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I think some businesses are going out of businesses because they stubbornly refuse to raise their wages. In the vacation community where I live, there are two

I think some businesses are going out of businesses because they stubbornly refuse to raise their wages. In the vacation community where I live, there are two grocery/delis about a mile apart from each other. One is at a marina, the other is at a beach. They have almost the same business offering. Traditionally, both are fully mobbed during the sunny seasons. Two weeks ago, I visited the one I usually go to -- at the marina. They had a sign at the front door, "Due to the labor shortage..." and they weren't operating their deli counter. No sandwiches. When I sent inside, it was empty. No customers. The one employee at the register was on their phone. Nothing going on. A couple of people pulled up in their cars, read the sign, pulled out and left immediately. Drove up the road a mile to the other one. No sign -- it was busy like it usually was. Full house, busy counters and registers. My son asked me why the other place wouldn't just raise their wages.. I couldn't answer, but I guessed it was more on a matter of principle than calculated reality. There's no way they were surviving or thriving. I joked that maybe the owner was an old cahoot who remembered when a soda was $0.05 and there was no way they were going to raise their hourly wages to $15 or more.

29083011397778 5y ago
> I think some businesses are going out of businesses because they stubbornly refuse to raise their wages. I'm sure you're right. Some business owners are stubborn and don't want to offer higher pay. That said, to quote TFA: > But in one recent survey, more than half of hospitality workers who've quit said no amount of pay would get them to return. Paying more will get some people. But it clearly won't be enough for all, and maybe not even most.
Aloha 5y ago
It's not just wages - like alot of what we can do is making shitty jobs less miserable, ensuring everyone gets some amount of vacation and sick time, insuring everyone has cheap or free healthcare access, ensuring everyone has relatively fixed schedule - eliminate punitive workplace policies, on stuff like attendance and other shit that makes being there miserable. Like, you can do a hell of alot to reduce peoples day to day misery. There used to be some sort of a tradeoff, there used to be a ton of jobs that didnt pay well, but they were not miserable places to work at, that was kinda the tradeoff, you know - you like, didnt get a ton of money, but the workplace wasnt awful. Those jobs still exist but they're rarer.
- mjevans 5y ago
  Healthcare, retirement, everything required for living should be socialized. Old people today have Medicare and Social Security, but we need to finish the progression to Star Trek and just make sure there's enough to go around and that it does go around. The other part is that misery, fire bad customers and bad managers. It really isn't that difficult to be polite.
  - qwerty456127 5y ago
    > Healthcare, retirement, everything required for living should be socialized. Indeed. Many small businesses can't even afford sponsoring a sick leave directly AFAIK. At my location (in Europe) you pay a part of your monthly wage to the social security fund and once you get sick it covers your salary in the amount like if you kept working (and also pays you basic pension once you get too old).
    - vladvasiliu 5y ago
      In which country is this? In France, the "social security" (run by the state) doesn't cover the full salary, not even close. It only covers up to 50% [0], and only after three days (if you have 10 single sick days, you lose 10 days' pay). You have to have your own insurance ("mutuelle", usually chosen by your employer — which you cannot refuse, but can augment) to have a better deal. --- [0] It covers 50% of the salary, but the maximum salary taken into account is 1.8 times the minimum wage, which is 2 798,24 € before tax. https://www.ameli.fr/assure/remboursements/indemnites-journalieres/arret-maladie-salarie https://www.ameli.fr/assure/remboursements/indemnites-journa...
      - Arete314159 5y ago
        You write that 50% of nearly 3k Euros is bad. I can see where it would be bad. But in the US, you would have to fight tooth and nail for YEARS to get disability coverage that "good." US Disability payments average around $1500 or so a month, and you often get rejected your first application or for several rounds of appeals. Source: am on disability.
itsoktocry 5y ago
>I think some businesses are going out of businesses because they stubbornly refuse to raise their wages I'm skeptical that a business would choose to go out of business rather that give raises. Have you considered that margins are tighter than you think? I know small businesses like that.
- paulcole 5y ago
  I mean this is HN where the solution to the problem is obvious to a software developer but invisible to someone with decades of experience in the restaurant industry.
- 71a54xd 5y ago
  One could argue the move to continue unemployment payments / covid payments is a strategy to "raise minimum wage" without actually having to pass any policy to do so. Politically it's brilliant, you gain the support of your voter base in 2yrs with the assumption that "cheap employers" will simply go out of business because nobody will work for them. And your more conservative base will champion you for "resisting to raise minimum wage". I for one support raising minimum wage, but the automation / negative outcomes of menial labor being too expensive to hire for will happen whether or not the official minimum wage is increased. UBI is another debate entirely, however I'd also argue that UBI in time harms poor people more than it really helps them and just enriches huge companies and land-lords.
