
Seattle's Minimum Wage Killed the 'Five-Dollar Footlong' - ayanai
https://reason.com/blog/2018/01/10/seattles-minimum-wage-killed-the-five
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akkat
I'm pretty right wing and have opinions about minimum wage that a lot of other
hn users would disagree with, but this article is garbage. Basically one store
owner said that he can't afford to offer the new promotion because of the
minimum wage and other social spendings. That is all the facts we are given.
Of course another reason could be because people don't want that product, or
that the store owner isn't running the store as efficiently as other nearby
stores are. The article then criticises the new sugar tax because the cost of
soda is higher. Of course the price of soda is higher, that is the intention.

~~~
scarface74
Everything I know about economics tells me that anytime that you artificially
put price floors and price ceilings on anything - including wages - there are
unintended consequences. I don't think they should have raised the minimum
wage at all. Let the market decide what a fair wage is.

On the other hand, I do care about other people and think that people who are
willing to go to work everyday deserve some minimum amount of money. I don't
know what that minimum should be.

How do we square that circle? Increase the Earned Income Tax Credit and come
up with a way to allow businesses to distribute the credit back to their
employees just like we have a way now for employers to take payroll taxes.

Historically, raising the EITC has been popular among Republican and
Democratic presidents. Giving more to the poor - who will definitely spend it
- does a lot more for the economy than giving it to people who already have
enough.

~~~
supreme_sublime
One thing I am curious about is what really would happen if we had no minimum
wage. Anchoring bias is a pretty well known phenomenon. If you have a "cheap"
item priced at $10, an "economic" item priced at $15 and an "expensive" item
at $20 and they are functionally the same. People will choose the middle item.

I wonder if something similar is happening with wages. Because of the minimum
wage, a business owner can hire someone to the minimum wage, or something
slightly above, without too much thought other than knowing they can afford it
generally. So the minimum may be artificially "sticking" wages lower than what
they may otherwise be. Of course this is all conjecture and I have no kind of
proof for this.

Also, while minimum wage laws are almost universally praised, they (along with
a lot of things in the US) have a pretty sad history.
[https://mises.org/blog/racist-history-minimum-wage-
laws](https://mises.org/blog/racist-history-minimum-wage-laws)

~~~
Agustus
Minimum wage laws are not universally praised, those from the Austrian
economic side would disagree with that statement. The minimum wage is as bad
as licensing for hair wraps, it is a program to drive undesirables out of a
market.

~~~
supreme_sublime
I said "almost" because I happen to be a person who pretty strongly agrees
with Austrian economics. I'd think that linking a mises.org article might hint
at that pretty strongly.

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stevenwoo
I assume the Costco they mentioned in passing still has the nation wide 1.50
hot dog and soda deal and Costco is a lot better place for workers in terms of
wages and benefits over Subway. Did the writer forget this detail or did he
drop it because it didn't match his narrative?

~~~
lykr0n
Subway is a franchise. Costco can spread the loss of the 1.50 hot dog over
membership fees, and marginal markup of products from across the country. A
Seattle Subway franchise can not, as they are not charging a membership fee
nor do they have other business areas that they can spread the cost over.

Oversimplification and False Analogy.

~~~
dragonwriter
> Costco can spread the loss of the 1.50 hot dog over membership fees,

Costco is profitable before membership fees, though that profit is less than
the amount of membership fees. It's not covering any loss with membership
fees, it's piling them on top of a small profit to make a bigger profit.

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lstamour
If you’re interested in this story, Google for “Tim Horton’s minimum wage
Ontario” and you’ll find plenty of similar coverage, and not just Timmies... A
few weeks ago, minimum wage was CA$11.60 an hour in Ontario, it’s now $14 an
hour, and will increase to $15 in 2019. But most chain stores haven’t raised
prices, so you get conflict, and where there’s conflict, there’s no end to the
news coverage...

~~~
bryanlarsen
Businesses in Ontario and Seattle were handed a perfect opportunity to raise
their prices. Normally a price increase would cause a loss of business to
competitors, but a price raise blamed on the minimum wage hike would have been
tolerated much better.

\- competitors should be raising their prices too, so there shouldn't be
competitors to desert to \- opponents of the wage hike will blame the
government instead of the business for the wage hike \- supporters of the wage
hike should be happy to support the higher wages

Yet businesses in Ontario have responded by cutting employee benefits and
increasing tip splitting, resulting in significant negative publicity and
boycotts.

