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If labor is 30% of your costs then you could pay 20% more by charging 6% more for your finished goods or services. For a lot of such companies you could fill th

If labor is 30% of your costs then you could pay 20% more by charging 6% more for your finished goods or services. For a lot of such companies you could fill those labor hours trivially by making existing staff full time drastically increasing their wages and their financial stability. Take a fake employee named Susan. Presently you pay her $12 an hour for an average of 24 hours per week. In a normal month Susan receives 4 weekly paychecks for a grand total of 1152 before taxes or deductions with which to pay per bills. Susan is serving you a plate of food for $15 Now imagine you raised her wages to $14.40 and offered her full time. Her wages are now 2304. She is making twice as much money and now the food sadly must cost... $15.90. But you say Susan doesn't want to work full time she has other responsibilities, other jobs for example! This is because you and your industry have specialized in each paying Susan to run around between her 2-3 jobs so she can afford to live so she can get enough hours to live without any of you having to pay benefits. It could also be because your industry pays too little for anyone to afford to live so you have collected workers who have lesser need because for example they are spouses of well paid workers earning supplemental income. As the cost of living rises faster than incomes this isn't a stable equilibrium. Even Sam spare time may find he needs to earn more to live and if Sam moves on to a real job, graduates college, moves out of his parents home etc you can't be sure you can replace him at your less than survival wage. The service industry isn't a benefit to America its a diseased kidney and if the entire industry as it is died not much of value would be lost.

jollybean 5y ago
I'm sorry but your math doesn't add up. "companies you could fill those labor hours trivially by making existing staff full time drastically increasing their wages" ? So the company will 'trivially' have 2x more revenue to be able to offer everyone full time jobs? While raising prices by 'only 6%' - you understand how Supply and Demand works? You are the one paying for those services. If you were willing to pay any material amount more, there'd be higher wages. In addition to Supply and Demand you have 'competitiveness' - service industries run on razor thin margins not by choice (!!), it's the nature of competition. By having tons of illegal workers, willing to work for less, you guarantee lower wages. The #1 driver of low wages in America is essentially illegal migration, which is encouraged by the same people who want higher wages. But all of this is moot: It's immoral (and probably illegal) to collect unemployment benefits if you can be working. In addition, smaller service industry companies cannot afford to pay substantially more, and they will be hit much harder by 'worker subsidies' than Starbucks across the street who will put them out of business.
- michaelmrose 5y ago
  I'm sorry you haven't thought this through. The service industry isn't fully staffed and manifestly makes use of a large portion of part time labor. If are able to staff 100 hours of labor per week of part time labor but need 160 you can indeed make up the difference by converting some of your part time labor into full time labor. This doesn't require earning twice as much revenue because we are talking about filling existing labor shortfalls which is to say hours you would staff tomorrow if you could hire the bodies. We are merely talking about increasing the hours of your existing labor instead of lamenting that nobody else wants to work for so little per month that you cannot rent an apartment with all of your wages. Supply and demand pushes a market towards an equilibrium state it isn't gravity the market is still made up of human choices. It doesn't constrain you to a specific set of decisions. Don't base your argument on economics if you don't understand economics. Just because you have chosen to value a labor hour at $11 an hour and a burger at $14.99 doesn't mean its fate. You CAN pay more and you can charge more and because wages aren't most of your labor costs the price doesn't rise linearly with the cost of labor. This is also complete bubkis "The #1 driver of low wages in America is essentially illegal migration, which is encouraged by the same people who want higher wages." Please feel free to back it up.
  - jollybean 5y ago