  - avidiax 5y ago
    That's an interesting take, but it seems like a post-hoc rationale/strategy to me. Conservatives will block any rise in the minimum wage, but couldn't completely block additional unemployment benefits. Progressives would back a rise in the minimum wage, but had to deliver on relief for the unemployed working class, so they did just that. The secondary effect of rising wages was probably only something that conservatives were expecting.
    - 71a54xd 5y ago
      Yep, but at the end of the day anyone who's trying to build wealth or have anything left for retirement gets fucked by inflation. People who are spendthrift and receiving UBI or unemployment payments (long term) were never trying to do that anyways and their payments in theory would increase with inflation. I'm a supporter of the idea of UBI but I just can't see the incentives panning out realistically.
awillen 5y ago
I think that for a lot of businesses, it's a question of what will happen when extended unemployment ends in September. If employees are going to flood the market and you can keep paying the wages you were paying pre-pandemic, then it makes sense to hold out, since if you raise wages now, you can't really reduce them later. You lose out on sales now because you're short staffed, but you keep your costs low in perpetuity. On the other hand, if that's not going to happen, then clearly you should raise wages and prices now, so you don't miss out on those sales. At this point, though, I think the folks who raise wages/prices because they think the latter case is true are going to cause a significant enough rise in the effective minimum wage (not the legal one, but the least you can practically pay and actually get employees) that everyone's going to have to raise wages anyway. It's an interesting game theory problem - if everyone's going to hold out on pay raises, then you should too. If a critical mass of people are going to raise wages in the next few months, though, then you should raise wages ASAP to get the best employees and not miss out on a summer of sales. Luckily this appears to be one of the rare game theory problems that'll actually work out well for the little guy.
- lazyasciiart 5y ago
  pandemic unemployment has already ended in a bunch of states. If it's the problem, we would be seeing those states rebound.
  - koolba 5y ago
    That’s exactly what’s happening. The States that ended the extend benefits have lower unemployment rates. Ex: https://apnews.com/article/business-health-alabama-coronavirus-pandemic-135f7cbec8a5ff49c2e2ce7aa71a52bc https://apnews.com/article/business-health-alabama-coronavir...
    - dragonwriter 5y ago
      > The States that ended the extend benefits have lower unemployment rates. Your “example” is of a state that had a lower unemployment than the national average before ending extended unemployment benefits seeing not significantly different than the national rate of decline in unemployment in the brief period since cutting extended benefits, not an example of more rapid drop after cutting benefits.
MomoXenosaga 5y ago
Not sure how it is in the US but where I live restaurant owners are wealthy entrepreneurs driving around expensive SUVs. Every sunny day the restaurants and bars are packed from morning until midnight. If they need more staff they have the money to pay better wages. That's how every other industry deals with labour shortages.
- notsureaboutpg 5y ago
  Where do you live? I honestly have trouble believing this. Restaurants are a notoriously low margin business, the one most associated with having family members do labor in them to decrease costs...
- readflaggedcomm 5y ago
  Restaurant capital costs, and low margins, guarantee owners would be wealthy and willing to take the risk. If their risk calculations are off, that's an opportunity for competitors.
- kortilla 5y ago
  In the US restaurants are very cutthroat and what you describe only applies only to the most popular restaurants. It’s trivial to start a restaurant in the US so many people do an fail terribly after a year. Restaurants are the worst fucking industry to invest in.
trophycase 5y ago
Same thing is happening with entire buildings in my city. They'd rather evict their entire set of renters than lower the rent.
- josephcsible 5y ago
  That's a consequence of rent control laws, which limit the percent that you can raise rent by per year. Ever lowering rent in a place with such a law is penny-wise but pound-foolish.
- rdtwo 5y ago
  That’s a financing thing plus if you have an old building it’s probably better to evict everyone so you can build a new one
notsureaboutpg 5y ago
In California they just issued "relief" to a bunch of random (often very high class, fancy) restaurants in the order of millions per restaurant. I really dislike the "bailout" concept and really think a risky, non-vital business like a restaurant should be the last one to receive such a consideration, but if I were a restaurant owner and knew the government would cut me a multiple millions dollars check and all I had to do was wait out employees till they'd accept low wages again, I'd try my hand at it.
josephcsible 5y ago
It's not that businesses stubbornly refuse to raise wages - it's that they can't afford to. A lot of local small businesses were barely staying afloat even before March 2020.
- jackson1442 5y ago
