Go ahead and guess: If Amazon and Walmart paid every employee $xx more per hour, their profit would go away

Rojo tries math and applies it to economics.

Please stop, you have no idea what you are doing.

stillaprofit wrote:

There'd still be a profit because they would just increase the prices of the things they sell you if they pay their employees more....

That line of thinking is wrong. Large corporations are very averse to raising prices.

On a side not, if you think businesses do this, they're basically tyrannical and too powerful for the supply/demand curve. Also, there is not actually any risk because expenses will always be shoved on to consumers and profits will be guaranteed forever. Dystopian stuff. "Risk" is the current justification for owners (capital c Capitalists) to take home all the excess value, and the justification for giving 0% of excess to employees who are just an expense and not really a part of the company.

"Businesses will not give up their profits. They will never make less money than before. They will always force the consumer to pay more if their expenses increase unexpectedly". Do you like that???

rojo wrote:

I saw the other thread about some McDonalds paying their employees $18 an hour. Throughout my adult life, I've always raved about the McDonald's employee serving me a coffee at 5:30 am for like $10 an hour. I felt like they deserved an award. I'm glad to see them making more now.

At the same time, I understand money doesn't grow on trees.

I've always wondered how much more could a single McDonald's pay it's employees before it's profit went to zero.

I couldn't figure out how many employees work in a single McDonalds or how much a single location makes so I decided to do the math for Amazon as it's numbers are easy to find.

Guess how much if Amazon raised the pay of it's employees by xx per hour, it's profit would go to zero...

I'm glad to see you're coming to it now, but this is very old news. The cost to consumers for McDonald's products would rise negligibly if McDonald's workers were paid a living wage. Why you'd ever want someone to be paid less than a living wage is beyond me and a great number of others (a "silent majority" perhaps). Do better brojos. Keep up with s**t.

It's worth remembering that companies don't set labor prices. The market sets labor prices. When you as a consumer are only willing to pay x dollars for a certain product, that sets the labor price. Most consumers almost always seek out the lowest cost alternative, which is why so many people shop at places like Walmart, Costco and Amazon. A business owner or share holder will be limited in their markup by the rest of the market so long as there is adequate competition.

comedyre!i3f wrote:

It's worth remembering that companies don't set labor prices. The market sets labor prices. When you as a consumer are only willing to pay x dollars for a certain product, that sets the labor price. Most consumers almost always seek out the lowest cost alternative, which is why so many people shop at places like Walmart, Costco and Amazon. A business owner or share holder will be limited in their markup by the rest of the market so long as there is adequate competition.

Not really. Of course everybody wants cheap sh!t. There are a couple of forces at play. The company, the market, the employee and the government. Since the US government is usually just on the side of the companies because they bribe the system, the employees get the short stick.

But now it gets interesting. If you have nobody working for a decent wage anymore, people can't buy anything anymore. Companies close. Lose = lose.

Henry Ford understood this.

Now our smart, pumped up by subsidies billionaires run out of markets.

The pitchforks are coming.

If McDonalds prices go up enough, consumers will simply seek out alternative vendors like Smashburger, Culvers, Subway, Arbys or Burger King. People don't go to Mcdonalds because it is high quality. They go there because it is cheap. The average fast food franchise makes 6-9% a year in profit. Opening a franchise (where you don't own the building) will cost anywhere from about a half million to two and a half million (depending on location) up front. That is a lot of money to come up with for fairly tight margins that are held in check by competition. If someone wants a higher wage than places like this are offering, they need to get an education and exercise better judgement in their personal lives. I worked fast food jobs when I was young. I don't work them now because unlike many of my coworkers, I wasn't addicted to drugs or alcohol, I took out loans to go to college and I didn't have a kid outside of wedlock. You can live off a fast food wage (not well, but you can survive and you can try to work hard and try to get promoted or into a franchisee in training program and earn a better wage if fast food is your career aspiration).

News alert. Amazon shareholders are investing their money in Amazon with the expectation that Amazon will maximize the return on their investment. Internally, Amazon should be working not to maximize or minimize wages but to optimize wages for the greatest return to their shareholders. If that was not the case investors would flee, the company would shrink, and many of those workers would have to find a job somewhere else. Except for billionaires flying into space for a few moments of thrills, capitalism is a great thing.

Sometimes, this is the stupidest website and my faith in the community comes into question.

