7 ms·

You're presenting it as he has an infinite money supply and just of pure stupidity and greed doesn't want to pay $20 or $50 per hour. Maybe his supply is not un

by smsm42 5y ago

You're presenting it as he has an infinite money supply and just of pure stupidity and greed doesn't want to pay $20 or $50 per hour. Maybe his supply is not unlimited, and maybe nobody would buy a taco for $50 and he knows it, and he made the calculation and decided there's no way to pay all his costs, charge the price that people would be willing to pay, and make a profit. Now, if you know how to do it, there's a big opportunity for you just opened up. You could buy the place (probably for cheap), hire the cooks for $20 or for $50 (they would be ecstatic to work for you, I am sure, you're not that previous greedy owner and would pay them lavishly) and become the model of a businessman. People love good Mexican food. I know I do. I know many people that do. You can't lose, really - it's a mystery why there aren't more Mexican food billionaires... It's so simple, after all. Somehow most of such attempts I've heard of never turned a profit and shut down soon. Maybe those restaurant owners know something about their business that is not obvious to a random person only reading newspaper headlines...

belltaco 5y ago
>Maybe his supply is not unlimited, and maybe nobody would buy a taco for $50 and he knows it Not true. >While Chipotle raised wages from $13 to $15 an hour, or 15.4%, menu prices, on the other hand, were hiked between 3.5% and 4%. Price increases are generally quite small relative to the increase in workers' wages. >he knows it, and he made the calculation and decided there's no way to pay all his costs, charge the price that people would be willing to pay, and make a profit. How does he know for certain? He never even tried raising prices.
- smsm42 5y ago
  We're not talking about a multinational chain spanning continents with billions of dollars in revenue, tens of thosands of employees and a NYSE stock ticker - and not just any ticker but a part of S&P 500! Such a corporation has a lot of means to raise salaries a little without going under, they could borrow millions, they could issue stock, they could sell assets (which they have in millions), could restructure business, etc. etc. We were talking about a single shop owner which usually doesn't measure revenues in billions and runs everything out of his own pocket and bank loans usually backed by the same pocket. If you don't understand the difference, maybe giving advice to businesses shouldn't be your primary pastime. > How does he know for certain? He never even tried raising prices. Sure, such a thought would never come to his mind without your help. And surely, a business owner would never know a thing about his own business and his own pricing without you instructing him on it with such a sage advice as "just try it!". Maybe tons of people would line up for $50 tacos and only the stupidity of business owners - which, as one, for some reason, choose to ignore your advice to just try it, which would make them billionaires - prevent it from happening. Seriously. How much disdain one must have for people actually living the thing...
  - karmajunkie 5y ago
    this is a ridiculously disingenuous argument. it doesn’t take a $50 taco to pay a living wage, no matter what the size of the business is.
    - smsm42 5y ago
      "living wage" is an emotional political term - there's no objective definition of it and instead of appealing to rational argument it appeals to irrational notion that somehow you can live on $20/hr but would die if you received $19/hr, and so it's somehow a moral imperative to pay $20/hr (and in a year it turns out it's already $25 that is a moral imperative because somehow, out of nowhere, prices have risen!). I'm not talking about literally $50.00 for a taco. I am talking about business owners who I'd assume know their business a bit better than a rando from the internet. And about the necessity of not thinking everybody but you missed a completely obvious solution like "just raise prices" because they don't understand anything about their business, but you do. It's usually not that simple.
      - iaw 5y ago
        A living wage is defined in the dictionary as "a wage that is high enough to maintain a normal standard of living." Now we could argue about what a normal standard of living qualifies as but I think we can agree that it includes at minimum room & board for the individual. By that meager definition a lot of restaurants don't pay a 'living wage'
