4 ms·
Not sure how you came up with 1/5 to the profits at most. If the labor costs increase by 20% it may well mean going from black to red got the company or the pro
by bluecalm 7y ago
Not sure how you came up with 1/5 to the profits at most. If the labor costs increase by 20% it may well mean going from black to red got the company or the profits being reduced by 80% or whatever other number depending on the margins the company is operating on.
- kennywinker 7y ago1/5 is 4 days a week instead of 5. If labour is 100% of your company’s costs, then yes you are facing a 20% increase in costs. 100% labour businesses are VERY rare. It is also very unlikely that cutting hours by 1/5 (while keeping wages stable) would result in a 1/5 loss in productivity. There is so much time wasted in the typical 9-5 workday because nobody can be productive for 8 hours straight. So if you have a business that’s near 100% labour costs, and the work is such that productivity is very nearly equal ti hours spent working, and your margins can’t take a 20% hit, then yes you are going out of business. There are whole classes of business that would work if 50 or 60 hour work weeks are legal to mandate - but we don’t care... why do we care about that thin slice of businesses that require a 40 hour work week? 32 hours or bust.
- thedufer 7y agoI think the confusion is not where the figure 1/5 comes from, but rather why that is the change in profit. It looks like you meant revenue.
- kennywinker 7y agoRight. I see how that was unclear. A 1/5 increase in labour costs is a much more precise way to frame it.
- bluecalm 7y agoIt's more precise but the whole point is that cutting 20% of profits sounds like a reasonable price to pay but once you realize increasing labor cost by 20% may mean for example 80% cut in profits it's not so simple anymore.