9 ms·

This again. >Ok so, here’s the plan: you pay $15 for a sandwich and I give my whole team a raise. Sweet. You’re the best! The money’s gotta come from somewhere

This again. >Ok so, here’s the plan: you pay $15 for a sandwich and I give my whole team a raise. Sweet. You’re the best! The money’s gotta come from somewhere. People seem to forget that part. But yes, I like this idea. In fact, Chipotle has recently increased both wages and pricing. McDonald’s as well. Now our turn, LFG! And yet, if you go to the source the article links directly in that paragraph: "Chipotle Mexican Grill has hiked menu prices by roughly 4% to cover the cost of raising its workers’ wages...In May, Chipotle said that it would raise hourly wages for its restaurant workers to reach an average of $15 an hour by the end of June." 4% price increase to get to a living wage. Not $15 sandwiches, just $7.28 instead of $7. Pay your employees. It's that simple.

jwagenet 5y ago
Yea sure, but you ignore that Chipotle and McDs have magnitudes larger supply chain optimizations, cash reserves, and operate in high and low cost markets such that there is more margin to keep the business afloat when there is a squeeze.
- seanmcdirmid 5y ago
  > Yea sure, but you ignore that Chipotle and McDs have magnitudes larger supply chain optimizations, cash reserves, and operate in high and low cost markets such that there is more margin to keep the business afloat when there is a squeeze. Aren't most McDonalds franchises? You definitely see individual owned stores going out of business.
  - jwagenet 5y ago
    Franchisees still benefit from the supply chain. Even if individual stores wouldn't be subsidized by the company, they benefit from brand recognition and already operating at the price floor for food you dont make yourself.
  - MangoCoffee 5y ago
    >Aren't most McDonalds franchises? his point still stand. https://boxaroundtheworld.com/mcdonalds-supply-chain-management/ https://boxaroundtheworld.com/mcdonalds-supply-chain-managem... "McDonalds is a fine example of how vertical integration can keep costs down and profits up. They grow their own beef through contracted producers, process their own meat, create their own spices and mixes in factories that they contract, grow their own potatoes and other vegetable through contracted producers, transport their goods on their own. McDonalds owns the land that their restaurants are situated on, so they do not have to deal with leases and landlords. They have taken control of their supply chain nicely." edit: a mom and pop operation can't compete with McDonalds. McDonalds can increase employees wages thus force others to do the same even if mom and pop doesn't have a vertical integration like McDonalds. by increase wages, it force smaller operators to cut staffs or shut down. McDonalds can keep their competition down.
  - kcplate 5y ago
    > You definitely see individual owned stores going out of business. Where? In my five+ decades on this planet I have never seen one close. Might see them shift to new nearby location, newer building…but never seen one close. The only way I see an individual store going out of business is if community around them dies. I seriously doubt that a McDonalds in a populated area would close. You would have people lining up to buy the franchise.
    - lytrplytprytr 5y ago
      "McDonald’s Is Closing Hundreds of Its Walmart Restaurants" -WSJ article from this year
      - genewitch 5y ago
        Is this because of Walmart or poor franchisees, though. The McDonald's in a nearby hospital closed in the last 5 years. Perhaps the franchisees in those cases were a little optimistic.
        joe-collins 5y ago
        > The McDonald's in a nearby hospital closed That reads like a headline from The Onion.
        kcplate 5y ago
        It’s likely because the space was more valuable to Walmart for retail needs than as a McDs. It was an experiment and it turns out that people probably just went to the McDonald’s down the street. By the way, the McDonald’s in our local hospital has been in operation 24/7/365 since the late ‘70s. It’s a symbiotic relationship I guess.
      - kcplate 5y ago
        Sorry but equating a satellite restaurant experiment to actual restaurants is a false equivalency. Ask yourself how many of those Walmart McDonalds had a McDonald’s within a mile of the Walmart and whether or not they are still operating. There was a Walmart with a McDonald’s in my town that closed, however the McDonalds in its parking lot is still going strong.