    'Offering more hours' to part time workers, as opposed to 'hiring more workers' , as a proposed solution to a problem that is essentially global (and perennial) has to be one of the most glib proposals I've read in a long while. Millions of managers and CEOs will be ever grateful for that deep insight they couldn't otherwise fathom themselves ... if only they could read HN! Or maybe we can assume 'They Have Thought of That' and that it's a dynamic already in play. Obviously. "Supply and demand ... It doesn't constrain you to a specific set of decisions. Don't base your argument on economics if you don't understand economics." If you understood economics, you would realize they fundamentally constrains your choices. They are literally 'the biggest constraints'. Small businesses are competitive, and generally keenly aware of what their margins and pricing pressures are. If they could magically create worker stability with a simple price increase -> wage increase function, they'd do it. Raising prices by 6% across the board is not a solution to anything, it's just inflationary. FYI California has 3 million illegal aliens [1]. That's about 8% of the population. If you consider that they have no benefits, are slightly younger, they're more likely to be working, that's a 'very solid and probably greater than 12% of the labour market'. Given that they are likely in the lower income bracket, it's probably well more than 20% of working class jobs. That's a massive proportion and it will fundamentally affect prices for everything. California's wealth is derived as much from illegal labour practices, paying illegal wages, and illegally not providing worker benefits. The surpluses go into the pockets of every Californian in the form of cheap prices all the way through the value chain. A solution could be to work very hard to ensure that every business was ruthlessly enforcing labour standards, wages, conditions and benefits. But that would price those illegal workers out of the market (the only reason they are employed is because they are very inexpensive) and they'd likely have to return home - or be permanent wards of the state. Hence the giant and obvious hypocritical paradox of the California economy. [1] https://en.wikipedia.org/wiki/Illegal_immigration_to_the_United_States https://en.wikipedia.org/wiki/Illegal_immigration_to_the_Uni... " Don't base your argument on economics if you don't understand economics."
sigstoat 5y ago
> If labor is 30% of your costs then you could pay 20% more by charging 6% more for your finished goods or services. right, businesses are all malign and evil, and they could raise their prices by 6% (without losing any business), but they just haven't, because they prefer to... have an excuse to pay less? > But you say Susan doesn't want to work full time she has other responsibilities, other jobs for example! any of my staff who didn't want to work full-time usually wanted to spend more time with their kids. or take classes.
- AnIdiotOnTheNet 5y ago
  > right, businesses are all malign and evil, and they could raise their prices by 6% (without losing any business), but they just haven't, because they prefer to... have an excuse to pay less? Let's assume that the reason you'd supposedly lose business with higher prices is due to competition not raising their prices. If you're struggling to find workers such that you have to raise prices to cover better wages, then it stands to reason your competitors are in the same boat, so either they keep struggling due to lack of labor or they raise their prices to match. Alternatively, they have a much more efficient business than you and you should go under anyway. Nobody owes you a successful business. Now let's assume that the reason you'd supposedly lose business with higher prices is due to people not being willing to pay that much for your product. Well, if your business revenue can't even afford to pay the labor that keeps it running than your business is a failure and should go under. Nobody owes you a successful business. I absolutely do not subscribe to the idea that the purpose of society should be to ensure there are enough desperate people to fill labor positions for untenable businesses.
  - jollybean 5y ago
    "I absolutely do not subscribe to the idea that the purpose of society" Your moral impetus isn't an important factor in trying to understand underlying dynamic of the situation. There's a basic operating competitive dynamic going in small business & services that is almost as old as time, or at least it goes back to even before antiquity before we even had the language to describe the economics of it all. Huge swaths of the economy operate on this basis. Most small business owners are not particularly rich, and if you add up the risk premium they take on, they're probably not that far ahead at all, if at all. Wages are what they are due to input costs (including labour) beyond their control. They have no market power and they are 'price takers' not 'price setters'. There's generally no situation in which they can magically raise wages and give longer hours as the OP fantasized. The only thing they can do is hope to be especially prudent, intelligent, conscientious and of course lucky. Larger entities & chains (i.e. Starbucks) probably could raise wages a bit. Regulations such as minimum wage will obviously have an affect but have side effects. And of course large pools of illegal migrants who's presence hugely skews the above board market for labour (this is major factor in Texas and Cali).

