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Labor shortage or terrible jobs? (annehelen.substack.com)
553 points by RuffleGordon 9 months ago | hide | past | favorite | 993 comments



This article unfortunately doesn't address the business side of the problem. Fast food restaurants, or place like "Dale's" mentioned in the article, make very little profit. It is most likely below 10%. Here is an estimate: https://www.restaurant365.com/blog/what-is-the-average-profi....

A 10% profit is very modest. That's not the story of the "fat cats getting rich on the back of the workers" that the article is alluding to.

The problem for the business is that the financial model is set by the fixed or imperative costs, i.e. the cost of rent, the cost of maintaining the capital equipment, the cost of cleaning to meet codes, insurance, etc. The cost of labor, for cooks, wait staff, etc. is often the biggest part of the expense budget for restaurants.

With such a small profit margin, arbitrarily raising everyone's wages is likely going to kill the business. There is no room in the budget. The only choice is to either automate, which will reduce the labor requirements, or raise prices and hope that customers won't just go down the street. But they will, they will go down the street--until everyone's prices go up and there is nowhere else to go. And all of this is free market capitalism at work. It is a continuous process of reinvention.

In short, I'm not saying that higher wages aren't necessary, I'm just saying that both sides of the equation need to be examined, i.e. the plight of the worker AND the plight of the business. And we need to understand that things will probably get ugly before they get better. Because that's how capitalism and free market economies work.

But watch out for technology and automation...that is the part of the equation that has been "solving" the labor problem for some time now...


A 10% margin also often doesn't tell the whole story of how they make their money. Nearly since its inception, a substantial portion of McDonald's long term profit came from the appreciation of the real estate the stores were built on. Operating a business on it just made it cash flow positive during the holding period. So it was essentially a REIT that happened to operate a fast food chain. Even for many mom-and-pop restaurants (or other business) the real payoff often comes when it comes time to sell and cash in on the capital appreciation of the business assets.

My point isn't to say there's anything wrong with that model: more power to anyone who comes up with a creative, legal way to make a living. Mainly I just want to point out that you often can't look at it simply as making X% margin on sales in a given period of time or any other single metric for many businesses as the real gain is longer term than that.

Which is really a long-winded way of saying: if the ability of a business to make a long term profit is not my concern, their claimed inability to pay a living wage isn't either. If they honestly can't afford to pay a living wage, then as the article states, perhaps it shouldn't be in business. If there is a market for whatever product/service they were offering, someone will come up with a sustainable way to serve it that is better for all involved.


Not to forget the times where states raise their minimum wage and see the number of people in the labor force increase. The balance of power is almost always squarely weighted on the side of the employer. This can push wages below market optimum.


I’d expect minimum wage increases to be mostly off the table during recessions, so it’s not surprising to see them passed during economic expansions, which are tightly linked to rising employment figures, so this might be a "wet streets cause rain" correlation.


Except it’s those on minimum wage that spend most or all of their paycheck stimulating the economy.

Middle class have record savings at the moment.


Then you have the reverse problem where the stores or restaurants are renting their space. As the neighborhood density increases, their customer base goes up but so does rent. And since location matters, you can’t just move if you don’t like the rent prices, so they can squeeze you pretty hard. Goodbye profit margins.

In my old neighborhood there were always a few empty places because they were pricing people out, and few wanted to pay the new prices.


Insert Adam Smith quote about the rent of land.


“As soon as the land of any country has all become private property,” he writes, “the landlords… love to reap where they have never sowed, and demand a rent even for its natural produce.

https://www.barrons.com/articles/the-trouble-with-adam-smith...


>If they honestly can't afford to pay a living wage

It's not logical to kill businesses by arbitrarily raising the minimum wage. Do you think the people they employ are better off not working at all? These people may not have a decent enough salary, but they get to work as opposed to staying at home and degenerate (mentally and physically). I always thought the better solution is to help them financially in other ways (greater tax credits, negative taxes?).


If raising the minimum wage will do them in, they're already halfway there if things are really[1] that dire and will end up there soon enough. So yes, people are better off not working for those types of businesses. If a business can only remain solvent by paying unreasonably low wages, it puts downward wage pressure on competing businesses and traps unskilled workers in a labor pool of dead-end jobs with little hope of escaping it/them and no time to do so since they're always scrambling to make enough money pay the most urgent bill.

There are plenty of things society needs done to keep displaced workers productive (with better pay and a sense of actual accomplishment) while giving them breathing room to figure out 'what next?' I don't believe for a second that we're doing workers in the sub-basement of the economy any favors by keeping them locked down there. It isn't a binary (either they work in these crap jobs or they sit at home and deteriorate) decision... there are a variety of options between the extremes.