- Arainach 5y ago
  To paraphrase the meme: Materials costs go up: Well, that's the cost of doing business, raise prices a bit Rent goes up: Well, that's the cost of doing business, raise prices a bit Labor costs go up: Business go crazy and threaten their employees
  - cercatrova 5y ago
    It's because you can't control materials or rent costs, but you can control (morally or immorally) your employees, simply because you have power over them.
    - aspenmayer 5y ago
      This is hilariously wrong in the case of McDonald’s. They are a real estate arbitrage corporation that leases space to franchises and gives sweetheart self-dealt deals to its wholly owned stores.
    - ALittleLight 5y ago
      I think it's more likely that most people are employees and so are familiar with how employers try to negotiate down labor costs and are not as familiar with how businesses try to negotiate down the cost of materials. I doubt business owners just shrug at rising materials costs, they probably try to negotiate those down too.
      - cercatrova 5y ago
        They do but it's harder to do so. Two businesses that trade are usually not in such an extreme dichotomy of power differential as an employer and employee; a business is usually at the same level of power as its trade partner, so were it to demand too low of a price of materials, the trade partner would take their business elsewhere. Contrast this to a labor market, where a laborer needs work to survive and thus it already has a lower level of power than its employer, even before any negotiation takes place.
        5y ago
- cma 5y ago
  > such that there is more margin to keep the business afloat when there is a squeeze. Chipotle's margin increased after the change. They didn't tap into margin using prior excess to stay afloat.
- megablast 5y ago
  And that is why those places already charge a lot more than McDonald’s.
mgkimsal 5y ago
I mostly agree with the sentiment, but other prices which factor in to their operating costs will eke up over time as their suppliers also add on their 4% hikes to get to 'living wage'. Over time prices will go up, but... so what? They've already gone up plenty for a variety of reasons over the years.
- tptacek 5y ago
  The author of this article says most of the staff we're talking about here makes minimum wage, so we don't so much have to scare-quote "living wage".
  - mgkimsal 5y ago
    Wasn't trying to scare-quote so much as emphasize the idea in the GP comment.
the_snooze 5y ago
What actually hapens in practice is that the sandwich place will advertise $7 sandwiches on their menu, but in small print say they'll automatically add an "optional" $1 fee to all items at check-out. It's far beyond what's needed to cover increased wages, and they don't even have the guts to list prices honestly.
- voisin 5y ago
  Sounds like tipping, but optional to the business what makes it to the employees.
- monkpit 5y ago
  Source for the “optional” thing? I tried searching for this but didn’t find anything.
  - sushid 5y ago
    Not sure about OP but in my experience, SF has so many hidden fees for restaurants it's not even funny. Restaurants were tacking on COVID surcharge fee on top of the SF mandate fee that they were imposing on diners. Tack on tax and tip and you literally have four additional fees on top of what you see on a menu.
    - the_snooze 5y ago
      Yeah, I'm referring to the Bay Area (Berkeley in particular). Here's a sandwich shop in Berkeley adding a 50-cent fee in 2016: https://www.yelp.com/biz_photos/ikes-love-and-sandwiches-berkeley-6?select=AHUAJ2HiO_KOfgO1RMid6A https://www.yelp.com/biz_photos/ikes-love-and-sandwiches-ber... They claim it's for transparency, but they were still advertising fee-less prices on the menu the last time I was there. You'd only see this sign at the check-out counter. Here's a Yelp review complaing about just that (raised to 75 cents as of 2018): https://www.yelp.com/biz/ikes-love-and-sandwiches-berkeley-6?hrid=dcNxYK_Crl0bprulJaoz9w&utm_campaign=www_review_share_popup&utm_medium=copy_link&utm_source=(direct) https://www.yelp.com/biz/ikes-love-and-sandwiches-berkeley-6...
jandrese 5y ago
The part you missed is if they raise the worker pay by 50% then the C-level pay also needs to increase by 50% to maintain the proper ratio and that raises the prices much more than 4%. /s
