7 ms·

A friend owns a high line/niche used car dealership and his service shop, who has a legendary mechanic, has not increased rates at all but just got more selecti

by Wistar 5y ago

A friend owns a high line/niche used car dealership and his service shop, who has a legendary mechanic, has not increased rates at all but just got more selective about the service work they are doing. Also, effectively no new service customers as they are booked solid for months.

eru 5y ago
So basically they are taking their increased compensation not in the form of more money from customers, but by improving their working conditions. It's very interesting, because this situation mirrors what economists predict about minimum wages: Employees take their compensation as a mixed basket of wages and non-monetary perks (like nicer working conditions or opportunities for learning and advancement). Different people like different baskets. Minimum wage laws make some of these baskets illegal. So orthodox economics predicts that increases in minimum wage leads, amongst other things, to deteriorating working conditions. Now the situation here is reversed: there's effectively a wage ceiling when service shops are unwilling to raise prices. But they can still raise compensation, by improving working conditions. Something similar-ish happens with very high marginal tax rates: eg the US used to have crazy high marginal tax rates after WW2 that essentially amounted to salary caps. Cue companies finding all kinds of fringe benefits that were taxed less, like health insurance.
- BurningFrog 5y ago
  I took "being selective" to mean focusing on the most profitable jobs.
  - Wistar 5y ago
    In this case, it is a blend of more profitable, less challenging jobs such as brakes and LOF, as well as interesting cases requiring the lead mechanic's renowned diagnostic skills. I have often thought this mechanic should maintain a blog about some of the crazy and perplexing issues he has solved but, he just has no interest in writing them up. Besides, I am not sure he could write them up as some of the leaps in logic he makes are closer to magic than any sort of process. Also, they have used this era to weed out the pain-in-the-ass customers.
- quintushoratius 5y ago
  > So orthodox economics predicts that increases in minimum wage leads, amongst other things, to deteriorating working conditions. I've never heard that take before, but it's a fascinating idea. Unfortunately, I think the problem we've run into in the U.S. is that minimum wage jobs have already hit rock bottom working conditions. Raising the minimum wage is the only thing left to improve conditions for those stuck in them.
  - throwawaylinux 5y ago
    If you're subscribing to orthodox economics then in that case raising minimum wage would result in job losses. What I think would actually happen is (perhaps some job losses, but) more jobs being pushed underground and laws skirted. I'm not against minimum wages or increasing it as such, but if the lowest paid workers are in such dire conditions, the fundamental problem seems to be that they have insufficient bargaining power. A huge issue has to be illegal immigrant population that largely competes for low wage positions -- I've heard it's estimated about 15 million but could be as high as double that. Absolutely staggering numbers in either case and being concentrated in the supply of low skill labor it hits the most disadvantaged Americans including minorities hardest unfortunately. I know it's verboten to speak about now, but even champions of labor and the disadvantaged such as Sanders talked about the problem before Trump sent everyone off the rails (and/or the corporatists completed their capture of the left-wing side of politics).
    - eru 5y ago
      > If you're subscribing to orthodox economics then in that case raising minimum wage would result in job losses. No, that's just one outcome. I already described another outcome higher up the comment tree: reduction in non-wage benefits. In practice, you would probably see some combination of outcomes. > A huge issue has to be illegal immigrant population that largely competes for low wage positions -- I've heard it's estimated about 15 million but could be as high as double that. The demand curve for labour seems to be nearly horizontal, ie in the longer run more or less labour supplied (almost) doesn't change its price. > [...] but even champions of labor and the disadvantaged such as Sanders talked about the problem [...] Are you suggesting that those people who are desperate enough to become nearly right-less illegal immigrants do not count as labour or as disadvantaged? (I can very well believe that Sanders doesn't care about them, of course.)

by Wistar 5y ago

eru 5y ago

So basically they are taking their increased compensation not in the form of more money from customers, but by improving their working conditions. It's very interesting, because this situation mirrors what economists predict about minimum wages: Employees take their compensation as a mixed basket of wages and non-monetary perks (like nicer working conditions or opportunities for learning and advancement). Different people like different baskets. Minimum wage laws make some of these baskets illegal. So orthodox economics predicts that increases in minimum wage leads, amongst other things, to deteriorating working conditions. Now the situation here is reversed: there's effectively a wage ceiling when service shops are unwilling to raise prices. But they can still raise compensation, by improving working conditions. Something similar-ish happens with very high marginal tax rates: eg the US used to have crazy high marginal tax rates after WW2 that essentially amounted to salary caps. Cue companies finding all kinds of fringe benefits that were taxed less, like health insurance.

BurningFrog 5y ago
I took "being selective" to mean focusing on the most profitable jobs.
- Wistar 5y ago
  In this case, it is a blend of more profitable, less challenging jobs such as brakes and LOF, as well as interesting cases requiring the lead mechanic's renowned diagnostic skills. I have often thought this mechanic should maintain a blog about some of the crazy and perplexing issues he has solved but, he just has no interest in writing them up. Besides, I am not sure he could write them up as some of the leaps in logic he makes are closer to magic than any sort of process. Also, they have used this era to weed out the pain-in-the-ass customers.
quintushoratius 5y ago
> So orthodox economics predicts that increases in minimum wage leads, amongst other things, to deteriorating working conditions. I've never heard that take before, but it's a fascinating idea. Unfortunately, I think the problem we've run into in the U.S. is that minimum wage jobs have already hit rock bottom working conditions. Raising the minimum wage is the only thing left to improve conditions for those stuck in them.
- throwawaylinux 5y ago
  If you're subscribing to orthodox economics then in that case raising minimum wage would result in job losses. What I think would actually happen is (perhaps some job losses, but) more jobs being pushed underground and laws skirted. I'm not against minimum wages or increasing it as such, but if the lowest paid workers are in such dire conditions, the fundamental problem seems to be that they have insufficient bargaining power. A huge issue has to be illegal immigrant population that largely competes for low wage positions -- I've heard it's estimated about 15 million but could be as high as double that. Absolutely staggering numbers in either case and being concentrated in the supply of low skill labor it hits the most disadvantaged Americans including minorities hardest unfortunately. I know it's verboten to speak about now, but even champions of labor and the disadvantaged such as Sanders talked about the problem before Trump sent everyone off the rails (and/or the corporatists completed their capture of the left-wing side of politics).
  - eru 5y ago
    > If you're subscribing to orthodox economics then in that case raising minimum wage would result in job losses. No, that's just one outcome. I already described another outcome higher up the comment tree: reduction in non-wage benefits. In practice, you would probably see some combination of outcomes. > A huge issue has to be illegal immigrant population that largely competes for low wage positions -- I've heard it's estimated about 15 million but could be as high as double that. The demand curve for labour seems to be nearly horizontal, ie in the longer run more or less labour supplied (almost) doesn't change its price. > [...] but even champions of labor and the disadvantaged such as Sanders talked about the problem [...] Are you suggesting that those people who are desperate enough to become nearly right-less illegal immigrants do not count as labour or as disadvantaged? (I can very well believe that Sanders doesn't care about them, of course.)