[1] I'm suspicious of the majority of cases where this claim is made. A rational business person would see that such a business is already marginal and that they would likely be better off shutting it down and redeploying the capital elsewhere for a better return. This happens all the time. If the owner can't see this, keeping the business on life support isn't doing anyone any favors.


> [1] I'm suspicious of the majority of cases where this claim is made. A rational business person would see that such a business is already marginal and that they would likely be better off shutting it down and redeploying the capital elsewhere for a better return. This happens all the time. If the owner can't see this, keeping the business on life support isn't doing anyone any favors.

I agree with you, I would never own a restaurant or bar personally. But profits are really ~10% for the average mom n pop restaurant. It's just how it is. So $1mm in annual sales makes you $100k, more or less. People like owning restaurants, despite their best financial interests.


10% is when the restaurant is extremely successful. Average margins are lower than that.

Arguably there are way too many restaurants, in part due to low interest rates. If there were fewer restaurants, the volume would go up and the average restaurant would do a larger gross and be able to handle low or lower margins.

Consider that if someone lived through the last time the US had significant price inflation as an adult, they are 70+ years old. Costs are going up for anything with tight supply, including for labor. Very few working age adults, or business owners, have any experience with that. The transition will be alarming and painful but there is no back peddling now. Businesses with slim margins and an inability to rapidly raise prices just will fail.


How does significant price inflation change investing/business strategies?


> People like owning restaurants, despite their best financial interests.

Which is fine, but then it’s silly to base minimum wage policy on whether or not it will make somebody’s already-irrational hobby business less profitable.


> People like owning restaurants, despite their best financial interests.

And part of the problem is cultural. There is social capital that exists alongside human and financial capital, and because its hard to quantify we end up with this sort of hidden value that isn't accounted for.


Plenty of small businesses, especially restaurants, appear to me to be sustenance operations. Many owners appear happy just to not go broke and pass the job to their kids.

That’s an OK life.


> there are a variety of options between the extremes.

There are a variety of options completely outside of that continuum.

Like, how about a democratically planned economy where we intentionally work on things that actually help society instead of just whatever happens to make the most profit for the current owners?

I think a big part of burnout is that the work we're doing is clearly pointless. I'm stuck writing debugging shitty Android apps all day. Can I please go plant some forests or something?


> I'm stuck writing debugging shitty Android apps all day. Can I please go plant some forests or something?

If this was the status quo, there'd be just as many people thinking "I'm stuck outside doing manual labor planting trees. Can I please spent time doing something mindless sitting at a desk in a climate controlled workspace instead?"

Someone out there is deriving value from the android app you're debugging or else it would not be economically viable to keep paying you to do that job.


> Someone out there is deriving value from the android app you're debugging or else it would not be economically viable to keep paying you to do that job.

Where does this sort of axiomatic economic thinking come from?

Tons of software projects really are completely pointless and will never turn a profit or generate value. And not even in a "the bet was worth making way" -- walk into any Fortune 500 and you'll find whole armies of people doing pointless busy work. Not confined to enterprises, though -- "special projects" are a thing in startups too. I've seen 10% layoffs -- literally workforce decimation -- without a single meaningful change to the economic output of the business. And that's the private sector. Anything defense-related is at least 100x worse in terms of pointless busy-work.

I don't quite understand how these sorts of neo-classical micro-econ axioms have such huge mindshare. Business managers are not omnipotent, and many aren't even competent.


> there'd be just as many people thinking "I'm stuck outside doing manual labor planting trees

Then we could trade jobs for a while. Part of the problem (for us knowledge workers) is that we get pidgeonholed into doing one thing because that's where we have enough experience to convince someone to pay us to work on their thing. Not to mention that switching jobs or taking breaks is more annoying than it ought to be because health insurance and other benefits are tied to employment.

> Someone out there is deriving value from the android app you're debugging

The CEO. Who already has enough money that he could retire if he wanted. I don't think people in general would miss our buggy app if it disappeared tomorrow. I do miss the trees when they disappear, though.


Almost as if humans don't naturally adapt well to doing single isolated jobs for long periods of time. A sort of labour alienation, you could say.

I'm not saying it's not economically efficient to split up jobs this way, but it sure isn't good for your state of mind.


> [1] I'm suspicious of the majority of cases where this claim is made. A rational business person would see that such a business is already marginal and that they would likely be better off shutting it down and redeploying the capital elsewhere for a better return.

Now do family farms.


> while giving them breathing room to figure out 'what next?'

I'm dubious of this claim. My experience from observing many friends in this situation at different economic levels (enough savings to take a break in US. Unemployment benefits in Europe) is that they rarely use the time to figure out what is next. Instead they most often use the time to relax and only spend time trying to figure out what is next when pressured to do so by impending financial circumstances (doing nothing depletes savings for those in America and unemployment benefits run out eventually in Europe).