caminante 5y ago
edit: upon discussion with the parent, it appears that the parent was supporting the author's argument, not critiquing Chipotle or saying living wages require charging $15 for a $7 sandwich. No... > 4% price increase to get to a living wage. Not $15 sandwiches, just $7.28 instead of $7. Pay your employees. It's that simple. This isn't in the article [0]. You're conflating revenues and wages. Chipotle raising prices by 4% for EACH sandwich allows you to increase salaries by way more than 4% for employees. Taking a $7 sandwich, a 4% increase yields... [$7 sandwich] * [4% price increase] * [20 sandwiches/hr/employee] * [1hr/employee] = $5.60/hr/employee in incremental wages [0] https://www.cnbc.com/2021/06/08/chipotle-hikes-prices-to-cover-the-cost-of-raising-wages.html https://www.cnbc.com/2021/06/08/chipotle-hikes-prices-to-cov...
- onlyrealcuzzo 5y ago
  Are we assuming that food prices did not go up at all with this calculation?
  - caminante 5y ago
    Why does that matter how much of the 4% increase is going to employees v. passing through variable costs? Here's Chipotle's audited financials, if you want to dig. [0] [0] https://ir.chipotle.com/sec-filings https://ir.chipotle.com/sec-filings
- voisin 5y ago
  I think you and OP are saying the same thing. Everyone can pay 4% more for their sandwiches so employees can earn a living wage, and saying it would be everyone paying $15 vs $7 is disingenuous.
- Arainach 5y ago
  I don't see how that disagrees with what I said. To increase wages significantly doesn't mean increasing prices significantly - that was my entire point.
  - caminante 5y ago
Swizec 5y ago
Thing is, people will pay $20 for a good sandwich. We have a place down the street, Deli Board, that makes truly amazing sandwiches. The only sandwich I've ever had that made me say "You know, this might be too much filling and not enough bread". They're expensive, literally $18 to $22, but you never ever feel like it wasn't worth it. But many places aren't interested in making food that feels worth paying for.
- bruceb 5y ago
  "people will pay $20 for a good sandwich." Some people will pay for a Bentley. Doesn't mean a lot of people will. Best example might be In-N-out burger, that is relativity good quality for the price that is accessible to most people, and compensates their employees relativity well, though they work super hard. . But I don't know what their margins are
  - genewitch 5y ago
    In n out burgers are half the radius they were in 1995-2000. So it makes sense they can charge the same prices. They also paid >$9/hr during that period, too. In n out is making money on thin margins and volume. Also I assume the drinks and shakes are high margin. I haven't really enjoyed in n out in a decade, maybe I just grew out of it.
- bambax 5y ago
  > Thing is, people will pay $20 for a good sandwich. Really? Where is that? I live around Paris -- a city where the cost of living isn't considered low by world standards. Here the normal price for an excellent sandwich made of fresh bread (1/2 baguette), chicken or beef, lettuce, tomato and sauce is around €4.5; if it's just ham and cheese, and the same wonderful bread, the cost is €4. I consider that expensive because I can make a meal at home for less than €2 (the cost can even go down to 0 if I just eat the leftovers from yesterday's dinner). I don't think I'd ever pay $20 for a sandwich of any quality.
  - BrandoElFollito 5y ago
smnrchrds 5y ago
How much do sandwiches cost in Australia, where minimum wage is approximately 15 USD? I don't think they cost 15 AUD, let alone 15 USD.
- motohagiography 5y ago
  An oddly specific analogous reference, https://www.economist.com/big-mac-index https://www.economist.com/big-mac-index
- jwagenet 5y ago
  My understanding is the cost of goods a parabola with respect to wages, where until an inflection point, the wages are not high enough to allow workers to have discretionary spending. But once wages are high, demand increases enough to cover the increased wages and cost of goods can come back down as marginal cost decreases.
- ALittleLight 5y ago
  I just looked up a random Subway in Australia and it was 10 AUD for a 6 inch, 15 AUD for a foot-long (varies some by sandwich). 7-11 USD.
  - deleted 5y ago
    [deleted]
rufus_foreman 5y ago
