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Until you start seeing low-income people in Seattle and around the country taking to the streets to demand lower minimum wages, don’t listen to anyone who tries

Until you start seeing low-income people in Seattle and around the country taking to the streets to demand lower minimum wages, don’t listen to anyone who tries to tell you otherwise. The article ending on this note kind of soured the whole thing. The average person will be perfectly okay with higher wages so long as they don't take into account things like inflation and other knock-on effects - and most won't, because those effects are subtle over time. The money's gotta come from somewhere at the end of the day. And if the company doesn't want to or can't raise prices (franchises are especially hit by this, since a lot of their pricing flexibility is dictated by a corporate office), the next thing to be cut will always be labor.

MaysonL 9y ago
Remember reading an article in Forbes back in the '80s that cited a study comparing the profitability of McDonalds franchises that paid minimum wage, and those that paid somewhat higher. Guess which were more profitable? The ones who paid higher wages.
- JustSomeNobody 9y ago
  At what point does the law of diminishing returns kick in, though? McDonalds fries are good, but not THAT good, so at some point it's just not worth going there any more.
- mmmpop 9y ago
  I like to think this is because the workers are more inspired to work harder to "earn their keep". I'd say it's more likely the boss is keeping a closer eye on the workers' productivity and insists upon a bit more effort. I think it's a win-win but my lack of faith in humanity (read: cynicism) causes me to worry about those not interested in putting that much effort into a "minimum wage job". I understand the perceived need for something like a $15 minimum wage but as a guy who has always considered himself quite benevolent when paying subcontractors their actual value, I have a hard time swallowing the whole deal. Again, probably my own shortcomings but it would be interesting to understand how this might affect the attitudes of your typical "minimum wage worker".
- mikeash 9y ago
  Did the study consider the possibility of confounding factors? For example, I'd expect McDonald's locations in wealthier areas to pay higher wages because labor is in higher demand, and be more profitable because their client base is larger.
  - MaysonL 9y ago
    Yes, they matched the sites examined for socioeconomic locations.
- GhostVII 9y ago
  Did the study determine which way the relationship went though? Only McDonalds that are making a profit will be able to afford to pay more than minimum wage, a struggling one will obviously not be able to do that very easily.
michaelmrose 9y ago
Companies only hire enough labor to service their need to start with. They either will already cut labor or the can't and still profit. If minimum wage labor is 20% of your costs and it increases in price by 50% prices you can make up the difference by increasing prices by 10%
- j4kp07 9y ago
  > you can make up the difference by increasing prices by 10% LOL. Beautiful. Just beautiful. With no insight what so ever into the profit margins for a business, you've managed to solve all the Corporate world's problems. LMAO!
  - dang 9y ago
    Please don't do this here.
  - michaelmrose 9y ago
    Its obviously an oversimplification. In fact 20% of gross costs being minimum wage labor is arbitrary and high as is an increase in minimum wage by 50%. The point was to demonstrate that even in the case of a massive sudden increase in the minimum wage in an industry where unskilled labor makes up a pretty damn big portion of costs that the price increase that would pay for 100% of that pay increase was comparatively quite modest. For example McDonald's is almost the quintessential low skill job and a McDs franchise can easily pay 20% of its costs to labor. In fact the average mcdonalds employee is paid $10 an hour. Raising rates is one option, accepting lower margins is another if your margins are such that you can keep the doors open. Slashing labor as you have suggested is an unreasonable suggestion because the relationship as stated above isn't linear. In order to make up for labor going up by 50% you would have to slash your labor hours by 33% which is unsustainable. Basically the gist of the matter is that I don't possess nor claim specific insight into a particular business in this post. I'm saying that elementary school math can show that slashing labor is an unreasonable reaction that nobody will do because they when faced with the same scenario will be fully capable of doing the math. I'm not here to solve all the corporate worlds problems I'm here specifically to refute your post.
crdoconnor 9y ago
>The money's gotta come from somewhere Profits: https://www2.warwick.ac.uk/fac/soc/economics/staff/mdraca/minwage_profits.pdf https://www2.warwick.ac.uk/fac/soc/economics/staff/mdraca/mi...

MaysonL 9y ago

Remember reading an article in Forbes back in the '80s that cited a study comparing the profitability of McDonalds franchises that paid minimum wage, and those that paid somewhat higher. Guess which were more profitable? The ones who paid higher wages.

JustSomeNobody 9y ago
At what point does the law of diminishing returns kick in, though? McDonalds fries are good, but not THAT good, so at some point it's just not worth going there any more.
mmmpop 9y ago
I like to think this is because the workers are more inspired to work harder to "earn their keep". I'd say it's more likely the boss is keeping a closer eye on the workers' productivity and insists upon a bit more effort. I think it's a win-win but my lack of faith in humanity (read: cynicism) causes me to worry about those not interested in putting that much effort into a "minimum wage job". I understand the perceived need for something like a $15 minimum wage but as a guy who has always considered himself quite benevolent when paying subcontractors their actual value, I have a hard time swallowing the whole deal. Again, probably my own shortcomings but it would be interesting to understand how this might affect the attitudes of your typical "minimum wage worker".
mikeash 9y ago
Did the study consider the possibility of confounding factors? For example, I'd expect McDonald's locations in wealthier areas to pay higher wages because labor is in higher demand, and be more profitable because their client base is larger.
- MaysonL 9y ago
  Yes, they matched the sites examined for socioeconomic locations.
GhostVII 9y ago
Did the study determine which way the relationship went though? Only McDonalds that are making a profit will be able to afford to pay more than minimum wage, a struggling one will obviously not be able to do that very easily.

michaelmrose 9y ago

Companies only hire enough labor to service their need to start with. They either will already cut labor or the can't and still profit. If minimum wage labor is 20% of your costs and it increases in price by 50% prices you can make up the difference by increasing prices by 10%

j4kp07 9y ago
> you can make up the difference by increasing prices by 10% LOL. Beautiful. Just beautiful. With no insight what so ever into the profit margins for a business, you've managed to solve all the Corporate world's problems. LMAO!
- dang 9y ago
  Please don't do this here.
- michaelmrose 9y ago
  Its obviously an oversimplification. In fact 20% of gross costs being minimum wage labor is arbitrary and high as is an increase in minimum wage by 50%. The point was to demonstrate that even in the case of a massive sudden increase in the minimum wage in an industry where unskilled labor makes up a pretty damn big portion of costs that the price increase that would pay for 100% of that pay increase was comparatively quite modest. For example McDonald's is almost the quintessential low skill job and a McDs franchise can easily pay 20% of its costs to labor. In fact the average mcdonalds employee is paid $10 an hour. Raising rates is one option, accepting lower margins is another if your margins are such that you can keep the doors open. Slashing labor as you have suggested is an unreasonable suggestion because the relationship as stated above isn't linear. In order to make up for labor going up by 50% you would have to slash your labor hours by 33% which is unsustainable. Basically the gist of the matter is that I don't possess nor claim specific insight into a particular business in this post. I'm saying that elementary school math can show that slashing labor is an unreasonable reaction that nobody will do because they when faced with the same scenario will be fully capable of doing the math. I'm not here to solve all the corporate worlds problems I'm here specifically to refute your post.

crdoconnor 9y ago

>The money's gotta come from somewhere Profits: https://www2.warwick.ac.uk/fac/soc/economics/staff/mdraca/minwage_profits.pdf https://www2.warwick.ac.uk/fac/soc/economics/staff/mdraca/mi...