Whether the amount of time afforded by savings or unemployment is 3 months or 2+ years, it's only the last 1-2 months where most people spend time figuring things out.


This is a very nice way of saying “I asked my poor friends to confirm what I want to believe.”

When all you have to look forward to your entire life is some slog of service industry jobs with little to no benefits or vacation, of course you maximize the amount of time you spend on your own life. Poor people deserve to relax, and I have never had a job in my tech career that compared to the stress or exhaustion of my minimum wage jobs.

If I get fired now, I’d be happy to go find my next career move. Back then, you would have to drag me into another restaurant.


You seem to know a lot more about his friends then would be expected. How do you know they are poor? I had a high paying job for years but couldn’t have afforded not working for two years without seriously draining retirement savings at the time.


The cost of some businesses closing because they can't afford a higher minimum wage has to be considered in the context of every business that can afford the higher wage improving the lives of their minimum wage staff.

Maybe it is worthwhile killing some businesses, and pushing some people to get new jobs or to live on benefits, if the wage increase for others is a greater benefit to society.

Its also worth noting that practically no businesses close when minimum wages have been increased in the past. People suggest its a problem,and logically it makes sense, but it doesn't seem to actually happen in practise.


This is something that is quite nuanced that isn't apparent until you really look into the numbers.

When something happens that universally makes the labor costs go up, and you expect for many businesses to go into the black, what you will instead see is that the very worst company goes out business and all of the others will put pressure on their land owner for lower rents pointing out that they are next. The landowner wants their land to be used and not be earning nothing for years, so they will lower rents. For a restaurant, if everyone is in the same boat, is agnostic to labor costs.

Higher labor costs makes real estate prices go down. Automation makes real estate prices go up. With interest rates going down bringing real estate up, we have plenty of space to rise minimum wage to balance.


> Higher labor costs makes real estate prices go down.

Well, it might by your argument make commercial rents, and thus commercial prices, go down. But it also means more money chasing the median residential unit (whether rent or purchase), so it should increase residential prices. Absent zoning constraints, that would seem to encourage shifting from commercial to residential land use


Yep, completely agree.

But notice how this argument is based around the margins. When labor goes up, rents go down and food costs go up slightly. Someone who used to just barely be able buy fast-food from McDonalds will suddenly not be able to, and instead be forced to buy more from the grocery store. But there might be two customers that would have otherwise bought food at Five Guys who now buy from McDonalds.

You might see a shift from commercial to residential, or you might see a shift to 4+1 mixed. The town might buy the space and put in a park. You might put in a high-rise. Anything could happen based on the situation.

Whenever the argument of raising the minimum wage comes up, we always hear these stats that 50% of businesses will go in the black, and we will destroy the economy. It's much more subtle than that. The effect that we see is tiny tiny percentages that are overwhelmed by other factors.


No, higher minimum wage shouldn't increase the labor cost "universally". Most of the cost increase would be felt by those employers who actually paid wages below the new limit. Which isn't even that great a portion of the economy.

There might be some effect diffusing upwards, but I doubt it.


Right, which is why I clarified each time I said that. Software costs don't go up as they don't rely on minimum wage labor. For restaurants, that almost universally rely on the cheapest labor, this is the case. If Burger King and McDonalds both have higher labor costs, both put pressure on their land owner, and both don't end up caring.


> Its also worth noting that practically no businesses close when minimum wages have been increased in the past.

The problem got pushed somewhere, but where?

Very rarely does the owner of the business just eat the cost except in the very short term. If the business doesn't close usually one of two things happen:

(1) there are fewer hours available because books need to be balanced. Some workers that are able to keep their hours do better at the expense of those whose hours are cut. Basically this ends up being a wealth transfer between some hourly workers and others.

(2) prices eventually go up and cause localized increases in prices. Within two to three years you end up with the situation where that new higher minimum wage has about the same purchasing power locally as the previous minimum wage had.


The government giving more to minimum wage workers instead of raising minimum wage feels like a roundabout way to subsidize businesses that don’t way living wages.


That's exactly how it works in many european countries, especially the ones without a legal minimum wage (Austria for example), so people working "slave" gig jobs (cleaners, delivery, construction and hospitality workers, etc.) where if they earn below a certain "livable' threshold, get various tax credits, subsidies and benefits from the government to reach that "livable" threshold, which, while it sounds good, it creates a perverse incentive where employees arrange with the employer to be paid as little on paper as possible to still qualify for the government subsidies and then get paid the rest under the table (tipping is expected here for this reason) which just moves the burden from the employers of paying a livable wage to the customers and to the taxpayers which are basically subsidizing their business.