>> 4% price increase to get to a living wage. Not $15 sandwiches, just $7.28 instead of $7 That only works if the price elasticity is 0 - meaning that a 4% price increase doesn't lead to a decrease in sales. The price elasticity isn't 0. It's close to 1. A 4% price increase leads to close to a 4% drop in sales. Fixed costs stay the same. Do the math under those assumptions.
- sudosysgen 5y ago
  They're not actually making a prediction. This is what actually happened. The prices increased by 4% and, including elasticity, this allowed for a 15$ minimum wage. It's empirical.
  - rufus_foreman 5y ago
    Those numbers don't contain enough information to calculate a price elasticity. Even sales numbers don't contain enough information to calculate a price elasticity, because you don't just need to know the change in sales after a price change, you need to know what percentage of that change was due to the price change instead of other changing factors - slowing of the pandemic, changing menu, advertising, growth in customer base that was happening anyway, etc. Those numbers are hard to get. But people who have done studies have estimated that in the restaurant industry, the number is close to 1. I mean think about what you are saying if you are claiming that the price elasticity is 0. You are saying that even before the wage increases, they could have raised prices by 4% and returned that money to their investors as pure profit, in an industry where profit margins are single digit and not usually high single digit. Not a chance.
    - sudosysgen 5y ago
      That's completely besides the point. No, that is not all what I meant, and at this point I don't really understand how I can make it clearer. The 4% increase in prices leading to a 15% minimum wage is a FACTUAL DATAPOINT. It is EMPIRICAL REALITY. No theorem, model, or anything, can change that, because that's what ACTUALLY HAPPENED. It's not theoretical. After all was said and done, prices were increased by 4%, and wages were increased to 15$/hour. It's completely useless to talk about elasticity, and try to estimate it, in this context. You are trying to apply a model, to reality, and arguing that the model is correct, but reality is not correct.
908B64B197 5y ago
> 4% price increase to get to a living wage. Not $15 sandwiches, just $7.28 instead of $7. Pay your employees. It's that simple. At a large chain like Chipotle, sure. But most "fine dining" restaurants have razor thin margins on food. Alcohol is how they make money. With the pandemic, people have switched to ordering food for takeout and therefore restaurants can no longer make a profit on drinks. There's also two other aspects the author won't touch on: if you open a legitimate fine dining restautant you'll have to compete with places employing illegal aliens. And lastly, some restaurants are really just fronts for money laundering. They can operate a really long time without making any real profit; it's a business where it's easy to claim some large transactions were made in cash.
- waynesonfire 5y ago
  > restaurants can no longer make a profit on drinks. but they also just need to keep the kitchen open.
heavyset_go 5y ago
There's actual research in this space, and it found that for every 10% increase in minimum wage, some restaurant prices rose by 0.36% and others decreased[1]. Price increases are negligible at best. [1] https://www.upjohn.org/research-highlights/does-increasing-minimum-wage-lead-higher-prices https://www.upjohn.org/research-highlights/does-increasing-m...
- chrisco255 5y ago
  This is a dubious statement for a number of reasons. Let's just use raw analysis. If a restaurant's current labor budget is 30% of revenue, and the restaurant's profit margin is 3% and the cost of labor increases by 10%, how much profit is the restaurant making now? If the restaurant owner wanted to maintain a 3% profit margin in such a scenario, how could they do it?
  - tekstar 5y ago
    Your raw analysis ignores things like staff turnover and quality of work
  - supernovae 5y ago
    FYI, Chipotle CEO makes ~14 million a year. A normal salary for CEO could go a long way to improving stores and pay for some.
    - missedthecue 5y ago
      That salary dividend among the workforce of Chipotle is $4 a week, pennies an hour, and the company wouldn't have a CEO. And his salary is only $1.2M, the rest is performance incentives and so forth.
    - Jtype 5y ago
      While I agree that CEO pay is obscene, that money wouldn't do much. What is the percentage of CEO pay to annual expenses and revenues?
  - deleted 5y ago