      - belltaco 5y ago
        Are there a lot of anecdotal stories of "I raised prices and I had to close shop because of drop in demand" ? All I see are people just shutting down and giving up.
        anonuser123456 5y ago
        The restaurant business is very hard. It’s not clear why anyone does it to be honest; the skills required to successfully manage a restaurant can net you a lot more for a lot less work in other industries. Of course people just throw in the towel. After getting kicked in the face by COVID why stand back and get kicked in the teeth again by government policy?
gpsx 5y ago
This is market forces at work. There is not necessarily someone to blame, generally speaking. I expect we'll see prices going up, wages going up and margins going down. I think that is good since I think we have gone too far in the other direction. What frustrates me about economics (with my one intro class level experience) is that they could only talk about equilibrium. The dynamics of things changing like this is what would be really interesting.
- smsm42 5y ago
  Equilibrium is a theoretical construct. Life is dynamic, there's never anything fixed, there's always disruption and change. The theory needs artificial constructs to be workable - and some models get close enough to reality to be usable and give useful predictions and tools - but the life would always be more complex.
  - France_is_bacon 5y ago
    That is correct. Which is why people are refusing to go back to work. The wealthy get wealthier and those at the bottom are getting left behind, with no insurance, hugely expensive housing prices. The dynamics are saying "F you". Perfectly realistic and playing out right now.
- pram 5y ago
  I’m not clear on your interpretation. Aggregate demand/supply and such models you find in Econ 101 are all about demonstrating the effect of things changing, as you just described. In a supply shock for example, convergence to equilibrium is the change.
bsagdiyev 5y ago
Christ, people here and their taller than standard horses. My girlfriends dad owns a pizza place and walked away with $5k last year, after paying rent, supply and wages. Where do they magically pull this money from? They aren’t evil banker types with bags marked “$$$” full of money like people here seem to think and it is disgusting they’re considered cheap instead of just “people will absolutely not pay the increase in price” to pay for these wage increases. This man is one of the most hardworking and honest people I’ve met, as opposed to the people I meet working in tech.
- karmajunkie 5y ago
  it’s not magic. there are inputs and outputs. raise prices by a buck a pizza. people will absolutely pay it. problem solved.
  - anonuser123456 5y ago
    Yeah, demand is totally inelastic to price.
    - kozd 5y ago
      Well presumably all restaurants would have similar issues hiring cooks so prices should rise everywhere. I would wager that demand for restaurant food as a category is less elastic than demand for any one particular Mexican restaurant's food.
      - anonuser123456 5y ago
        At the margin consumers are sensitive to price. A family of 4 might skip out on getting drinks with their order if the price goes from 36->40$. Drinks are where the entire profit for many restaurants comes from. In terms of total market, the effects are well studied in the field of labor economics. Big producers can easily absorb the added labor costs. They outsource some elements of their labor (prep work). They simplify menus for better economies of scale. They cut back hours on marginal employees and add hours for high productivity ones. Small shops without economies of scale struggle and go out of business. A restaurant owner that owns 1 restaurant is likely working full time to keep it afloat. The added time to respond to the current labor market can break the camels back. vs. McMegacorp that has people that sit around and optimize cost all day long. So the trade off is more McDonalds and Chipotle and less Albertos burrito stands.
deleted 5y ago
[deleted]
oxnrtr 5y ago
Paying people properly has very little impact on customer prices, see countries who enforce this.
- tluyben2 5y ago