ChairmanPowell wrote:

Sometimes, this is the stupidest website and my faith in the community comes into question.

please don't raise rates, mr. powell.

Breakfast In Bed wrote:

What makes this a complicated question is that every McDonald's location is an individual franchise that pays McD's a licensing fee plus supply costs. Each location's profit margins and losses are otherwise their own. So the answer varies location by location.

A glaring omission on rojos calculation.. Those franchises are in completely different markets where the costs and revenue flows vary to the extreme.

ChairmanPowell wrote:

Sometimes, this is the stupidest website and my faith in the community comes into question.

You should have no faith in any website.

Jogger262 wrote:

Interesting quick study.

Amazon trades at a 58 P/E. For every dollar extra they spend on wages, that’s $58 against the value of the company (pretax). I realize P/E can adjust, but in a vacuum it would negatively affect the stock price.

Companies aren’t created to break even, they are created to generate returns for shareholders.

This concern is mostly irrelevant. Money is relative. Meaning, if you pay your workers more, you pass along some costs to the buyer of the goods. Very long story short, it depends on the marginal costs of substitution and elasticities of the goods. Meaning some goods you can pass the entire marginal cost on to the customer and other goods you can pass none of the marginal cost to the customer. Almost all goods are somewhere in the middle.

Anyways, as I was saying before getting distracted on the marginal cost of substitution, paying workers more means there’s more money on the system to buy goods. So they buy more goods. So wages go up, sales go up, and Amazon’s profit and cash flows remain the same. In reality they’d probably increase because Amazon is a quantity business so more sales means more profit and cash flows.

Also note, there’s short and long term effects. I outline the long term impacts. In the very short term, the stock price will likely be negatively impacted as initially higher wages are concerning. But eventually investors will realize it’s fine.

It is insane how people with such an infantile understanding of economics can be so sure of themselves.... Jesus Christ...

Something tells me your feigned outrage on behalf of the little guy doesn't extend to you actually refusing to shop at WalMart or Amazon... But then feigned outrage has never been about actually helping people has it?

The POOREST Amazon and WalMart workers are living better than most of the world and literally better than anyone born not too long ago in the past.

Why do people compare everything to the utopian ideal??? The alternative to minimum wage jobs from corporations isn't everyone being rich and making a living wage. It's 3rd world poverty where EVERYONE is poor.

You know if their payroll expenses go up, their taxable income goes down and their tax expense goes down.

So the net income doesn’t go down as much as the additional expense.

Oh wait.

Amazon doesn’t pay taxes.

So you've gleaned my exact understanding of economics by this post.

The response was to the poke holes in the age old saying "they will simply raise their prices". That's not universally true and it would also be pretty crappy if it was.

But, SocialismIsForIdiots, you clearly know more than me, an idiot socialist. Geniuses like yourself are worth millions at a young age because of your deep knowledge of business, right? I've never heard of the stock market or a 401k and spend my welfare money on weed and abortions, right?

chidder wrote:

SocialismIsForIdiots wrote:

It is insane how people with such an infantile understanding of economics can be so sure of themselves.... Jesus Christ...

So you've gleaned my exact understanding of economics by this post.

The response was to the poke holes in the age old saying "they will simply raise their prices". That's not universally true and it would also be pretty crappy if it was.

But, SocialismIsForIdiots, you clearly know more than me, an idiot socialist. Geniuses like yourself are worth millions at a young age because of your deep knowledge of business, right? I've never heard of the stock market or a 401k and spend my welfare money on weed and abortions, right?

"What? Do you think the stock market is some great mystery beyond the realm of human understanding?"

rojo wrote:

I saw the other thread about some McDonalds paying their employees $18 an hour. Throughout my adult life, I've always raved about the McDonald's employee serving me a coffee at 5:30 am for like $10 an hour. I felt like they deserved an award. I'm glad to see them making more now.

At the same time, I understand money doesn't grow on trees.

I've always wondered how much more could a single McDonald's pay it's employees before it's profit went to zero.

I couldn't figure out how many employees work in a single McDonalds or how much a single location makes so I decided to do the math for Amazon as it's numbers are easy to find.

Guess how much if Amazon raised the pay of it's employees by xx per hour, it's profit would go to zero...

Many on this topic have valid points. But not to speak for ROJO I believe his point is that companies like Amazon CAN afford to pay their employees more and be profitable