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the most incredible libertarian assumption is that all companies operate in such a way that the smallest hike in pay absolutely must result in cutbacks elsewher

by bakhy 12y ago

the most incredible libertarian assumption is that all companies operate in such a way that the smallest hike in pay absolutely must result in cutbacks elsewhere. apparently, no company is making any profit! :D

georgemcbay 12y ago
Agreed. Also there seems to be an implied assumption that these "no-profit" companies are only holding on to their current low-wage workers out of some kind of charity that will expire when they have to pay them a few bucks more an hour, which seems absurd when all of my experience as a retail consumer suggests that modern companies staffed primarily by minimum-wage workforces are generally incredibly under-staffed already in the name of increasing the profit the companies employing them supposedly aren't making, as evidenced by the generally poor customer service, long wait times for service, etc (I'm in SoCal, YMMV in other parts of the country).
- bakhy 12y ago
  of course. the day a company, when faced with larger profits, decides "hey, let's give it all to our workers through an increase in pay" is when i'll believe the libertarians ;) the determining factor for the amount someone is payed is not how much their company earns, and/or how much they contribute to that. for most workers it is simply - how easily can s/he be replaced? i.e. market price, mostly independent of how well an individual company is doing! no manager is going to pay workers more than s/he needs to, at least not without risking reduction in competitiveness, and for workers with low education, you can find replacements easy, particularly during economic downturns.
  - zo1 12y ago
    "of course. the day a company, when faced with larger profits, decides "hey, let's give it all to our workers through an increase in pay" is when i'll believe the libertarians ;)" This has nothing to do with Libertarianism, nor any of it's main tenets. It's called charity, and you'd do well to disassociate it with petty political ideology.
    - bakhy 12y ago
      hm, i would not necessarily call redistributing profits to workers "charity". it is merely an alternative model of work organization, which is actually implemented in some organizations around the world.
      - zo1 12y ago
        Then it's not a company, or they're not employees. Gee, I wish I could just make up random re-definitions of long-established words so I could win arguments.
        bakhy 12y ago
        gee, i wish you could follow the thread, since the petty detail you are squabbling about bears little if any relevance to the main point ;) and yes, it still can be a company, unless you wish to narrow the definition of the word company. the way a company will distribute it's profits is mostly it's own business. are you perhaps automatically assuming that all companies are traded on the stock market? in any case, you're the one who started with redefining "charity" in such a wild manner you seem to now hypocritically be accusing me of.
glenra 12y ago
One "libertarian assumption" is that it's worth doing a little math to figure these sorts of things out. Usually if you do that math you will discover that neither profits nor high top salaries are anywhere near large enough that companies could merely absorb the higher cost out of either or both. (Incidentally, a raise to $15/hour is quite a lot more than "the smallest hike in pay".) But hey, just for the sake of argument let's pretend you COULD take it out of profits. Here's where you run into a related assumption which is one of the basic rules of economics: change happens on the margin. Suppose that the entirety of the McDonalds chain as a whole is profitable. For simplicity we'll ignore the fact that the individual stores are mostly franchises and pretend they're all company-owned. The chain is not uniformly profitable! Some outlets are very profitable and others are just barely scraping by. When you increase the cost of labor the outlets that were very profitable are still worth running even with the new cost of labor, but the outlets that were only slightly profitable before are now losing money. Those are the outlets that close. Restaurants that will lose money every year with the higher wage aren't worth keeping open. shifts that lose money at the higher wage also aren't worth keeping open, so hours of work tend to get cut back too. You don't lose jobs at every store or uniformly, but you do lose marginal jobs that did exist or that would exist were it not for the new wage. Overall, the chain will survive, but it has to shrink back in order to do so. In order to argue that it doesn't, you'd need to believe not just that the company overall is making (a lot of) profit, but that EVERY individual outlet is making the same share of that profit, so they're all worth keeping around post-change.
- whimsy 12y ago
  See my reply to zo1 on the same topic: https://news.ycombinator.com/item?id=7838800 https://news.ycombinator.com/item?id=7838800
  - glenra 12y ago
    Doesn't really answer my point. An average increase in costs of 5% or even 3% is still enough to kill restaurants on the margin. For instance, suppose you are a McD franchise owner whose restaurant has 50 "crew members" (source on that number: https://answers.yahoo.com/question/index?qid=20070917131148AAT0JbQ https://answers.yahoo.com/question/index?qid=20070917131148A... ) and your restaurant recently became profitable to the point that it currently makes an annual profit of $250k. A quarter million dollars in annual profit isn't a lot but it's respectable - that is a sustainable business! That's something you can afford to keep operating indefinitely (and try to grow over time). You have some room to invest, some room to make mistakes. Now suppose the state passes a law requiring you to give all 50 of your crew members an extra $5/hour. How much does that cost? 50 people * 2000 hours/year * $5 = $500,000. So your restaurant just went from gaining a quarter million to losing a quarter million a year. Now it is not a sustainable business. Your pockets are not deep enough to keep losing that year after year; you should probably close the business or scale it way back. Are you going to claim that every restaurant in the chain has enough buffer to take a half-million-per-year hit to the bottom line and stay standing? Of course not. There are always some marginal businesses; those are the ones that are likely to shrink, cut benefits, or close.