  I live(d) only in countries that enforce it and it definitely makes a huge difference in consumer prices. Places that are ran 'by the family' here have their family do all the work for free (usually their kids and the parents running it all); in exchange they get pocket money, a roof over their head and food. But they are very cheap employees. Now compare the food and drink prices to a place with official employees and matching wages. Even at minimum wage (which is the norm here for restaurants and hotels), the difference in consumer price is massive. It is between having a lunch for E5 or E25+.
  - chunkyfunky 5y ago
    I think that is a fair point and anecdotally at least it gels with what I have observed. I've worked in quite a few food service settings when I was younger and the margins (in general of course; Soup du Jour is like 5/600% margin at least) are very thin. However I wonder if this isn't just a symptom of the bigger problem; in order to pay better wages, consumer prices have to be raised because it's the only way to make enough margin to pay the employees BUT the real reason margins are so thin is because you are paying exorbitant rent to some faceless landlord who actually owns the building you operate out of; and it only ever goes up, never down; and your suppliers constantly raise their prices (or lower their quality) because they are in the same boat; and thus all that money that is generated by the tip of the spear (the restaurant, the retail store, the pub) is mostly being pushed back up to....the people who already have all the money...which is why they own all the buildings and rent them out to make more money....and so on. Just a thought :)
France_is_bacon 5y ago
Depends on how you look at it. If the owner has 10 restuarants, and is making $750,000 per year, let's say, then he or she does have an unlimited amount of money, compared to the workers, especially if the workers are making the federal minimum wage of $7.25. If they have a small mom and pop company that cannot pay workers at least $50,000, then they need to go out of business. Then, as more and more shops go out of business, then there will be less of a supply and then the company can demand more money from customers and pay their workers more. Except, the reality is that the owners WILL make more money, but still won't want to pay their employees more, and will give the same line - that that type of labor is unskilled and f-ck them, which means more money for the owner. That's the reality. And if true that the labor is unskilled and the owner shouldn't pay more, then the workers should not come back to work. All the Wall Street journals and pro-business journals and business videos have mouth noises that people don't have to accept the wages and it is voluntary work. But, when it actually happens, the cry like a bunch of little babies and say that the worker is at fault for not wanting to work for no insurance, shitty wages, and not being able to afford housing. Well, let the business owners do all of the work without workers, and get all the money. Sounds good to me. You like your Mexican food, but only want to pay .89 cents for it? Good. You go grow the beans, grow the wheat or corn to make your own tortillas. Buy and milk your own damn cow in order to get the beef and milk the cow to make sour cream, and grow an avocado tree to make your own guacamole. It's ok. Do it yourself. Let all the cheap restaurants go out of business. Deal with it. And that the story. That's the REAL story, not the one that you are making up. However, there might be a solution. If a business shows me all their financials, ALL of them, and the personal financial statements, and if I see that they are not making a lot of money, that's fine, maybe I will work for them. But if I see that they have 10 restaurants and make $750,000 per year, well, f the f out of them. But, business owenrs, show me your financials. You don't want to? Fine. Do it yourself. But I'm not going to work for $18,000 with zero benefits, while you're making $750,000. You say your contributions is worth more? Good. Do it yourself. I, and everyone else, don't accept that wage anymore, so do it yourself and go out of business, and you won't get that $750,000 per year anymore anyways.
- fredestine 5y ago
  I agree with you and the solution is to have them pay minimal wage + a % of profit sharing.
someguy101010 5y ago
If you can't pay your employees a living wage your business does not deserve to exist. I don't care if it's a small business owner or $megacorp.
- Grazester 5y ago
  Absolutely! I don't owe you anything so why should I be obliged to work your less than $20/hr job if I don't want to? I find it absolutely arrogant of restaurant owners. Your restaurant doesn't have a right to be in business and I am not obligated to work for you.

