pay, the more willing experienced, qualified workers will be to take them, thereby bumping the young and inexperienced out of the work force. Puzder says that is causing a real problem for the young people of America.
“The real problem with youth is: You have to have these entry-level jobs to get the experience you need to move forward in your life. If they don’t have those jobs, they’re sitting at home – I don’t know – looking at the posters from the last election or waiting for mom to make dinner, as opposed to being out there actually working and getting the experience that they need to go forward in life,” argues Puzder. “The experience is the important part and we’ve got a whole generation of kids ages 16 to 29 who are missing out on that.”
So how does the economy regulate the price of labor?
“When there’s a demand for labor, the cost of labor goes up. When there’s no demand for labor, it goes down and you can’t solve that problem by having the government artificially mandate a wage increase when there’s no economic growth to support that,” says Puzder. “What businesses do is they increase their prices and they move to automation so you have less jobs.”
Yes, as usual, central planning will fail and have negative consequences. I know, you’re shocked.
Oh, and this:
“When politicians tell people, ‘We’re going to increase the minimum wage and your check will be bigger,’ what they don’t say and [what] the next sentence should be [is]: ‘However, it’s not going to be worth as much as the increase, because everybody’s going to increase their prices so you’re not going to be able to buy as much as you could have if we’d just had economic growth that justified that increase.”
So what does Andy Puzder propose instead of artificially inflated minimum wages? “Government needs to get out of the way. If government gets out of the way, businesses will create jobs,” he says. “Wages will go up and the country will go back to a state of prosperity instead of what we’re in now.”
So you get the usual self-serving half-truth from pols when they claim they’re doing something to help the “little people”. By the way, Andy Puzder is the CEO of CKE Restaurants. He and I disagree on one thing:
Puzder says he believes states and municipalities have the right to raise the minimum wage, but he believes people need to understand the consequences, including higher prices and increased automation, which his company is undertaking using iPads to take orders at some restaurants instead of people.
Uh, no, Mr. Puzder … states have the power to raise the minimum wage, but unless you believe some entity other than yourself has a “right” to mandate how you spend your labor dollar, they have no “right”.
Anyway, prepare for some lefty to come by and assure us that the laws of economics aren’t really iron-clad at all, that supply and demand regulated by the market is old thinking and that central planning has a much better chance of assuring a “living wage” … if, given their skills, anyone can find a job at that price.
Well that’s determined by all sorts of variables – how much the person seeking the job is willing to take, how much the person wanting the job done is willing to pay, the scarcity or abundance of labor, etc.. And so in a free market, when a job is open it is up to the person seeking to have the work done and the person seeking a job to decide what it is worth to each of them. If they can reach agreement, then the job is offered to the person seeking the job. If agreement can’t be reached, then the job goes unfilled.
The bottom line is that no outside party can decide what that job is worth – in that mythical free market, that is. However, we don’t have a free market and legislators, trying to buy the good will of voters with other people’s money, often decide they know what every job is worth at a minimum. Thus the minimum wage.
Well this is anecdotal, I know, but it certainly seems to support every negative we here at QandO have been talking about for years. In the long run raising the minimum wage only raises the cost of labor. It does not change the worth of a job. Ever.
SeaTac workers are learning that the hard way:
Last January, SeaTac implemented a $15 per hour minimum wage for hospitality and transportation workers. The consequences to the drastic hike in wages are just beginning to be realized—and it’s not pretty.
“It sounds good, but it’s not good,” the woman said.
“Why?” I asked.
“I lost my 401k, health insurance, paid holiday, and vacation,” she responded. “No more free food,” she added.
“The hotel used to feed her. Now, she has to bring her own food. Also, no overtime, she said. She used to work extra hours and received overtime pay.
“What else? I asked.
“I have to pay for parking,” she said.
“I then asked the part-time waitress, who was part of the catering staff.
“Yes, I’ve got $15 an hour, but all my tips are now much less,” she said. Before the new wage law was implemented, her hourly wage was $7. But her tips added to more than $15 an hour. Yes, she used to receive free food and parking. Now, she has to bring her own food and pay for parking.”
SeaTac is a small city—10 square miles in area and a population of 26,909—with an economy almost exclusively defined by the Seattle-Tacoma International Airport. Five months into the implementation of a $15 minimum wage and it appears that a deep sense of regret has already flooded the city and workers who should have “benefited” from the terrible economic policy.
Meanwhile, as the largest city in the Pacific Northwest and one of the fastest growing major cities in America, Seattle is on the verge of following in SeaTac’s woefully unfit footsteps. Seattle Mayor Ed Murray’s $15 minimum wage plan includes a phase-in period of three to seven years and makes no exception for business type or size. Murray’s plan elicited back-lash from prominent Seattle businesses owners and economists alike.
Like we’ve said, increased costs associated with the job will likely be passed along to either the customer or the worker or both. Here you have two perfect examples of how perks that helped workers and were of value to them (and for which they didn’t have to pay taxes) fell victim to some interfering government body unilaterally raising the cost of labor. The worth of the job done didn’t increase at all. Consequently, businesses looked at ways to compensate for the increase in labor cost. As for the decrease in tips? Well people tip well because they know most waiters and waitresses don’t make much for a wage. However, when they’re making $15 an hour, suddenly there isn’t a great or compelling reason to “help them out”. Tips decrease. Why tip someone for doing their job when they’re making that kind of money hourly. And, just as likely, prices have gone up to cover this expense. Consequently, overtime is limited, etc.
Its not that this is something hard to figure out. But the socialists among us never get past the feelgood part of it, because, well, because math is hard and economics is absurdly hard … or something..