  If a business can’t afford to pay its employees enough make rent and buy groceries, perhaps it shouldn’t be a business?
  - ahallock 5y ago
    In high school, I worked at a fast food joint to make a little extra money. There were no expectations to pay rent or other essentials. But you'll say that it's not kids working these jobs, so we need to provide a livable wage. What about getting these people skills for better jobs? I'd rather attack that problem than make Wendy's sandwich maker a viable career.
    - jackson1442 5y ago
      What skills does a line cook at Wendy’s learn aside from “how a job works?” Also, who staffs Wendy’s from morning until schools let out during the day? I haven’t seen seasonal fast food restaurants anywhere near me.
      - crooked-v 5y ago
        General multitasking, team coordination, cash handling, basic restaurant dishwashing, stock management, industrial cleaning, pacifying unhappy customers, dealing with druggies and harassers, and a whole bunch of other things I've probably forgotten from when I worked fast food as a teenager. The simplicity of each individual job means that nobody ever has just one job at a fast food place. Stick around for any amount of time and you'll get rotated through every available position.
        5y ago
seriousquestion 5y ago
Given that we are outside observers, is it possible that they know something we don't? What might be some charitable explanations for why they don't raise prices?
- pempem 5y ago
  Restaurants that are not franchises have a 50% failure rate. Margins are intensely tight and the largest cost is labor, not food, spoilage, advertising, interior design, or whatever else. The central government and state government take limited to no responsibility for healthcare, child care, retirement, sick leave, pto etc. The central justice system has agreed that corporations have a duty to their stakeholders above their business and so growth is paramount. As a result, restaurants, esp independent ones, struggle to find ways to make ends meet and corporations (aka McDonalds) see no incentive to raise wages. The easiest and most obvious example of this playing out is imo that McDonalds pays labor more elsewhere than in the US.
  - chillwaves 5y ago
    https://www.restaurantbusinessonline.com/financing/mcdonalds-expects-pay-15-hour-company-restaurants-2024 https://www.restaurantbusinessonline.com/financing/mcdonalds...
    - pempem 5y ago
      Exactly! Thanks for sharing this. Currently the demand for higher wages is suddenly slightly more weighted towards the employee and yet McDonalds can pull out a three year timeline to get to $15 an hour, by which time inflation will make the increase insufficient
      - chillwaves 5y ago
        It's weird how evidence opposite to the point you are making actually supports your point? Whatever.
mlindner 5y ago
The reason they're not raising their wages is because restaurants make slim to nothing profits. Additionally the people quitting is from the government continuing to provide the stimulus checks that are in excess of the minimum wage. They need to stop providing those checks when the economy needs to be recovered.
SMAAART 5y ago
Most small shops are struggling, being 1 bad financial decision away from bankruptcy; doing business with no type of insurance whatsoever, and here and there stiffing some suppliers to make ends meet. So, there's no way they can afford to increase any expense, if they were to do that, they'd be out of business right away, so they continue floating away. These business owners are unfit to do business; so what is happening is economic darwinism. RIP.
- Droobfest 5y ago
  Economic darwinism for the small businesses. Economic socialism for the big companies.
coldtea 5y ago
>I joked that maybe the owner was an old cahoot who remembered when a soda was $0.05 and there was no way they were going to raise their hourly wages to $15 or more. But otherwise had no issue jacking their prices up to the heavens...
flippertheD 5y ago
Well, all businesses run operations dif and have dif margins, so let's not forget that. I run a recruiting company. From our data a few things have popped up. First, people want higher wages in the lower wage industries. They are asking for $15-20 per hour. Second, lot of these people don't want to go back to the same labor jobs they had - they want to do something different. the problem with this is that they want to get paid more than they were making before for jobs in which they have no exp. For those that think the worker knows they can get more money, it's not the majority. They only know if someone told them. A lot of low wage workers who risked it and stuck it out during the pandemic are upset they really didn't get wage increases. Their employers sure didn't offer it to them. And now they want to quit and get their benefits like the rest. There is a lot going on here. One group though that does want to work are the teenagers. Issue is that they want $20 per hour...this fiasco is probably going to continue for a while.
- rendall 5y ago
  It sounds like a seller's market.
  - fridif 5y ago
    A seller's market created by a law in which if the buyer pays too low of a price, very bad things happen to them.
    - rendall 5y ago
      One would expect in that case lots of laborers with wages at the minimum, and many more looking for work. What we're seeing in the description is not that.
      - fridif 5y ago
        I reckon the jobs are not on offer because the restaurants only want to pay a small amount (they have razor thin margins and an employee costs more than just salary [workers comp, insurance, equipment, liability etc]). Previously people accepted the small amount, but now they aren't because they're (currently still) being paid to stay home in most cases.