by smsm42 5y ago

belltaco 5y ago

>Maybe his supply is not unlimited, and maybe nobody would buy a taco for $50 and he knows it Not true. >While Chipotle raised wages from $13 to $15 an hour, or 15.4%, menu prices, on the other hand, were hiked between 3.5% and 4%. Price increases are generally quite small relative to the increase in workers' wages. >he knows it, and he made the calculation and decided there's no way to pay all his costs, charge the price that people would be willing to pay, and make a profit. How does he know for certain? He never even tried raising prices.

smsm42 5y ago
We're not talking about a multinational chain spanning continents with billions of dollars in revenue, tens of thosands of employees and a NYSE stock ticker - and not just any ticker but a part of S&P 500! Such a corporation has a lot of means to raise salaries a little without going under, they could borrow millions, they could issue stock, they could sell assets (which they have in millions), could restructure business, etc. etc. We were talking about a single shop owner which usually doesn't measure revenues in billions and runs everything out of his own pocket and bank loans usually backed by the same pocket. If you don't understand the difference, maybe giving advice to businesses shouldn't be your primary pastime. > How does he know for certain? He never even tried raising prices. Sure, such a thought would never come to his mind without your help. And surely, a business owner would never know a thing about his own business and his own pricing without you instructing him on it with such a sage advice as "just try it!". Maybe tons of people would line up for $50 tacos and only the stupidity of business owners - which, as one, for some reason, choose to ignore your advice to just try it, which would make them billionaires - prevent it from happening. Seriously. How much disdain one must have for people actually living the thing...
- karmajunkie 5y ago
  this is a ridiculously disingenuous argument. it doesn’t take a $50 taco to pay a living wage, no matter what the size of the business is.
  - smsm42 5y ago
    "living wage" is an emotional political term - there's no objective definition of it and instead of appealing to rational argument it appeals to irrational notion that somehow you can live on $20/hr but would die if you received $19/hr, and so it's somehow a moral imperative to pay $20/hr (and in a year it turns out it's already $25 that is a moral imperative because somehow, out of nowhere, prices have risen!). I'm not talking about literally $50.00 for a taco. I am talking about business owners who I'd assume know their business a bit better than a rando from the internet. And about the necessity of not thinking everybody but you missed a completely obvious solution like "just raise prices" because they don't understand anything about their business, but you do. It's usually not that simple.
    - iaw 5y ago
      A living wage is defined in the dictionary as "a wage that is high enough to maintain a normal standard of living." Now we could argue about what a normal standard of living qualifies as but I think we can agree that it includes at minimum room & board for the individual. By that meager definition a lot of restaurants don't pay a 'living wage'
    - belltaco 5y ago
      Are there a lot of anecdotal stories of "I raised prices and I had to close shop because of drop in demand" ? All I see are people just shutting down and giving up.
      - anonuser123456 5y ago
        The restaurant business is very hard. It’s not clear why anyone does it to be honest; the skills required to successfully manage a restaurant can net you a lot more for a lot less work in other industries. Of course people just throw in the towel. After getting kicked in the face by COVID why stand back and get kicked in the teeth again by government policy?

gpsx 5y ago

This is market forces at work. There is not necessarily someone to blame, generally speaking. I expect we'll see prices going up, wages going up and margins going down. I think that is good since I think we have gone too far in the other direction. What frustrates me about economics (with my one intro class level experience) is that they could only talk about equilibrium. The dynamics of things changing like this is what would be really interesting.

smsm42 5y ago
Equilibrium is a theoretical construct. Life is dynamic, there's never anything fixed, there's always disruption and change. The theory needs artificial constructs to be workable - and some models get close enough to reality to be usable and give useful predictions and tools - but the life would always be more complex.
- France_is_bacon 5y ago
  That is correct. Which is why people are refusing to go back to work. The wealthy get wealthier and those at the bottom are getting left behind, with no insurance, hugely expensive housing prices. The dynamics are saying "F you". Perfectly realistic and playing out right now.
pram 5y ago
I’m not clear on your interpretation. Aggregate demand/supply and such models you find in Econ 101 are all about demonstrating the effect of things changing, as you just described. In a supply shock for example, convergence to equilibrium is the change.

bsagdiyev 5y ago

Christ, people here and their taller than standard horses. My girlfriends dad owns a pizza place and walked away with $5k last year, after paying rent, supply and wages. Where do they magically pull this money from? They aren’t evil banker types with bags marked “$$$” full of money like people here seem to think and it is disgusting they’re considered cheap instead of just “people will absolutely not pay the increase in price” to pay for these wage increases. This man is one of the most hardworking and honest people I’ve met, as opposed to the people I meet working in tech.

karmajunkie 5y ago
it’s not magic. there are inputs and outputs. raise prices by a buck a pizza. people will absolutely pay it. problem solved.
- anonuser123456 5y ago
  Yeah, demand is totally inelastic to price.
  - kozd 5y ago
    Well presumably all restaurants would have similar issues hiring cooks so prices should rise everywhere. I would wager that demand for restaurant food as a category is less elastic than demand for any one particular Mexican restaurant's food.
    - anonuser123456 5y ago
      At the margin consumers are sensitive to price. A family of 4 might skip out on getting drinks with their order if the price goes from 36->40$. Drinks are where the entire profit for many restaurants comes from. In terms of total market, the effects are well studied in the field of labor economics. Big producers can easily absorb the added labor costs. They outsource some elements of their labor (prep work). They simplify menus for better economies of scale. They cut back hours on marginal employees and add hours for high productivity ones. Small shops without economies of scale struggle and go out of business. A restaurant owner that owns 1 restaurant is likely working full time to keep it afloat. The added time to respond to the current labor market can break the camels back. vs. McMegacorp that has people that sit around and optimize cost all day long. So the trade off is more McDonalds and Chipotle and less Albertos burrito stands.