This is what's happened with housing benefit in the UK[1], it's basically a subsidy to businesses in high rent areas. It was £500M a week, I shudder to think what it is now.

[1] https://www.bbc.co.uk/programmes/b06bnbpx


What strikes me as weird is that parties that call themselves left-wing opt for this kind of hand outs without realising they are in fact subsidising the rich with workers' money. How this can fly?


Left and right wings belong to the same vulture.


Well not helping people in order to stick it to the rich is neither productive nor effective. There’s a reason for these handouts and it’s not as if left-wing parties don’t advocate for higher minimum wage. A problem can always be attacked from multiple sides.


The government already does that in terms of food stamps.

A job in the richest country in the world should not pay starvation wages.


Please think about the holistic nature of your argument. The sum of it's parts essentially suggests that taxpayers should subsidize the employment costs of businesses, which is ridiculous.


Taxpayers already subsidize the employment costs, by supplementing low salaries and lack of benefits via welfare programs, tax rebates, lower tax rates, subsidized healthcare, and countless other benefits. Walmart et al have externalized almost all of the true cost of labor to taxpayers.


Right, and raising the minimum wage is an attempt to control that by putting the costs back on the employer.


Who will simply either pass the costs along to the consumer, or shut down.


Which is a healthy cleanse of an exploitive economy, and America definitely has an exploitive economy, make no mistake.

A minimum wage is a decision a society makes, that says "this is the minimum market rate for a human that we consider non-exploitive", it's not an economic decision made to maximize GDP or profit. If a company can't afford to operate in a way that's non-exploitive then it needs to reconfigure or die out, because it doesn't belong in your society.


Why not have the government subsidize purchases at the business, if the goal is to have as close to 0 pricing as possible and ensure the business survives regardless of its utility?

People constantly argue for the rights of businesses which pay incredibly poorly, as if that is effecting mom and pop shops which are by and large already closed and gone, and when they were around ended up paying a bit more. Maybe a community is better when there’s a collection of local businesses moving money locally instead of a big nowhere-place off the turnpike paying slave wages and moving money back to corporate HQ? America’s business climate is pretty sick compared to so much of the world.


I think the problem may also be that mom and pop shops are taxed much more heavily than big multinational corporations, that pay very little tax and thus have huge competitive advantage over small local businesses. I would think that any government caring about the local population would look into getting those companies to pay their fair share.


The areas where people vote for less and less government tend to be the places that have the most minimal services. I have yet to see an area that truly attracts business because of having low regulation and taxes, they all seem to have absolutey no businesses because there is no infrastructure to build upon, nor an existing business community to interact with.


The problem is that in most places the general population is absolutely fine for being fleeced. They pay 30%-40% tax for a privilege of working for a big corporation that only contribution to their society are the salaries they pay. All the rest gets siphoned out to tax havens. So far neither the so called left nor right have a clue how to fix this. That is a next level entitlement for corporations to expect people build infrastructure for them for free.


The Marxists saw this coming 150 years ago, and not coincidentally they also have a few good ideas for how to fix it. They are worth hearing out.


Again, internalizing the true cost of things.

How is this bad?


This isn't correct. The amount of costs passed along to the consumer depends on the supply and demand elasticities of each particular market. That's Econ 101.


In a market system, a company that takes less profit would keep their prices low and put the other company out of business.


Yes. That's the point.

First, inefficient employers like McDonald's have an entrenched position in the industry because of their massive scale and their real estate holdings. A new entrant in the market already has an uphill battle - if they don't want to rely on government subsidies (e.g., because they want to attract employees who would rather be paid directly for their work), their task is even harder.

A free market in the sense Adam Smith meant it - not a free-for-all, but free to enter - would treat it as a policy goal that new companies would have a fair shot at competing.

I'd understand the argument that government welfare and a low minimum wage are important to support new entrants, by making it possible for them to compete against the entrenched companies. But that's not what's happening; it's the entrenched companies that are effective beneficiaries of these policies (cf. https://www.cnbc.com/2020/11/19/walmart-and-mcdonalds-among-...).

Second, passing the costs along to the consumer along with raising wages has the effect of increasing the purchasing power of low-income consumers. If the minimum wage goes from X to 2X, which causes the cost of items at McDonald's or Wal-Mart to go from Y to 2Y (which it won't, because labor costs aren't the entire costs, but for the sake of argument assume they are), then people being paid the minimum wage are in basically the same position for their everyday purchases: they get twice as much money, but they spend twice as much money. But they've also got larger expenditures - renting or buying a home, buying a car, paying medical bills, etc. The cost of emergency surgery isn't going to double just because the minimum wage goes up (even though much more of the cost is labor) - surgeons are paid way above the minimum wage already.