ayngg 5y ago
Policy has crept business in this direction by stretching wages low while maintaining the benefits of revenue of a developed society, and while there are some successful restaurants, a large amount of them aren't exactly swimming in money because the benefits of this policy are captured by the large corporations. Nobody starts a restaurant to get rich. If there is a hard snap back like what covid did with state benefits, it isn't a stretch to say that many businesses would be scrambling to find a new equilibrium. Restaurants in general are relatively premissionless in that anyone can start one, which is why so many fail. They can run the gamut from low margin to high margin, poorly managed to managed very well, so its no surprise that some will do better than others. In fact, I would think that the large corporate franchises will have the resources to adapt compared to the small business, family run restaurants because they have the logistical acumen to subsidize the costs.
pcmoney 5y ago
So the owner who has operated a cut throat, extremely demanding, razor thin margin for years folds because they don’t understand basic labor supply and demand? Keep in mind this person has mostly likely done in depth analysis on how to make their most popular item at the same quality but for 2% less of some expensive ingredient. I know one phenomenal restaurant owner who spent an entire year to get the cost of their paper products from 2% of COGS to 1%. Bonuses to managers, trash audits, the whole thing. You really think people like that couldn’t figure out raise salaries and prices? Do you know whats going to happen here? Panera, Qdoba, and 5 Guys. Just a monoculture of terrible bland food. Only the big players with economies of scale can charge less and pay the same as smaller restaurants.
- dannyw 5y ago
  I think your anecdote isn't necessarily reflective of all restaurant owners: (1) not everyone leases, some family businesses own the land and has significantly better margins at the trade-off of opportunity cost on the real estate, (2) some businesses are explicitly there to fulfil visa or immigration obligations, so profitability isn't a priority, (3) in less dense areas, the general laws of competition don't apply as much pressure as SF or NYC. Don't forget lifestyle businesses. I actually know multiple high-income people (lawyers, doctors) who just let their partners run businesses for the sake of doing something during the day; they lose money every year which offsets the joint income, and is better than having their partner sit around at home and spending money on something else.
- amyjess 5y ago
  If you can't stay open while paying people a living wage, you deserve to go out of business. I would rather have nothing but chain restaurants owned by megacorps than have people working for less than a living wage.
  - grapehut 5y ago
    That's fair, but would you also rather people unemployed than working for less than a living wage as well?
bryanrasmussen 5y ago
>I think some businesses are going out of businesses because they stubbornly refuse to raise their wages. That would mean the people running those businesses were in need of psychological help, it is pretty much crazy to close your business because you refuse to raise wages. I propose a counter explanation - your business has a very tight margin - if you raise wages you cannot afford to continue in business unless you raise prices. If there is a competing business nearby and you raise prices you lose customers to competitor and you will have to go out of business - unless of course competitor also raises prices. You and competitor(s) sit around waiting to see who will raise prices first, probably one of you closes up because they don't have enough workers. The one who remains open gets customers, because of extra income from customers they might be able to raise wages. At any rate they can probably raise wages because competitor that closed can't just reopen without any down time.
- consp 5y ago
  By not raising wages, keeping your employees and staying open you will definitely go under. Maybe you cannot outcompete the other business but by not even trying to go open you have already lost. There is always convenience customers, loyal customers and opportunity customers who do not care about the 2-3% difference in price. I'm not saying you are wrong, it could definitely be this case, just that there might be more factors to consider.
  - bryanrasmussen 5y ago
    >by not even trying to go open you have already lost. sorry, I thought the store was open until it closed down and posted its reasons? The problem with following the don't raise wages strategy and wait for your competitor to do it is if they outlast you - you reach the have to close position first. >By not raising wages, keeping your employees and staying open you will definitely go under. unless something changes that will make it profitable to raise wages. >There is always convenience customers, loyal customers and opportunity customers who do not care about the 2-3% difference in price. In a small margins business this might not be enough to keep you afloat.
- 6510 5y ago
ashtonkem 5y ago
This “labor shortage” line makes more sense when you think of it as a capital strike, not an objective statement of reality that should be treated literally.
lumberingjack 5y ago
Then food has got to go up the profit margin is not there. We talking $10 per taco them people will complain about that.