deleted 5y ago

[deleted]

oxnrtr 5y ago

Paying people properly has very little impact on customer prices, see countries who enforce this.

tluyben2 5y ago
I live(d) only in countries that enforce it and it definitely makes a huge difference in consumer prices. Places that are ran 'by the family' here have their family do all the work for free (usually their kids and the parents running it all); in exchange they get pocket money, a roof over their head and food. But they are very cheap employees. Now compare the food and drink prices to a place with official employees and matching wages. Even at minimum wage (which is the norm here for restaurants and hotels), the difference in consumer price is massive. It is between having a lunch for E5 or E25+.
- chunkyfunky 5y ago
  I think that is a fair point and anecdotally at least it gels with what I have observed. I've worked in quite a few food service settings when I was younger and the margins (in general of course; Soup du Jour is like 5/600% margin at least) are very thin. However I wonder if this isn't just a symptom of the bigger problem; in order to pay better wages, consumer prices have to be raised because it's the only way to make enough margin to pay the employees BUT the real reason margins are so thin is because you are paying exorbitant rent to some faceless landlord who actually owns the building you operate out of; and it only ever goes up, never down; and your suppliers constantly raise their prices (or lower their quality) because they are in the same boat; and thus all that money that is generated by the tip of the spear (the restaurant, the retail store, the pub) is mostly being pushed back up to....the people who already have all the money...which is why they own all the buildings and rent them out to make more money....and so on. Just a thought :)

France_is_bacon 5y ago

Depends on how you look at it. If the owner has 10 restuarants, and is making $750,000 per year, let's say, then he or she does have an unlimited amount of money, compared to the workers, especially if the workers are making the federal minimum wage of $7.25. If they have a small mom and pop company that cannot pay workers at least $50,000, then they need to go out of business. Then, as more and more shops go out of business, then there will be less of a supply and then the company can demand more money from customers and pay their workers more. Except, the reality is that the owners WILL make more money, but still won't want to pay their employees more, and will give the same line - that that type of labor is unskilled and f-ck them, which means more money for the owner. That's the reality. And if true that the labor is unskilled and the owner shouldn't pay more, then the workers should not come back to work. All the Wall Street journals and pro-business journals and business videos have mouth noises that people don't have to accept the wages and it is voluntary work. But, when it actually happens, the cry like a bunch of little babies and say that the worker is at fault for not wanting to work for no insurance, shitty wages, and not being able to afford housing. Well, let the business owners do all of the work without workers, and get all the money. Sounds good to me. You like your Mexican food, but only want to pay .89 cents for it? Good. You go grow the beans, grow the wheat or corn to make your own tortillas. Buy and milk your own damn cow in order to get the beef and milk the cow to make sour cream, and grow an avocado tree to make your own guacamole. It's ok. Do it yourself. Let all the cheap restaurants go out of business. Deal with it. And that the story. That's the REAL story, not the one that you are making up. However, there might be a solution. If a business shows me all their financials, ALL of them, and the personal financial statements, and if I see that they are not making a lot of money, that's fine, maybe I will work for them. But if I see that they have 10 restaurants and make $750,000 per year, well, f the f out of them. But, business owenrs, show me your financials. You don't want to? Fine. Do it yourself. But I'm not going to work for $18,000 with zero benefits, while you're making $750,000. You say your contributions is worth more? Good. Do it yourself. I, and everyone else, don't accept that wage anymore, so do it yourself and go out of business, and you won't get that $750,000 per year anymore anyways.

fredestine 5y ago
I agree with you and the solution is to have them pay minimal wage + a % of profit sharing.

someguy101010 5y ago

If you can't pay your employees a living wage your business does not deserve to exist. I don't care if it's a small business owner or $megacorp.

Grazester 5y ago
Absolutely! I don't owe you anything so why should I be obliged to work your less than $20/hr job if I don't want to? I find it absolutely arrogant of restaurant owners. Your restaurant doesn't have a right to be in business and I am not obligated to work for you.