The "squeeze" is always on the margin. Decades ago, it was with SRO (single room occupancy) hotels, often derided (sometimes correctly) as fleabags. Superior minds didn't like people living in squalor, so now they are homeless instead.
Same goes here. Right now, you can sell a cheapo burger at $6.45, compared to the "gourmet" burger that wets the elite's tastes at more like $10 or $12 (or even much more, of course). But when you bump the mini wage, the cheapo becomes $9, and the low-end gourmet only goes up to $12.50 or $15. So the percentage extra is not as much, and the artificially high labor cost (compared to other inputs) tips the scale. Then the cheapo goes out of business, leaving the process to repeat at the next level in a decade's time.
Of course there are those will call this progress, getting rid up of cheap food options (as being "insulting" or something), and making food stamp dependency more rampant. And it never touches the elites and their $25 or $50 burgers.
Elites don't eat burgers. They eat small salads with a few ounces of free range chicken.
Donald Trump and Bill Gates favorite food is the hamburger
Yes, but they still will call them "burgers", at least when they need votes from average Joe America.
Back in 2012, the EU was trying to get rid of low-cost burgers.
Rumor has it that KFC was forced to remove "chicken" from their name, because the product they sell wasn't considered "chicken"-enough by EU bureaucrats.
Nah son, I like a nasty greasy double patty w/double cheese-double bacon.
Beeevie wrote:
Elites don't eat burgers. They eat small salads with a few ounces of free range chicken.
I like a veggie burger with cheese and bacon. I think all the beef of a burger throws all the cheese and bacon off.
Laws of Econ 101 (frosh) wrote:
Right now, you can sell a cheapo burger at $6.45, compared to the "gourmet" burger that wets the elite's tastes at more like $10 or $12 (or even much more, of course). But when you bump the mini wage, the cheapo becomes $9
It does not, put down whatever you're smoking.
Well, the owner said the minimum wage raise to $15 would cause the price of his burgers from $6.45 to $9. My guess he knows the burger business and the relative labor costs more than we do.
“The minimum-wage law was the straw that broke the camel’s back. We’d need to raise the burger to $9 from $6.45. I don’t want to do that to my customers. They’ve been good to me. These are middle-class people,†said owner Larry Georgeton, 66.
Right now the NY minimum wage is $9 (with side effects from tips). By end-2019, it will be $15, or a 67% increase. Now the expected labor cost for a restaurant is only about 30%. Add in a small amount for other input costs to go up, and you still only get that total costs should go up by maybe 25%, max 30%. So how is Georgeton jacking up the price by 39% (to $9 from $6.45)?
Also, the minimum wage also affects all other wages, as many unions have deals that are tied to them as a multiplier percentage.
Union activists want to raise the minimum wage in the fast-food industry to $15 an hour.
http://www.heritage.org/research/reports/2014/09/higher-fast-food-wages-higher-fast-food-pricesUltimately, the average fast-food restaurant would have to raise prices by nearly two-fifths.
39% is just about two-fifths, whaddya think of that?
Moreover,
This would cause sales to drop by more than one-third, and profits to fall by more than three-quarters.
The typical restaurant has a profit margin of just 3 percent before taxes.
And after taxes, it's certainly even less.
http://www.heritage.org/research/reports/2014/09/higher-fast-food-wages-higher-fast-food-prices
This is a good article, as it discusses the elasticity constraints on price rises.
That's what I meant by "squeezing" out the lower end. When you compete on price to the consumer, and then yours gets raised (relatively) by law, obviously it hurts you competitively.
If fast-food restaurants raised their prices, many of their customers would either eat at home or go to more expensive restaurants.
In the long run, only the elites will be able to go to restaurants, as everyone will be priced out (all will be expensive). But they only care about little people to get their votes. The insanity of "democracy".
The math don't add up? wrote: So how is Georgeton jacking up the price by 39% (to $9 from $6.45)?
Perhaps because he is a real-world actual business owner, and not an ivory-towered economist making dopey assumptions.
Many economists analyzing the fast-food industry overlook this dynamic.[9] They assume that fast-food restaurants would only have to raise prices enough to cover the cost of wage increases—ignoring the sales and revenue that fast-food restaurants lose because of these price increases. Consumers’ price sensitivity means that fast-food prices must rise by more than the initial increase in labor costs.
Who cares if fast food joints go out of business. Isn't that half of the idea anyway?
I think that was the point and intent. Some people are ideologically opposed to the existence of fast food joints. So they yoke unbearable burdens to force them out. Others have different favored targets in mind. Why they are allowed to do this in a civilized society is a different question.
Decades ago, it was with SRO (single room occupancy) hotels
In San Francisco a century ago, a passable room might cost 35 cents a night ($8 in today’s currency).
New state and local laws made residential hotels more expensive to operate. Other rules simply made them illegal outside of historic downtowns. As cities expanded outward, rooming houses could not spread to the new neighborhoods.
The rules were not accidents. Real-estate owners eager to minimize risk and maximize property values worked to keep housing for poor people away from their investments. Sometimes they worked hand-in-glove with well-meaning reformers who were intent on ensuring decent housing for all. Decent housing, in practice, meant housing that not only provided physical safety and hygiene but also approximated what middle-class families expected.
This coalition of the self-interested and the well-meaning effectively boxed in and shut down rooming houses, and it erected barriers to in-home boarding, too. Over more than a century, it acted through federal, state, and local rules in ways that sounded reasonable at the time: occupancy limits and requirements for private bathrooms, kitchens, and parking spaces. The net effect, however, was to essentially ban affordable private-sector urban housing for those at the bottom of the pay scale.
Fully agree, yesterday it was housing, now it's food, tomorrow it will be ?
Fully agree, yesterday it was housing, now it's food, tomorrow it will be ?
The math don't add up? wrote:
Right now the NY minimum wage is $9 (with side effects from tips). By end-2019, it will be $15, or a 67% increase. Now the expected labor cost for a restaurant is only about 30%. Add in a small amount for other input costs to go up, and you still only get that total costs should go up by maybe 25%, max 30%. So how is Georgeton jacking up the price by 39% (to $9 from $6.45)?
Also, the minimum wage also affects all other wages, as many unions have deals that are tied to them as a multiplier percentage.
You don't understand economic equilibrium.
The higher labor costs would initially force fast-food restaurants to raise their prices by 15 percent, which would drive down sales by 14 percent. This would force restaurants to raise prices again, pushing sales down further. In equilibrium the average fast-food restaurant would have to raise prices 38 percent.
Yes, the idea is to hurt people who frequently eat fast food (middle class), but not touch the wealthy.
These changes would hurt consumers. Americans would face higher fast-food prices, putting a dent into the budgets of everyone who frequently eats fast food—primarily moderate-income consumers, not the wealthy, who do not regularly eat fast food.
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