29083011397778 5y ago

> I think some businesses are going out of businesses because they stubbornly refuse to raise their wages. I'm sure you're right. Some business owners are stubborn and don't want to offer higher pay. That said, to quote TFA: > But in one recent survey, more than half of hospitality workers who've quit said no amount of pay would get them to return. Paying more will get some people. But it clearly won't be enough for all, and maybe not even most.

Aloha 5y ago

It's not just wages - like alot of what we can do is making shitty jobs less miserable, ensuring everyone gets some amount of vacation and sick time, insuring everyone has cheap or free healthcare access, ensuring everyone has relatively fixed schedule - eliminate punitive workplace policies, on stuff like attendance and other shit that makes being there miserable. Like, you can do a hell of alot to reduce peoples day to day misery. There used to be some sort of a tradeoff, there used to be a ton of jobs that didnt pay well, but they were not miserable places to work at, that was kinda the tradeoff, you know - you like, didnt get a ton of money, but the workplace wasnt awful. Those jobs still exist but they're rarer.

mjevans 5y ago
Healthcare, retirement, everything required for living should be socialized. Old people today have Medicare and Social Security, but we need to finish the progression to Star Trek and just make sure there's enough to go around and that it does go around. The other part is that misery, fire bad customers and bad managers. It really isn't that difficult to be polite.
- qwerty456127 5y ago
  > Healthcare, retirement, everything required for living should be socialized. Indeed. Many small businesses can't even afford sponsoring a sick leave directly AFAIK. At my location (in Europe) you pay a part of your monthly wage to the social security fund and once you get sick it covers your salary in the amount like if you kept working (and also pays you basic pension once you get too old).
  - vladvasiliu 5y ago
    In which country is this? In France, the "social security" (run by the state) doesn't cover the full salary, not even close. It only covers up to 50% [0], and only after three days (if you have 10 single sick days, you lose 10 days' pay). You have to have your own insurance ("mutuelle", usually chosen by your employer — which you cannot refuse, but can augment) to have a better deal. --- [0] It covers 50% of the salary, but the maximum salary taken into account is 1.8 times the minimum wage, which is 2 798,24 € before tax. https://www.ameli.fr/assure/remboursements/indemnites-journalieres/arret-maladie-salarie https://www.ameli.fr/assure/remboursements/indemnites-journa...
    - Arete314159 5y ago
      You write that 50% of nearly 3k Euros is bad. I can see where it would be bad. But in the US, you would have to fight tooth and nail for YEARS to get disability coverage that "good." US Disability payments average around $1500 or so a month, and you often get rejected your first application or for several rounds of appeals. Source: am on disability.

itsoktocry 5y ago

>I think some businesses are going out of businesses because they stubbornly refuse to raise their wages I'm skeptical that a business would choose to go out of business rather that give raises. Have you considered that margins are tighter than you think? I know small businesses like that.

paulcole 5y ago
I mean this is HN where the solution to the problem is obvious to a software developer but invisible to someone with decades of experience in the restaurant industry.
71a54xd 5y ago
One could argue the move to continue unemployment payments / covid payments is a strategy to "raise minimum wage" without actually having to pass any policy to do so. Politically it's brilliant, you gain the support of your voter base in 2yrs with the assumption that "cheap employers" will simply go out of business because nobody will work for them. And your more conservative base will champion you for "resisting to raise minimum wage". I for one support raising minimum wage, but the automation / negative outcomes of menial labor being too expensive to hire for will happen whether or not the official minimum wage is increased. UBI is another debate entirely, however I'd also argue that UBI in time harms poor people more than it really helps them and just enriches huge companies and land-lords.
- avidiax 5y ago
  That's an interesting take, but it seems like a post-hoc rationale/strategy to me. Conservatives will block any rise in the minimum wage, but couldn't completely block additional unemployment benefits. Progressives would back a rise in the minimum wage, but had to deliver on relief for the unemployed working class, so they did just that. The secondary effect of rising wages was probably only something that conservatives were expecting.
  - 71a54xd 5y ago
    Yep, but at the end of the day anyone who's trying to build wealth or have anything left for retirement gets fucked by inflation. People who are spendthrift and receiving UBI or unemployment payments (long term) were never trying to do that anyways and their payments in theory would increase with inflation. I'm a supporter of the idea of UBI but I just can't see the incentives panning out realistically.