jwagenet 5y ago

Yea sure, but you ignore that Chipotle and McDs have magnitudes larger supply chain optimizations, cash reserves, and operate in high and low cost markets such that there is more margin to keep the business afloat when there is a squeeze.

seanmcdirmid 5y ago
> Yea sure, but you ignore that Chipotle and McDs have magnitudes larger supply chain optimizations, cash reserves, and operate in high and low cost markets such that there is more margin to keep the business afloat when there is a squeeze. Aren't most McDonalds franchises? You definitely see individual owned stores going out of business.
- jwagenet 5y ago
  Franchisees still benefit from the supply chain. Even if individual stores wouldn't be subsidized by the company, they benefit from brand recognition and already operating at the price floor for food you dont make yourself.
- MangoCoffee 5y ago
  >Aren't most McDonalds franchises? his point still stand. https://boxaroundtheworld.com/mcdonalds-supply-chain-management/ https://boxaroundtheworld.com/mcdonalds-supply-chain-managem... "McDonalds is a fine example of how vertical integration can keep costs down and profits up. They grow their own beef through contracted producers, process their own meat, create their own spices and mixes in factories that they contract, grow their own potatoes and other vegetable through contracted producers, transport their goods on their own. McDonalds owns the land that their restaurants are situated on, so they do not have to deal with leases and landlords. They have taken control of their supply chain nicely." edit: a mom and pop operation can't compete with McDonalds. McDonalds can increase employees wages thus force others to do the same even if mom and pop doesn't have a vertical integration like McDonalds. by increase wages, it force smaller operators to cut staffs or shut down. McDonalds can keep their competition down.
- kcplate 5y ago
  > You definitely see individual owned stores going out of business. Where? In my five+ decades on this planet I have never seen one close. Might see them shift to new nearby location, newer building…but never seen one close. The only way I see an individual store going out of business is if community around them dies. I seriously doubt that a McDonalds in a populated area would close. You would have people lining up to buy the franchise.
  - lytrplytprytr 5y ago
    "McDonald’s Is Closing Hundreds of Its Walmart Restaurants" -WSJ article from this year
    - genewitch 5y ago
      Is this because of Walmart or poor franchisees, though. The McDonald's in a nearby hospital closed in the last 5 years. Perhaps the franchisees in those cases were a little optimistic.
      - joe-collins 5y ago
        > The McDonald's in a nearby hospital closed That reads like a headline from The Onion.
      - kcplate 5y ago
        It’s likely because the space was more valuable to Walmart for retail needs than as a McDs. It was an experiment and it turns out that people probably just went to the McDonald’s down the street. By the way, the McDonald’s in our local hospital has been in operation 24/7/365 since the late ‘70s. It’s a symbiotic relationship I guess.
    - kcplate 5y ago
      Sorry but equating a satellite restaurant experiment to actual restaurants is a false equivalency. Ask yourself how many of those Walmart McDonalds had a McDonald’s within a mile of the Walmart and whether or not they are still operating. There was a Walmart with a McDonald’s in my town that closed, however the McDonalds in its parking lot is still going strong.
Arainach 5y ago
To paraphrase the meme: Materials costs go up: Well, that's the cost of doing business, raise prices a bit Rent goes up: Well, that's the cost of doing business, raise prices a bit Labor costs go up: Business go crazy and threaten their employees
- cercatrova 5y ago
  It's because you can't control materials or rent costs, but you can control (morally or immorally) your employees, simply because you have power over them.
  - aspenmayer 5y ago
    This is hilariously wrong in the case of McDonald’s. They are a real estate arbitrage corporation that leases space to franchises and gives sweetheart self-dealt deals to its wholly owned stores.
  - ALittleLight 5y ago
    I think it's more likely that most people are employees and so are familiar with how employers try to negotiate down labor costs and are not as familiar with how businesses try to negotiate down the cost of materials. I doubt business owners just shrug at rising materials costs, they probably try to negotiate those down too.
    - cercatrova 5y ago
      They do but it's harder to do so. Two businesses that trade are usually not in such an extreme dichotomy of power differential as an employer and employee; a business is usually at the same level of power as its trade partner, so were it to demand too low of a price of materials, the trade partner would take their business elsewhere. Contrast this to a labor market, where a laborer needs work to survive and thus it already has a lower level of power than its employer, even before any negotiation takes place.
      - 5y ago
cma 5y ago
> such that there is more margin to keep the business afloat when there is a squeeze. Chipotle's margin increased after the change. They didn't tap into margin using prior excess to stay afloat.
megablast 5y ago
And that is why those places already charge a lot more than McDonald’s.