jollybean 5y ago

I'm sorry but your math doesn't add up. "companies you could fill those labor hours trivially by making existing staff full time drastically increasing their wages" ? So the company will 'trivially' have 2x more revenue to be able to offer everyone full time jobs? While raising prices by 'only 6%' - you understand how Supply and Demand works? You are the one paying for those services. If you were willing to pay any material amount more, there'd be higher wages. In addition to Supply and Demand you have 'competitiveness' - service industries run on razor thin margins not by choice (!!), it's the nature of competition. By having tons of illegal workers, willing to work for less, you guarantee lower wages. The #1 driver of low wages in America is essentially illegal migration, which is encouraged by the same people who want higher wages. But all of this is moot: It's immoral (and probably illegal) to collect unemployment benefits if you can be working. In addition, smaller service industry companies cannot afford to pay substantially more, and they will be hit much harder by 'worker subsidies' than Starbucks across the street who will put them out of business.

michaelmrose 5y ago
I'm sorry you haven't thought this through. The service industry isn't fully staffed and manifestly makes use of a large portion of part time labor. If are able to staff 100 hours of labor per week of part time labor but need 160 you can indeed make up the difference by converting some of your part time labor into full time labor. This doesn't require earning twice as much revenue because we are talking about filling existing labor shortfalls which is to say hours you would staff tomorrow if you could hire the bodies. We are merely talking about increasing the hours of your existing labor instead of lamenting that nobody else wants to work for so little per month that you cannot rent an apartment with all of your wages. Supply and demand pushes a market towards an equilibrium state it isn't gravity the market is still made up of human choices. It doesn't constrain you to a specific set of decisions. Don't base your argument on economics if you don't understand economics. Just because you have chosen to value a labor hour at $11 an hour and a burger at $14.99 doesn't mean its fate. You CAN pay more and you can charge more and because wages aren't most of your labor costs the price doesn't rise linearly with the cost of labor. This is also complete bubkis "The #1 driver of low wages in America is essentially illegal migration, which is encouraged by the same people who want higher wages." Please feel free to back it up.
- jollybean 5y ago
  'Offering more hours' to part time workers, as opposed to 'hiring more workers' , as a proposed solution to a problem that is essentially global (and perennial) has to be one of the most glib proposals I've read in a long while. Millions of managers and CEOs will be ever grateful for that deep insight they couldn't otherwise fathom themselves ... if only they could read HN! Or maybe we can assume 'They Have Thought of That' and that it's a dynamic already in play. Obviously. "Supply and demand ... It doesn't constrain you to a specific set of decisions. Don't base your argument on economics if you don't understand economics." If you understood economics, you would realize they fundamentally constrains your choices. They are literally 'the biggest constraints'. Small businesses are competitive, and generally keenly aware of what their margins and pricing pressures are. If they could magically create worker stability with a simple price increase -> wage increase function, they'd do it. Raising prices by 6% across the board is not a solution to anything, it's just inflationary. FYI California has 3 million illegal aliens [1]. That's about 8% of the population. If you consider that they have no benefits, are slightly younger, they're more likely to be working, that's a 'very solid and probably greater than 12% of the labour market'. Given that they are likely in the lower income bracket, it's probably well more than 20% of working class jobs. That's a massive proportion and it will fundamentally affect prices for everything. California's wealth is derived as much from illegal labour practices, paying illegal wages, and illegally not providing worker benefits. The surpluses go into the pockets of every Californian in the form of cheap prices all the way through the value chain. A solution could be to work very hard to ensure that every business was ruthlessly enforcing labour standards, wages, conditions and benefits. But that would price those illegal workers out of the market (the only reason they are employed is because they are very inexpensive) and they'd likely have to return home - or be permanent wards of the state. Hence the giant and obvious hypocritical paradox of the California economy. [1] https://en.wikipedia.org/wiki/Illegal_immigration_to_the_United_States https://en.wikipedia.org/wiki/Illegal_immigration_to_the_Uni... " Don't base your argument on economics if you don't understand economics."

sigstoat 5y ago

> If labor is 30% of your costs then you could pay 20% more by charging 6% more for your finished goods or services. right, businesses are all malign and evil, and they could raise their prices by 6% (without losing any business), but they just haven't, because they prefer to... have an excuse to pay less? > But you say Susan doesn't want to work full time she has other responsibilities, other jobs for example! any of my staff who didn't want to work full-time usually wanted to spend more time with their kids. or take classes.

AnIdiotOnTheNet 5y ago
> right, businesses are all malign and evil, and they could raise their prices by 6% (without losing any business), but they just haven't, because they prefer to... have an excuse to pay less? Let's assume that the reason you'd supposedly lose business with higher prices is due to competition not raising their prices. If you're struggling to find workers such that you have to raise prices to cover better wages, then it stands to reason your competitors are in the same boat, so either they keep struggling due to lack of labor or they raise their prices to match. Alternatively, they have a much more efficient business than you and you should go under anyway. Nobody owes you a successful business. Now let's assume that the reason you'd supposedly lose business with higher prices is due to people not being willing to pay that much for your product. Well, if your business revenue can't even afford to pay the labor that keeps it running than your business is a failure and should go under. Nobody owes you a successful business. I absolutely do not subscribe to the idea that the purpose of society should be to ensure there are enough desperate people to fill labor positions for untenable businesses.
- jollybean 5y ago
  "I absolutely do not subscribe to the idea that the purpose of society" Your moral impetus isn't an important factor in trying to understand underlying dynamic of the situation. There's a basic operating competitive dynamic going in small business & services that is almost as old as time, or at least it goes back to even before antiquity before we even had the language to describe the economics of it all. Huge swaths of the economy operate on this basis. Most small business owners are not particularly rich, and if you add up the risk premium they take on, they're probably not that far ahead at all, if at all. Wages are what they are due to input costs (including labour) beyond their control. They have no market power and they are 'price takers' not 'price setters'. There's generally no situation in which they can magically raise wages and give longer hours as the OP fantasized. The only thing they can do is hope to be especially prudent, intelligent, conscientious and of course lucky. Larger entities & chains (i.e. Starbucks) probably could raise wages a bit. Regulations such as minimum wage will obviously have an affect but have side effects. And of course large pools of illegal migrants who's presence hugely skews the above board market for labour (this is major factor in Texas and Cali).