What this means is that people being paid a high minimum wage are equally able to live their ordinary lives, because they can afford the increased cost of goods made by other minimum-wage employees, but they are more able to make expenditures that improve their lives (e.g., more able to deal with medical issues before an emergency) - and more able to make purchases that stimulate the economy. Instead of buying N hamburgers a year and a car that costs Z which they use for five years, they can now buy the same N hamburgers a year and a car that costs 1.2Z.

As long as government policy continues to enable both wages and prices remaining low, the economy is stuck.

(It does mean that the relative purchasing power of rich consumers goes down - they can buy the same number of vacation homes, but they can't buy as many McDonald's hamburgers - but that hardly seems like a concern. You can only eat so many hamburgers, and they're probably not buying very many hamburgers from McDonald's anyway.)


That seems fine no?


Aren’t you essentially saying that because the government spends lots of money on welfare/social support, it gets to control private business too?

If the state chooses to offer benefits, great! But the state shouldn’t blame businesses having to offer those benefits.

If the state wants people to have more money than the market provides, the state can simply increase benefits to that level.

Wage subsidies are supported by both conservative and liberal economists.


I think you are right in a way, but all we are doing is setting a minimum market rate for employees so that they can't be exploited. If a business can't afford that employee at that rate then it can't afford to do business without being exploitive and so it needs to reconfigure itself until it can.

I am not saying it's a net good or bad for the economy by the way, I don't think I am qualified for that. But I can tell be pretty confident that exploitive wages are bad for employees and good for employers, a balance for which we have a lever to adjust.


Whether or not someone’s being exploited isn’t determined by a wage.

For example, my wife is an administrative assistant for an NGO. She makes about average for an administrative assistant, but that makes her one of the highest paid employees.

Some of the employees are true believers and donate much of their salary back. Others are broke, and can hardly make it by.

Most are women with husbands who make the real money.

I know for a fact that the “higher ups” get paid less than the lower end. But many are retired lawyers and bankers. They also have seats on the board.

Some of the people who work there do so at great personal cost. The kids just out of college can barely eat.

Is this exploitive?

If my wife was the primary breadwinner, it sure as heck would be.

But everyone there could easily make much, much more in a heartbeat.


I think you're trying to suggest that an NGO couldn't run without a low minimum wage because it couldn't afford it, but there are ways to structure an organization that society is willing to volunteer labour for without jacking up the rest of the community. I say that as someone with a partner in a very similar position to yours.

No one is working at McDonalds out of the kindness of their heart. For my partner's work, they simply have a delineation between volunteer participation and worked hours, and it makes it very clear which hours you're paid for and which you aren't. They have "working bees" and "volunteer weekends" and so on, and people are happy to sign up for them.

Similarly, theatres (as in performance art not cinema) are often for-profit but still quite heavily volunteer reliant, because people want to support the arts and the theatres wouldn't run without them they can make it work. If a petrol station tried to do that, no one would sign up for the volunteer program, and "the market" has happily chosen which businesses can run with volunteered labour or not.


Ok, maybe a better example is being a secret agent for the CIA.

The CIA is able to recruit people for the Clandestine Service who could easily make millions at a bank. They get paid about 90k a year, for more work.

Why? Because they get to be freaking secret agents!

Are they being exploited? I know some folks who used to work for intelligence agencies. They seem to think so. The “secret agent” factor is bullshit. They have to live in high cost of living areas. And 99% of the time the job sucks.

Mostly just office work.

I certainly see something exploitive about that … offering one thing and not giving it.

The military is famous for that shit.

I’m sure there are other industries that do the same. Hollywood comes to mind. So does programming computer games. Etc.


To be clear was talking about exploitation regarding the minimum wage, I agree with you that there are many other ways exploit people.

A great example in your favour is pilots working for minimum wage because people just want to be pilots so bad. But these are really exceptions, the vast majority of people just want to eat and make rent with any job and they're not able to. Companies know they've got no choice but to work at non-livable wages, so that's the most prominent exploitation around minimum wage that we're trying to solve by raising it. Make it so people in poverty don't have to trade there lives in exchange for money that can't even sustain their position in poverty.


I'm not an economist, but isn't it bad for overall economic health to have huge swaths of your country's workforce tied up in failing firms indirectly propped up by the government?


Yes, but why do you think the government is supporting them and why do you think they’re failing?

My own experience is that failing firms pay more. They can’t offer security, and tend to lay off as many people as possible. The layoffs leave the firm top-heavy. In order to recruit new staff they have to pay more. Who wants to be VP of a failing company?

Regarding propping them up, I don’t see how making up the difference between a given wage and the amount necessary to live a decent life is propping up the company.