mgkimsal 5y ago

I mostly agree with the sentiment, but other prices which factor in to their operating costs will eke up over time as their suppliers also add on their 4% hikes to get to 'living wage'. Over time prices will go up, but... so what? They've already gone up plenty for a variety of reasons over the years.

tptacek 5y ago
The author of this article says most of the staff we're talking about here makes minimum wage, so we don't so much have to scare-quote "living wage".
- mgkimsal 5y ago
  Wasn't trying to scare-quote so much as emphasize the idea in the GP comment.

the_snooze 5y ago

What actually hapens in practice is that the sandwich place will advertise $7 sandwiches on their menu, but in small print say they'll automatically add an "optional" $1 fee to all items at check-out. It's far beyond what's needed to cover increased wages, and they don't even have the guts to list prices honestly.

voisin 5y ago
Sounds like tipping, but optional to the business what makes it to the employees.
monkpit 5y ago
Source for the “optional” thing? I tried searching for this but didn’t find anything.
- sushid 5y ago
  Not sure about OP but in my experience, SF has so many hidden fees for restaurants it's not even funny. Restaurants were tacking on COVID surcharge fee on top of the SF mandate fee that they were imposing on diners. Tack on tax and tip and you literally have four additional fees on top of what you see on a menu.
  - the_snooze 5y ago
    Yeah, I'm referring to the Bay Area (Berkeley in particular). Here's a sandwich shop in Berkeley adding a 50-cent fee in 2016: https://www.yelp.com/biz_photos/ikes-love-and-sandwiches-berkeley-6?select=AHUAJ2HiO_KOfgO1RMid6A https://www.yelp.com/biz_photos/ikes-love-and-sandwiches-ber... They claim it's for transparency, but they were still advertising fee-less prices on the menu the last time I was there. You'd only see this sign at the check-out counter. Here's a Yelp review complaing about just that (raised to 75 cents as of 2018): https://www.yelp.com/biz/ikes-love-and-sandwiches-berkeley-6?hrid=dcNxYK_Crl0bprulJaoz9w&utm_campaign=www_review_share_popup&utm_medium=copy_link&utm_source=(direct) https://www.yelp.com/biz/ikes-love-and-sandwiches-berkeley-6...

