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?
The language we use matters - it provides clarity to our own thoughts and enables…
It is now generally acknowledged that the structure of the NHS needs to be overhauled…
In the film Apollo 13, a loss of oxygen causes the crew to start inadvertently…
There's an idea out there which seems intuitive but then so many ideas do seem…
When we think about the darkly opaque goals of modern central bankers as they relate…
As the papers recently filled with the distressing images of desperate souls looking to escape…
View Comments
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.
Survived maybe. But are they prospering?
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.
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.
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.
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.
‘ 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.
Have I got that right?
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 progressives to preen about how wonderful they are while knowing just who they are driving away.
Most progressives are happy to see fast food joints close down just as fast as they can drive them out of business.
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.
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.
Secondly, some of those previously existing jobs that are not worth the minimum wage will still need to be done. This is likely to be (in part at least) by time-sharing employees previously doing slightly more valuable jobs. Thus the value of those employees will decrease somewhat. Consequently (and eventually), the wage for many jobs slightly above the minimum wage will actually fall, as they do a mix of work worth just a bit above the minimum wage - rather than all work above the minimum wage. This will very likely have a knock-on effect (lower wages) all the way up the employment ladder.
Thirdly, some of the previously existing jobs that are not worth the minimum wage (particularly those involving manufacturing, but also for example call centres) will continue to exist but move off-shore. Those that did them will need retraining (possibly also need to be additionally educated) to do other jobs that continue to exist. This will increase government costs for education (or divert funds from existing tertiary education) - at least until such time as standard child and other young-person education catches up with actual vocational needs (and assuming it ever does, if minimum wages continue to be increased in the future).
Fourthly and on minimum wages for young workers, on-the-job training for young workers such as apprentices will continue to be weakened - by making their benefit to employers/trainers less cost-effective. This is likely to damage the work ethic of many, encouraging them to believe their opportunities are in delay through seeking full-time 'higher education' of the sort that we already see too much of - 'higher education' that has little or no vocational benefit.
Fifthly, technology will become more directed at satisfying the previously existing jobs that are not worth the minimum wage - but still need to be done. This will take resources from technology which is more directed at advancing human civilisation (ie satisfying the bottom end of function rather than the top end of function). This will weaken First-World economies more, particularly in comparison with Second-World economies that simultaneously make leading edge technical advances and provide more efficient higher levels of employment for a larger proportion of their population.
Minimum wage is, all round: paying more for less - depriving of opportunity many of those merely because they are in the lower quartile of ability - making less efficient use of available labour and available capital.
Keep safe and best regards
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 on mandated wages, or voters might replace it with one that will.
And yes, the work done to automate menial labor has an opportunity cost in other innovation not done, but this is especially hard to measure. The thing to avoid is Trumpian rhetoric about foreigners "stealing" our business, when the truth is that domestic legislation has made it infeasible to get certain work done at home.
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 worker and giving them basic skills has plummeted. When the minimum wage goes from$7/he to $15/hr investing money in automation is a much better plan than paying labor.
The sad thing is that the bottom rungs are cut off the career ladder The important skills of showing up on time, following instructions, and being polite to customers are not inculcated.
The teenagers that miss this don't even know what they lost. The beneficiaries of the high minimum wage are highly concentrated and visible. The victims are diffuse and anonymous.