I’m very much in favor of minimum wage laws. But I don’t see them as government propping up failing companies.


I would say the government gets to control private businesses because it is the government. Businesses exist at governments discretion. Everything about how business is done is within scope of the government to regulate

They should enforce things like minimum wage because it's doing welfare and social support, but they have the power regardless.


This is exactly what government does in Belgium for specific types of jobs, like home cleaning aids for example.

Before the (significant) wage subsidy, they used to almost always be paid under the table. Now they earn a proper salary with all extra security that entails.


>but they get to work as opposed to staying at home and degenerate (mentally and physically)

If I don't have a job I go workout during the day, learn new skills, and read. Without kids that is, with kids I take care of the kids.


If have a hard time believing people are going to just sit at home staring at the wall because they loose their jobs.

If you want to argue that the minimum wage increases unemployment, and that the unemployment tends to be long term, go ahead and argue.

But don’t ask us to take it as an article of faith.


Same argument is used by Americans to justify sweatshops in SE Asia. TBF, not much you can do about working conditions in other countries, so you might as well rationalize it and wear cheap clothes. It says a lot about an individual who chooses the same strategy for their own countrymen too.


> Do you think the people they employ are better off not working at all?

Maybe you didn't read the article. but in summary, because the businesses are not paying enough, the businesses have less employees.

Its not that the employees wont have jobs, but they will just have a higher paying job somewhere else.


Most likely they wouldn't stay at home but either would start their own small business (which would be more competitive now since people with employees have to pay them a livable wage) or, if they can be supported by their partner and not work, do something that's important for society but doesn't pay well (e.g. caring for your family, or for people in your community, writing, creating art).

I'd call it a wrong conclusion to assume that the thing that people do to unwind after a busy workday or what people do who are unable to work due to depression is the same as what people undertake when they can sustain themselves without spending the majority of their waking hours commuting and working.


There's nothing arbitrary about paying a living wage. I could rephrase your argument as "Shouldn't businesses be able to pay poverty wages, and taxpayers can make up the difference?" If you can't stay in business without the government supporting your workers, then your business doesn't work. These businesses are effectively being subsidized by the government without giving the government a stake.

Also, I feel like this isn't even worth addressing, but no, work is not a government-sponsored day care for workers.


I think negative taxes are a great solution. Provide people with enough for the basics and incentivize them to entering the labour pool. I think even ($1/hr + training + negative taxes) is much better than people being unemployed and 100% reliant on the government.


It's also not logical to kill businesses by arbitrarily raising rent, but that happens anyway, and wouldn't you know, that squeezes the businesses on their ability to pay higher wages.


Unprofitable business paying below mininum wage distorts the market. They are in direct competition with businesses who do pay minimum wage and have advantage.

Otherwise said, these not ending is bad thing.

And none of that is for benefit of worker.


>but they get to work as opposed to staying at home and degenerate (mentally and physically)

That's a disgusting thing to say.


This is why its hard to start a restaurant. You need to be rich enough to own the land.


Yup, if you don't then your landlord gets all the value. You get a 10 year lease, build a successful restaurant (if you make it past the dreaded first year) and then when your lease expires your successful restaurant has helped increase the land value in the area and the margin you worked up to evaporates when you sign a new 10-year lease that is more expensive because the value of the land has gone up (partly due to your success).


My old neighborhood was full of people deciding on their third 10 year or early retirement. Had a few old guard businesses close before people noticed the pattern. Not that the residents could do much about the cause...

I imagine them thinking, “I’m 56 and this contract basically says I’ll have to work harder than I have in decades just to keep out of bankruptcy.” And just checking their finances and then the want ads for management positions.


In this case, why bothering operating a restaurant at all (it's a terribly terribly complex business to manage)? Just buy real estate and sit on it?

I always wondered how restaurants even work - how can owners be motivated to keep themselves in this endless, poorly paid grind. In my opinion, when this is not about large chains that are effectively self-reproducing machines that don't depend on any people's motivation, it's mostly either hobbies (someone runs it to keep himself busy and feel beneficial to the society during retirement, for example), or just failures (someone foolishly believes there's a massive amount amount of money to make, gets burned, and vacates the space to leave it to the next one). Yours truly have been that sort of person in my younger years (when it was a lot easier, as industry professionals say!).

And yes, i can easily understand how can one become a dick being a restaurant owner. You deal with people who are paid poverty wages (there is no choice here), who can't be motivated with anything but threat of losing their jobs, have no work ethic (or they'd be doing something better), and in general can't be trusted in anything at all. You become paranoid and you quickly learn to disrespect people. I can feel that guy, don't judge him so heavily.

This is a hellish business to do and anyone who envies them is a fool.