awillen 5y ago

I think that for a lot of businesses, it's a question of what will happen when extended unemployment ends in September. If employees are going to flood the market and you can keep paying the wages you were paying pre-pandemic, then it makes sense to hold out, since if you raise wages now, you can't really reduce them later. You lose out on sales now because you're short staffed, but you keep your costs low in perpetuity. On the other hand, if that's not going to happen, then clearly you should raise wages and prices now, so you don't miss out on those sales. At this point, though, I think the folks who raise wages/prices because they think the latter case is true are going to cause a significant enough rise in the effective minimum wage (not the legal one, but the least you can practically pay and actually get employees) that everyone's going to have to raise wages anyway. It's an interesting game theory problem - if everyone's going to hold out on pay raises, then you should too. If a critical mass of people are going to raise wages in the next few months, though, then you should raise wages ASAP to get the best employees and not miss out on a summer of sales. Luckily this appears to be one of the rare game theory problems that'll actually work out well for the little guy.

lazyasciiart 5y ago
pandemic unemployment has already ended in a bunch of states. If it's the problem, we would be seeing those states rebound.
- koolba 5y ago
  That’s exactly what’s happening. The States that ended the extend benefits have lower unemployment rates. Ex: https://apnews.com/article/business-health-alabama-coronavirus-pandemic-135f7cbec8a5ff49c2e2ce7aa71a52bc https://apnews.com/article/business-health-alabama-coronavir...
  - dragonwriter 5y ago
    > The States that ended the extend benefits have lower unemployment rates. Your “example” is of a state that had a lower unemployment than the national average before ending extended unemployment benefits seeing not significantly different than the national rate of decline in unemployment in the brief period since cutting extended benefits, not an example of more rapid drop after cutting benefits.

MomoXenosaga 5y ago

Not sure how it is in the US but where I live restaurant owners are wealthy entrepreneurs driving around expensive SUVs. Every sunny day the restaurants and bars are packed from morning until midnight. If they need more staff they have the money to pay better wages. That's how every other industry deals with labour shortages.

notsureaboutpg 5y ago
Where do you live? I honestly have trouble believing this. Restaurants are a notoriously low margin business, the one most associated with having family members do labor in them to decrease costs...
readflaggedcomm 5y ago
Restaurant capital costs, and low margins, guarantee owners would be wealthy and willing to take the risk. If their risk calculations are off, that's an opportunity for competitors.
kortilla 5y ago
In the US restaurants are very cutthroat and what you describe only applies only to the most popular restaurants. It’s trivial to start a restaurant in the US so many people do an fail terribly after a year. Restaurants are the worst fucking industry to invest in.

trophycase 5y ago

Same thing is happening with entire buildings in my city. They'd rather evict their entire set of renters than lower the rent.

josephcsible 5y ago
That's a consequence of rent control laws, which limit the percent that you can raise rent by per year. Ever lowering rent in a place with such a law is penny-wise but pound-foolish.
rdtwo 5y ago
That’s a financing thing plus if you have an old building it’s probably better to evict everyone so you can build a new one

notsureaboutpg 5y ago

In California they just issued "relief" to a bunch of random (often very high class, fancy) restaurants in the order of millions per restaurant. I really dislike the "bailout" concept and really think a risky, non-vital business like a restaurant should be the last one to receive such a consideration, but if I were a restaurant owner and knew the government would cut me a multiple millions dollars check and all I had to do was wait out employees till they'd accept low wages again, I'd try my hand at it.

josephcsible 5y ago

It's not that businesses stubbornly refuse to raise wages - it's that they can't afford to. A lot of local small businesses were barely staying afloat even before March 2020.