~~~
Agustus
The companies do not need to raise prices, they have a few strategies to take:

1\. Keep prices the same and hope to make it up on the increased traffic if
competitors increase prices; employment costs stay the same.

2\. Keep prices the same; adjusting the costs in employees to offset the
higher value they must be returning.

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Overtonwindow
Higher minimum wage, IMHO, leads to a zero sum game. Wages increase, then
prices increase, returning us right back to where we started. Businesses are
not going to give up profit, and I think it's basic Econ 101 that if your
fixed costs rise, you increase prices, or you shut down. The minimum wage in
Sydney, Australia is $17.70 per hour. This has led to an increase in
everything - from food to apartments. Sure you're making $17.70 an hour, but
that apartment that was previously 1,000 a month is now $2,000, so you've
really gained nothing.

~~~
AstralStorm
Any real data to back all these assertions up? Say, a price/minimum wage
chart?

One Subway does not a correlation make. Neither does a price hike that can be
caused by a myriad of causes not necessarily related to minimum wage.

~~~
donatj
If you compare minimum wage hikes to inflation you can see they're very
closely linked – to the point that a minimum wage hike only ever results in
very short buying power increases.

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tekproxy
We made it illegal to sell something for what it's worth. What's the worst
that can happen?

~~~
kthejoker2
Economics 101 says supply equals demand at all price levels. So there is no
one "what it's worth."

Baking in (no pun intended) externalities into the price is better than just
shuffling it off into the wastelands of government deficits.

The market and I are not obligated to make a profit for Subway just because
conditions have changed. If their entire value proposition was to be the
lowewt cost food provider, that's on them.

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rdiddly
"The net outcome: In 2016, the 'higher' minimum wage actually _lowered_ low-
wage workers' earnings by an average of $125 a month."

No, it turned some of the low-wage workers into higher-wage workers, leaving
not as many low-wage workers and therefore less total work done and money
earned by low-wage workers. Which was the goal.

Now if the goal of raising the minimum wage were to ensure wages were low,
you're right, it's a disaster!

~~~
supreme_sublime
I bet that the people priced out of a job totally love getting $0/hour vs the
evil wage they were receiving before.

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imron
> The biggest cost driver, as Jones' sign mentions, is Seattle's highest-in-
> the-nation minimum wage. It went from $9.47 to $11 per hour in 2015, then to
> $13 per hour in 2016, with a further increase to $15 per hour planned.

Good thing businesses just got a big tax cut which will help offset those wage
increases. Some companies even voluntarily raised their minimum hourly wage to
$15 as a result of it.

~~~
votepaunchy
If the business was breaking even before the tax cut, how would it help them
to absorb increased costs?

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alphabettsy
I lived in LA several years ago and there were quite a few places that did not
honor the same pricing as the rest of the national chain including Subway so I
think there’s more than a minimum wage impact.

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forbin_meet_hal
The _real_ "minimum wage" is actually "zero."

~~~
scaryspooky
It's slightly above zero but a race toward zero.

~~~
bryanlarsen
I think the parent was implying that the real minimum wage is no job.

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AstralStorm
Real minimum wage is chattel slavery. You get paid in bare minimum living
expenses.

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skrebbel
Tl;dr: Seattle firms need to pay employees decently which is bad for hungry
right-wing journalist's wallet.

(Edit: my argument is not that this is somehow a bad thing to write, but that
it's an opinion piece disguised as neutral reporting)

~~~
braindongle
Seriously. "the consequences of high minimum wages, excessive taxation, and
mandate-happy public policy are not limited to the death of cheap sandwiches."
No leap to conclusions about causality there. Nope. Can't possibly be that
greedy bastards simply used this policy change as an excuse to make a
statement.

~~~
igravious
Haha. You and I both just simultaneously quoted the same absurdity and both
followed it up with sarcasm. :)