In some social groups you'll get massive social status signaling about being an "entrepreneur". Admittedly it mostly comes from people who profit off the pipeline, mortgage refi officers, commercial landlords, accountants, bankruptcy attorneys, etc.

As a cash business I often wonder how much laundering goes on. Not just hard core drug money, but any time cash is handled I suspect there's some rounding down going on.


That’s an excellent question, and touches many other avenues of life too. Why bother with producing anything, when asset appreciation provides bigger gains with no effort needed


Because your activity contributes to the appreciation. A good restaurant attracts a lot of people, which in turn attracts other businesses (think of bookstores next to popular cafés). This increases the worth of the property.


That's true, while that's not what i meant to say. I just pointed out that business doesn't work on appreciation alone, and restaurants nearly always rent their places anyway, and that it is extremely extremely difficult to make ends meet operating a restaurant while avoiding getting to madhouse.


McDonalds is a franchise, isn’t it? Corporate doesn’t own the stores.


There was a good Polymatter video about this very topic: https://youtu.be/kJVj3vp-lho

McDonald’s model is pretty different from standard franchises.


Some stores are corporate owned and operated.

Most are franchise owned and operated, but corporate owns the real-estate the store is sitting on.


Corporate owns 15% of ~36000 total stores, which it leases to franchisees.


"I'm just saying that both sides of the equation need to be examined, i.e. the plight of the worker AND the plight of the business."

It was examined. In 1944 in the Beverage Report "Full Employment in a Free Society". It concluded that people not earning sufficient to eat is an order of magnitude more harm than businesses not earning a profit and that the labour market should always be a sellers market, not a buyers market.

"But watch out for technology and automation...that is the part of the equation that has been "solving" the labor problem"

That's sort of the point. However micro-solving the labour problem with automation to drive forward productivity leaves you with a big problem - given wages are the primary source of demand, who are you going to sell the output of the robots to?

The underlying assumption here is always that the private sector provides the jobs. Look at the vacancies vs the number of people without work that want it. Then you'll realise that the private sector is systemically incapable of supplying sufficient jobs to go around. It always stops short. Which means that jobs have to be topped up by the public sector to ensure there are enough to go around.

If there are always 19 bones and 20 dogs, it doesn't matter how good the dogs are at bone hunting. Blaming the dogs for a bone shortage is desperately unfair.


> who are you going to sell the output of the robots to?

to other people employing, manufacturing or investing in the robots

Gains in a society goes to those that are doing something useful to contribute to increase productivity, such as providing the labor that increases the productivity or providing the capital to make that increased productivity a reality. While they won't get the gains, bystanders to this process benefit from cheaper costs due to increased productivity.


Is there enough people doing that to justify the scale of robot based manufacturing?

I've only seen costs for stuff go up with inflation, and most people don't have wages that track inflation. The owners benefit from the cheaper costs, but nobody else does


define "stuff"

When adjusting for inflation, most things are getting cheaper. It is only a few goods that are getting much more expensive after you adjust for inflation and almost all of those things have one thing in common: government meddling and regulation.


> It was examined. In 1944 in the Beverage Report "Full Employment in a Free Society". It concluded that people not earning sufficient to eat is an order of magnitude more harm than businesses not earning a profit and that the labour market should always be a sellers market, not a buyers market

This report is completely irrelevant in today’s America, where everyone has more than enough to eat, especially if they are working.


> today’s America, where everyone has more than enough to eat

What are you talking about? Nearly 1 in 4 households experienced food insecurity during the pandemic.

https://www.npr.org/2020/09/27/912486921/food-insecurity-in-...


“Food insecurity” has nothing to do with not having enough food to eat. It’s a term designed to confuse.


"Food insecurity is the limited or uncertain availability of nutritionally adequate and safe foods, or limited or uncertain ability to acquire acceptable foods in socially acceptable ways."

"Food insecurity is a household-level economic and social condition of limited access to food, while hunger is an individual-level physiological condition that may result from food insecurity.

Information about the incidence of hunger is of considerable interest and potential value for policy and program design. But providing precise and useful information about hunger is hampered by the lack of a consistent meaning of the word. "Hunger" is understood variously by different people to refer to conditions across a broad range of severity, from rather mild food insecurity to prolonged clinical undernutrition."

https://www.ers.usda.gov/topics/food-nutrition-assistance/fo...


It sounds to me like you're just OK with children starving unless it benefits you to point it out.


Food insecurity is not the same thing as starvation. In fact, that's his whole point.


I don't think anyone is saying that these sorts of companies have lots of money.

These business have a model that relies on poverty wages changing the minimum wage will disrupt these businesses greatly and I don't see a problem with that.

You can't keep a broken thing going because of the businesses that will have to change their model.