jackson1442 5y ago
If a business can’t afford to pay its employees enough make rent and buy groceries, perhaps it shouldn’t be a business?
- ahallock 5y ago
  In high school, I worked at a fast food joint to make a little extra money. There were no expectations to pay rent or other essentials. But you'll say that it's not kids working these jobs, so we need to provide a livable wage. What about getting these people skills for better jobs? I'd rather attack that problem than make Wendy's sandwich maker a viable career.
  - jackson1442 5y ago
    What skills does a line cook at Wendy’s learn aside from “how a job works?” Also, who staffs Wendy’s from morning until schools let out during the day? I haven’t seen seasonal fast food restaurants anywhere near me.
    - crooked-v 5y ago
      General multitasking, team coordination, cash handling, basic restaurant dishwashing, stock management, industrial cleaning, pacifying unhappy customers, dealing with druggies and harassers, and a whole bunch of other things I've probably forgotten from when I worked fast food as a teenager. The simplicity of each individual job means that nobody ever has just one job at a fast food place. Stick around for any amount of time and you'll get rotated through every available position.
      - 5y ago

seriousquestion 5y ago

Given that we are outside observers, is it possible that they know something we don't? What might be some charitable explanations for why they don't raise prices?

pempem 5y ago
Restaurants that are not franchises have a 50% failure rate. Margins are intensely tight and the largest cost is labor, not food, spoilage, advertising, interior design, or whatever else. The central government and state government take limited to no responsibility for healthcare, child care, retirement, sick leave, pto etc. The central justice system has agreed that corporations have a duty to their stakeholders above their business and so growth is paramount. As a result, restaurants, esp independent ones, struggle to find ways to make ends meet and corporations (aka McDonalds) see no incentive to raise wages. The easiest and most obvious example of this playing out is imo that McDonalds pays labor more elsewhere than in the US.
- chillwaves 5y ago
  https://www.restaurantbusinessonline.com/financing/mcdonalds-expects-pay-15-hour-company-restaurants-2024 https://www.restaurantbusinessonline.com/financing/mcdonalds...
  - pempem 5y ago
    Exactly! Thanks for sharing this. Currently the demand for higher wages is suddenly slightly more weighted towards the employee and yet McDonalds can pull out a three year timeline to get to $15 an hour, by which time inflation will make the increase insufficient
    - chillwaves 5y ago
      It's weird how evidence opposite to the point you are making actually supports your point? Whatever.

mlindner 5y ago

The reason they're not raising their wages is because restaurants make slim to nothing profits. Additionally the people quitting is from the government continuing to provide the stimulus checks that are in excess of the minimum wage. They need to stop providing those checks when the economy needs to be recovered.

SMAAART 5y ago

Most small shops are struggling, being 1 bad financial decision away from bankruptcy; doing business with no type of insurance whatsoever, and here and there stiffing some suppliers to make ends meet. So, there's no way they can afford to increase any expense, if they were to do that, they'd be out of business right away, so they continue floating away. These business owners are unfit to do business; so what is happening is economic darwinism. RIP.

Droobfest 5y ago
Economic darwinism for the small businesses. Economic socialism for the big companies.

coldtea 5y ago

>I joked that maybe the owner was an old cahoot who remembered when a soda was $0.05 and there was no way they were going to raise their hourly wages to $15 or more. But otherwise had no issue jacking their prices up to the heavens...

flippertheD 5y ago

Well, all businesses run operations dif and have dif margins, so let's not forget that. I run a recruiting company. From our data a few things have popped up. First, people want higher wages in the lower wage industries. They are asking for $15-20 per hour. Second, lot of these people don't want to go back to the same labor jobs they had - they want to do something different. the problem with this is that they want to get paid more than they were making before for jobs in which they have no exp. For those that think the worker knows they can get more money, it's not the majority. They only know if someone told them. A lot of low wage workers who risked it and stuck it out during the pandemic are upset they really didn't get wage increases. Their employers sure didn't offer it to them. And now they want to quit and get their benefits like the rest. There is a lot going on here. One group though that does want to work are the teenagers. Issue is that they want $20 per hour...this fiasco is probably going to continue for a while.

rendall 5y ago
It sounds like a seller's market.
- fridif 5y ago
  A seller's market created by a law in which if the buyer pays too low of a price, very bad things happen to them.
  - rendall 5y ago
    One would expect in that case lots of laborers with wages at the minimum, and many more looking for work. What we're seeing in the description is not that.
    - fridif 5y ago
      I reckon the jobs are not on offer because the restaurants only want to pay a small amount (they have razor thin margins and an employee costs more than just salary [workers comp, insurance, equipment, liability etc]). Previously people accepted the small amount, but now they aren't because they're (currently still) being paid to stay home in most cases.

