These situations are not solvable by doing basic math, you miss the complexities of the situation. To pay employees better, he'd shift the cost of the salaries

These situations are not solvable by doing basic math, you miss the complexities of the situation. To pay employees better, he'd shift the cost of the salaries to the goods in question, and possibly provide new/different products to address market conditions. Additionally everywhere I've worked, and this is anecdotal but still, when you pay your employees better they don't loathe their jobs quite so much, which leads to better customer service. Some people do still shop for service. If his response to rising operating costs is to not respond at all and continue charging the same prices for the same goods and not move at all in terms of addressing the problem, then he shouldn't be in business in the first place, he clearly has no idea how to run one.