It’s the inability to think that’s so painful

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1183

This is painful truly so:

But it also attributed its difficulties to commodity price volatility as well as a tight labour market and a greater political focus on low wage workers. NPC noted in the filing that minimum wages and competition for workers were driving labour costs higher faster than their ability to raise prices.

It’s a timely reminder that fast food’s success might ultimately stem from it being able to take advantage of low-wage workers who lack bargaining power. If that changes, and profits end up being redistributed more equitably, it’ll be a good thing for fry cooks and cashiers, but not private equity bros.

So, a fast food company (franchisee, that is someone actually paying the wage bills) points out that a rising minimum wage has impacted upon costs so much that it has gone bust. Leading, one would rather think, to people thinking that if employers start going bust then perhaps there might be fewer jobs around for those minimum wage workers to do.

You know, that is, there might be an effect upon the number of jobs of an increase in the rate for the job?

But, but, but – yes, you’re right, it’s canonical these days that rising minimum wages don’t have an impact upon the number of jobs. Therefore the actual evidence right in front of their eyes is ignored. Twisted even. Twisted to the point that wages rising to the point of bankrupting employers is claimed to be good for employees who are no longer employed.

OK, well, if this were Amanduh we could excuse it as she doesn’t know anyway. But this is the Financial Times for the Lord’s Sake. The rot really has set in, hasn’t it?

Perhaps we should get the cows writing and eat the journalists instead?

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Spike
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Spike

To quibble over the headline, inability isn’t painful at all; one can contract out and even get an op-ed ghostwritten. What bothers me is unwillingness to think.

Given that the fast-food joint combines labor, management, capital, and raw materials to suit customers and make a profit, the writer gushes about “profits…redistributed more equitably,” defeating the purpose of the business. No wonder it goes broke, harming those groups the legislator sought to benefit.

Of course, undisclosed in the excuse-making of any bankruptcy filing is the fact that the competition managed to survive under identical constraints.

Chester Draws
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Chester Draws

Survived maybe. But are they prospering?

Spike
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Spike

Certainly not as much as they would be WITHOUT the constraints! But I mean the competitors found a way to trim their costs or convince the customer to bear them, as John B describes below, while the bankrupt company did not.

Barks
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Barks

The problem with these people is that they nearly always confuse revenue with profit. No matter how many times it is pointed out these journalism (and associated nonsense) degree holders simply can’t wrap their minds around the two concepts.

Spike
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Spike

I don’t think so; when redistributing loot, the gov’t does not care whether it was before or after expenses.

For example, you are permitted to pay no taxes if your revenue does not yield a profit after expenses, and they all regard that as proof that you got away with something illicit.

Laimonas Nikolajevas
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Laimonas Nikolajevas

I do not think it will work at all. We will end up with even more inequality with cows being both more intelligent and more tasty than journalists. Therefore I suggest we tax cows more until they taste as bad as the journalists.

John B
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John B

‘ If that changes, and profits end up being redistributed more equitably, it’ll be a good thing for fry cooks and cashiers, but not private equity bros.’ Profits are distributed among business owners/investor and are what is left after all costs have been paid. If profit is reduced as costs go up because increases cannot be recouped by raising prices, then business owner reduces costs to maintain profit, with labour being the primary target. That means fry cooks, etc get less, maybe lucky enough no longer to have a job. So in fact it is the cost that gets redistributed.… Read more »

TD
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TD

All these discussions assume that the advocates of increasing the minimum wage simply don’t understand that it will cost jobs and perhaps put some smaller businesses out of business. I disagree. The job losses and the bankruptcies are the entire point. Look at demographic trends, particularly in the US, and note who is leaving the states that are losing population relative to the growing states. Blacks have been exiting the north for the south in droves. It’s a more sophisticated form of Jim Crow (the original Jim Crow laws in the antebellum era were in the north) that allows the… Read more »

Spike
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Spike

That’s true; Democrats are arranging to fan racial anger all summer long (CNN is assembling special news desk for this purpose), but your average Democrat no more wants to encounter an actual Negro than Joe Biden relished his supposed scolding of “Corn Pop.” Nor eat at McDonald’s.

Nigel Sedgwick
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I posted this analysis of the minimum wage on Samizdata back on 14 May 2019. It’s thrust seems uncommon; perhaps more along the same lines would help. A government-mandated minimum wage is an interference with the free market in jobs. Firstly, some of those previously existing jobs that are not worth the minimum wage will disappear. This will make unemployed, those that previously did those jobs. Some of those newly created unemployed will thus need to be supported by welfare – increasing the size of government spending (as a proportion of GDP) while generating no actual benefit to the nation.… Read more »

Spike
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Spike

Wage-and-hour laws not only interfere with the free market but with free speech: communicating opinions on the value of one’s work. You’re right that the first-order effect is to kill jobs; but this ignores adaptation. The fired worker could change to be worth a job at the higher minimum wage: Maybe just dress better, lose the attitude, and start caring about appearances. Several entrepreneur friends have a story about an autocrat who did them a favor by firing them, at which point they reinvented themselves not as grunt but problem-solver. At some level of destruction, gov’t might drop its insistence… Read more »

Mohave Greenie
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Mohave Greenie

I have recently retired from running fast food stores. The reason is the climbing minimum wage and increased regulations. The returns on my capital; money and time made it no longer worthwhile. The reason that most of the jobs in the industry are minimum wage is that it takes very little training to have an effective worker. It took about a week to train an average high school student to be functional. This is definitely not designed to be a career to support a family. With the minimum wage doubling in the last decade, the value of taking a unskilled… Read more »