ayngg 5y ago

Policy has crept business in this direction by stretching wages low while maintaining the benefits of revenue of a developed society, and while there are some successful restaurants, a large amount of them aren't exactly swimming in money because the benefits of this policy are captured by the large corporations. Nobody starts a restaurant to get rich. If there is a hard snap back like what covid did with state benefits, it isn't a stretch to say that many businesses would be scrambling to find a new equilibrium. Restaurants in general are relatively premissionless in that anyone can start one, which is why so many fail. They can run the gamut from low margin to high margin, poorly managed to managed very well, so its no surprise that some will do better than others. In fact, I would think that the large corporate franchises will have the resources to adapt compared to the small business, family run restaurants because they have the logistical acumen to subsidize the costs.

pcmoney 5y ago

So the owner who has operated a cut throat, extremely demanding, razor thin margin for years folds because they don’t understand basic labor supply and demand? Keep in mind this person has mostly likely done in depth analysis on how to make their most popular item at the same quality but for 2% less of some expensive ingredient. I know one phenomenal restaurant owner who spent an entire year to get the cost of their paper products from 2% of COGS to 1%. Bonuses to managers, trash audits, the whole thing. You really think people like that couldn’t figure out raise salaries and prices? Do you know whats going to happen here? Panera, Qdoba, and 5 Guys. Just a monoculture of terrible bland food. Only the big players with economies of scale can charge less and pay the same as smaller restaurants.

dannyw 5y ago
I think your anecdote isn't necessarily reflective of all restaurant owners: (1) not everyone leases, some family businesses own the land and has significantly better margins at the trade-off of opportunity cost on the real estate, (2) some businesses are explicitly there to fulfil visa or immigration obligations, so profitability isn't a priority, (3) in less dense areas, the general laws of competition don't apply as much pressure as SF or NYC. Don't forget lifestyle businesses. I actually know multiple high-income people (lawyers, doctors) who just let their partners run businesses for the sake of doing something during the day; they lose money every year which offsets the joint income, and is better than having their partner sit around at home and spending money on something else.
amyjess 5y ago
If you can't stay open while paying people a living wage, you deserve to go out of business. I would rather have nothing but chain restaurants owned by megacorps than have people working for less than a living wage.
- grapehut 5y ago
  That's fair, but would you also rather people unemployed than working for less than a living wage as well?

bryanrasmussen 5y ago

>I think some businesses are going out of businesses because they stubbornly refuse to raise their wages. That would mean the people running those businesses were in need of psychological help, it is pretty much crazy to close your business because you refuse to raise wages. I propose a counter explanation - your business has a very tight margin - if you raise wages you cannot afford to continue in business unless you raise prices. If there is a competing business nearby and you raise prices you lose customers to competitor and you will have to go out of business - unless of course competitor also raises prices. You and competitor(s) sit around waiting to see who will raise prices first, probably one of you closes up because they don't have enough workers. The one who remains open gets customers, because of extra income from customers they might be able to raise wages. At any rate they can probably raise wages because competitor that closed can't just reopen without any down time.

consp 5y ago
By not raising wages, keeping your employees and staying open you will definitely go under. Maybe you cannot outcompete the other business but by not even trying to go open you have already lost. There is always convenience customers, loyal customers and opportunity customers who do not care about the 2-3% difference in price. I'm not saying you are wrong, it could definitely be this case, just that there might be more factors to consider.
- bryanrasmussen 5y ago
  >by not even trying to go open you have already lost. sorry, I thought the store was open until it closed down and posted its reasons? The problem with following the don't raise wages strategy and wait for your competitor to do it is if they outlast you - you reach the have to close position first. >By not raising wages, keeping your employees and staying open you will definitely go under. unless something changes that will make it profitable to raise wages. >There is always convenience customers, loyal customers and opportunity customers who do not care about the 2-3% difference in price. In a small margins business this might not be enough to keep you afloat.
6510 5y ago

ashtonkem 5y ago

This “labor shortage” line makes more sense when you think of it as a capital strike, not an objective statement of reality that should be treated literally.

lumberingjack 5y ago

Then food has got to go up the profit margin is not there. We talking $10 per taco them people will complain about that.