by bakhy 12y ago

georgemcbay 12y ago

Agreed. Also there seems to be an implied assumption that these "no-profit" companies are only holding on to their current low-wage workers out of some kind of charity that will expire when they have to pay them a few bucks more an hour, which seems absurd when all of my experience as a retail consumer suggests that modern companies staffed primarily by minimum-wage workforces are generally incredibly under-staffed already in the name of increasing the profit the companies employing them supposedly aren't making, as evidenced by the generally poor customer service, long wait times for service, etc (I'm in SoCal, YMMV in other parts of the country).

bakhy 12y ago
of course. the day a company, when faced with larger profits, decides "hey, let's give it all to our workers through an increase in pay" is when i'll believe the libertarians ;) the determining factor for the amount someone is payed is not how much their company earns, and/or how much they contribute to that. for most workers it is simply - how easily can s/he be replaced? i.e. market price, mostly independent of how well an individual company is doing! no manager is going to pay workers more than s/he needs to, at least not without risking reduction in competitiveness, and for workers with low education, you can find replacements easy, particularly during economic downturns.
- zo1 12y ago
  "of course. the day a company, when faced with larger profits, decides "hey, let's give it all to our workers through an increase in pay" is when i'll believe the libertarians ;)" This has nothing to do with Libertarianism, nor any of it's main tenets. It's called charity, and you'd do well to disassociate it with petty political ideology.
  - bakhy 12y ago
    hm, i would not necessarily call redistributing profits to workers "charity". it is merely an alternative model of work organization, which is actually implemented in some organizations around the world.
    - zo1 12y ago
      Then it's not a company, or they're not employees. Gee, I wish I could just make up random re-definitions of long-established words so I could win arguments.
      - bakhy 12y ago
        gee, i wish you could follow the thread, since the petty detail you are squabbling about bears little if any relevance to the main point ;) and yes, it still can be a company, unless you wish to narrow the definition of the word company. the way a company will distribute it's profits is mostly it's own business. are you perhaps automatically assuming that all companies are traded on the stock market? in any case, you're the one who started with redefining "charity" in such a wild manner you seem to now hypocritically be accusing me of.

glenra 12y ago

One "libertarian assumption" is that it's worth doing a little math to figure these sorts of things out. Usually if you do that math you will discover that neither profits nor high top salaries are anywhere near large enough that companies could merely absorb the higher cost out of either or both. (Incidentally, a raise to $15/hour is quite a lot more than "the smallest hike in pay".) But hey, just for the sake of argument let's pretend you COULD take it out of profits. Here's where you run into a related assumption which is one of the basic rules of economics: change happens on the margin. Suppose that the entirety of the McDonalds chain as a whole is profitable. For simplicity we'll ignore the fact that the individual stores are mostly franchises and pretend they're all company-owned. The chain is not uniformly profitable! Some outlets are very profitable and others are just barely scraping by. When you increase the cost of labor the outlets that were very profitable are still worth running even with the new cost of labor, but the outlets that were only slightly profitable before are now losing money. Those are the outlets that close. Restaurants that will lose money every year with the higher wage aren't worth keeping open. shifts that lose money at the higher wage also aren't worth keeping open, so hours of work tend to get cut back too. You don't lose jobs at every store or uniformly, but you do lose marginal jobs that did exist or that would exist were it not for the new wage. Overall, the chain will survive, but it has to shrink back in order to do so. In order to argue that it doesn't, you'd need to believe not just that the company overall is making (a lot of) profit, but that EVERY individual outlet is making the same share of that profit, so they're all worth keeping around post-change.

whimsy 12y ago
See my reply to zo1 on the same topic: https://news.ycombinator.com/item?id=7838800 https://news.ycombinator.com/item?id=7838800
- glenra 12y ago
  Doesn't really answer my point. An average increase in costs of 5% or even 3% is still enough to kill restaurants on the margin. For instance, suppose you are a McD franchise owner whose restaurant has 50 "crew members" (source on that number: https://answers.yahoo.com/question/index?qid=20070917131148AAT0JbQ https://answers.yahoo.com/question/index?qid=20070917131148A... ) and your restaurant recently became profitable to the point that it currently makes an annual profit of $250k. A quarter million dollars in annual profit isn't a lot but it's respectable - that is a sustainable business! That's something you can afford to keep operating indefinitely (and try to grow over time). You have some room to invest, some room to make mistakes. Now suppose the state passes a law requiring you to give all 50 of your crew members an extra $5/hour. How much does that cost? 50 people * 2000 hours/year * $5 = $500,000. So your restaurant just went from gaining a quarter million to losing a quarter million a year. Now it is not a sustainable business. Your pockets are not deep enough to keep losing that year after year; you should probably close the business or scale it way back. Are you going to claim that every restaurant in the chain has enough buffer to take a half-million-per-year hit to the bottom line and stay standing? Of course not. There are always some marginal businesses; those are the ones that are likely to shrink, cut benefits, or close.