jandrese 5y ago

The part you missed is if they raise the worker pay by 50% then the C-level pay also needs to increase by 50% to maintain the proper ratio and that raises the prices much more than 4%. /s

caminante 5y ago

edit: upon discussion with the parent, it appears that the parent was supporting the author's argument, not critiquing Chipotle or saying living wages require charging $15 for a $7 sandwich. No... > 4% price increase to get to a living wage. Not $15 sandwiches, just $7.28 instead of $7. Pay your employees. It's that simple. This isn't in the article [0]. You're conflating revenues and wages. Chipotle raising prices by 4% for EACH sandwich allows you to increase salaries by way more than 4% for employees. Taking a $7 sandwich, a 4% increase yields... [$7 sandwich] * [4% price increase] * [20 sandwiches/hr/employee] * [1hr/employee] = $5.60/hr/employee in incremental wages [0] https://www.cnbc.com/2021/06/08/chipotle-hikes-prices-to-cover-the-cost-of-raising-wages.html https://www.cnbc.com/2021/06/08/chipotle-hikes-prices-to-cov...

onlyrealcuzzo 5y ago
Are we assuming that food prices did not go up at all with this calculation?
- caminante 5y ago
  Why does that matter how much of the 4% increase is going to employees v. passing through variable costs? Here's Chipotle's audited financials, if you want to dig. [0] [0] https://ir.chipotle.com/sec-filings https://ir.chipotle.com/sec-filings
voisin 5y ago
I think you and OP are saying the same thing. Everyone can pay 4% more for their sandwiches so employees can earn a living wage, and saying it would be everyone paying $15 vs $7 is disingenuous.
Arainach 5y ago
I don't see how that disagrees with what I said. To increase wages significantly doesn't mean increasing prices significantly - that was my entire point.
- caminante 5y ago

Swizec 5y ago

Thing is, people will pay $20 for a good sandwich. We have a place down the street, Deli Board, that makes truly amazing sandwiches. The only sandwich I've ever had that made me say "You know, this might be too much filling and not enough bread". They're expensive, literally $18 to $22, but you never ever feel like it wasn't worth it. But many places aren't interested in making food that feels worth paying for.

bruceb 5y ago
"people will pay $20 for a good sandwich." Some people will pay for a Bentley. Doesn't mean a lot of people will. Best example might be In-N-out burger, that is relativity good quality for the price that is accessible to most people, and compensates their employees relativity well, though they work super hard. . But I don't know what their margins are
- genewitch 5y ago
  In n out burgers are half the radius they were in 1995-2000. So it makes sense they can charge the same prices. They also paid >$9/hr during that period, too. In n out is making money on thin margins and volume. Also I assume the drinks and shakes are high margin. I haven't really enjoyed in n out in a decade, maybe I just grew out of it.
bambax 5y ago
> Thing is, people will pay $20 for a good sandwich. Really? Where is that? I live around Paris -- a city where the cost of living isn't considered low by world standards. Here the normal price for an excellent sandwich made of fresh bread (1/2 baguette), chicken or beef, lettuce, tomato and sauce is around €4.5; if it's just ham and cheese, and the same wonderful bread, the cost is €4. I consider that expensive because I can make a meal at home for less than €2 (the cost can even go down to 0 if I just eat the leftovers from yesterday's dinner). I don't think I'd ever pay $20 for a sandwich of any quality.
- BrandoElFollito 5y ago

smnrchrds 5y ago

How much do sandwiches cost in Australia, where minimum wage is approximately 15 USD? I don't think they cost 15 AUD, let alone 15 USD.

motohagiography 5y ago
An oddly specific analogous reference, https://www.economist.com/big-mac-index https://www.economist.com/big-mac-index
jwagenet 5y ago
My understanding is the cost of goods a parabola with respect to wages, where until an inflection point, the wages are not high enough to allow workers to have discretionary spending. But once wages are high, demand increases enough to cover the increased wages and cost of goods can come back down as marginal cost decreases.
ALittleLight 5y ago
I just looked up a random Subway in Australia and it was 10 AUD for a 6 inch, 15 AUD for a foot-long (varies some by sandwich). 7-11 USD.
- deleted 5y ago
  [deleted]

rufus_foreman 5y ago

>> 4% price increase to get to a living wage. Not $15 sandwiches, just $7.28 instead of $7 That only works if the price elasticity is 0 - meaning that a 4% price increase doesn't lead to a decrease in sales. The price elasticity isn't 0. It's close to 1. A 4% price increase leads to close to a 4% drop in sales. Fixed costs stay the same. Do the math under those assumptions.

sudosysgen 5y ago
They're not actually making a prediction. This is what actually happened. The prices increased by 4% and, including elasticity, this allowed for a 15$ minimum wage. It's empirical.
- rufus_foreman 5y ago
  Those numbers don't contain enough information to calculate a price elasticity. Even sales numbers don't contain enough information to calculate a price elasticity, because you don't just need to know the change in sales after a price change, you need to know what percentage of that change was due to the price change instead of other changing factors - slowing of the pandemic, changing menu, advertising, growth in customer base that was happening anyway, etc. Those numbers are hard to get. But people who have done studies have estimated that in the restaurant industry, the number is close to 1. I mean think about what you are saying if you are claiming that the price elasticity is 0. You are saying that even before the wage increases, they could have raised prices by 4% and returned that money to their investors as pure profit, in an industry where profit margins are single digit and not usually high single digit. Not a chance.
  - sudosysgen 5y ago
    That's completely besides the point. No, that is not all what I meant, and at this point I don't really understand how I can make it clearer. The 4% increase in prices leading to a 15% minimum wage is a FACTUAL DATAPOINT. It is EMPIRICAL REALITY. No theorem, model, or anything, can change that, because that's what ACTUALLY HAPPENED. It's not theoretical. After all was said and done, prices were increased by 4%, and wages were increased to 15$/hour. It's completely useless to talk about elasticity, and try to estimate it, in this context. You are trying to apply a model, to reality, and arguing that the model is correct, but reality is not correct.

908B64B197 5y ago

> 4% price increase to get to a living wage. Not $15 sandwiches, just $7.28 instead of $7. Pay your employees. It's that simple. At a large chain like Chipotle, sure. But most "fine dining" restaurants have razor thin margins on food. Alcohol is how they make money. With the pandemic, people have switched to ordering food for takeout and therefore restaurants can no longer make a profit on drinks. There's also two other aspects the author won't touch on: if you open a legitimate fine dining restautant you'll have to compete with places employing illegal aliens. And lastly, some restaurants are really just fronts for money laundering. They can operate a really long time without making any real profit; it's a business where it's easy to claim some large transactions were made in cash.

waynesonfire 5y ago
> restaurants can no longer make a profit on drinks. but they also just need to keep the kitchen open.

heavyset_go 5y ago

There's actual research in this space, and it found that for every 10% increase in minimum wage, some restaurant prices rose by 0.36% and others decreased[1]. Price increases are negligible at best. [1] https://www.upjohn.org/research-highlights/does-increasing-minimum-wage-lead-higher-prices https://www.upjohn.org/research-highlights/does-increasing-m...

chrisco255 5y ago
This is a dubious statement for a number of reasons. Let's just use raw analysis. If a restaurant's current labor budget is 30% of revenue, and the restaurant's profit margin is 3% and the cost of labor increases by 10%, how much profit is the restaurant making now? If the restaurant owner wanted to maintain a 3% profit margin in such a scenario, how could they do it?
- tekstar 5y ago
  Your raw analysis ignores things like staff turnover and quality of work
- supernovae 5y ago
  FYI, Chipotle CEO makes ~14 million a year. A normal salary for CEO could go a long way to improving stores and pay for some.
  - missedthecue 5y ago
    That salary dividend among the workforce of Chipotle is $4 a week, pennies an hour, and the company wouldn't have a CEO. And his salary is only $1.2M, the rest is performance incentives and so forth.
  - Jtype 5y ago
    While I agree that CEO pay is obscene, that money wouldn't do much. What is the percentage of CEO pay to annual expenses and revenues?
- deleted 5y ago