But sorry I also see your point there needs to be help to business to change their business.


Exactly.

Maintaining laws which force working employees into poverty in order to support inadequate business models is not the solution.

Employees outnumber business owners - more people having spending power is vital for the economy.


>>which force working employees into poverty

I think you have a widely unorthodox defination of "force" as no one is forced to take any job at any wage.

Force in the equation would come from the government using the threat of government violence to force a wage on a business owner.

A person that voluntary accepts a job for X wage is not "forced" to do so.


Yeah but the job market is not a free market, because not getting a job is existential for those seeking the job, while the company can usually just survive when a position is not filled for a certain time.

This means to make this a free market many nations did the reasonable thing and introduced measures like minimum wages and unemployment benefits. This way when you loose your job the balance of power evens out a little and the job market works better for all involved (workers have a highee chance of finding a job they like, companies have a higher chance of getting people that like them, really shitty companies get an incentive to change).

In the US all shitty work places have no incentive at all to change, because everybody and their dog is struggling to make ends meet. That means no matter how slavishly they treat your people, there will always be another person desperate enough to throw themselves into the grinder. Result: No incentive to change for the company and people who feel like society ows them nothing.

I don't think that is recipe for a bright future, but who am I to judge.

So from a systemic perspective minimum wage is like a limit you can set for how desperate you allow people to get. And quite frankly. 15 USD is still less than if you had adjusted the original minimum wage for inflation, so come on.


> Yeah but the job market is not a free market, because not getting a job is existential for those seeking the job, while the company can usually just survive when a position is not filled for a certain time.

This is, to begin with, not true. It's common for small businesses to be operating at the margin. If you don't have someone making the sandwiches then you don't have revenue and you still have rent and utilities. That math puts you out of business in a hurry and then the owner (whose wages came out of the revenue they now don't have) is facing the same circumstances as the employee.

But on top of that, even if you existentially need a job, that doesn't mean you need that job. You can pick the one that pays the most.

Where this falls down is when all of your alternatives are terrible. But if all of your alternatives are terrible, prohibiting you from choosing the one that was the least terrible (e.g. because it's right across the street but pays $2/hour less instead of being a two hour commute for $2/hour more) is not actually helping you.

To do that you need something like lower housing costs (so the wage you can earn is enough to live), or some kind of free community college so you can learn a trade that pays better, or a UBI. Not a minimum wage that could take away the job you currently existentially need.


> You can pick the one that pays the most.

Oh sweet summer child. When you are in debt and struggle to survive on a day to day basis, time is your enemy You cannot afford not to take a job. And if you are lucky enough to be able afford it today, you might not tomorrow.

Another thing: many people need more than one job as it is now. Guess what: if you pay people a decent living wage more people can actually get jobs, because less people have to do two or more. If your business is so inefficient it can't support minimum wage labor, it was doomed to fail before. Again: even McDonalds manages to pay minimum wages in Europe and their prices are roughly comparable. You are being gaslighted by the people profiting from that modern form of slavery.

you are right in recognizing that living costs are an issue as well, and they are an issue in many big cities. The known solution for this issue is publically owned housing which you shouldn't put into their own districts (thus creating ghettos) but mix them in throughout the city (Vienna's "Gemeindebau" is a good example for this, Vienna repeatedly got the title "City most worth living in" over the past decades). Don't only put poor people into these houses, make them decent and make them something people want to live in. Make them cheaper to rent than other flats (this way the rents in the surrounding areas cannot go up so fast). But most importantly: this must be done from the public side — nobody else in control has the incentive to act in ways that lower rents.

Aside from all this, what the US really needs to do is to look at all the other countries that are comparable to the area you are living in and wonder why they are doing so well without all the doomsday scenarios your politicians make tou believe (both socially and economically). Whenever I talk to US citizens about this they are either completely delusioned ("I live in an oligarchy") or they pretend their problems are so unique the rest of the industrialized world never had to deal with comparable things. "Who knows, maybe it cannot be solved at all", they say, while it was solved literally one country over since half a century ago.

That's like wondering whether man will ever be able to move faster than a horse, while your neighbouring country has airplaines they use on a daily basis.


>>and they are an issue in many big cities

Housing is an issue in big cities largely due to government policies that both limit inventory (building and zoning regulations) and limit profitability (rent control) that make is extremely undesirable to create new housing.

The solution to this is NOT government housing but less government regulations about building new housing


> The solution to this is NOT government housing but less government regulations about building new housing

Where and when did this work? Have you any examples?


Not who you replied to, but I believe the current popular answer is to refer to Japan. Numerous articles have been written regarding how they managed their housing crisis by deregulating zoning and building permits. You'll have to read up on it yourself, it's beyond me to summarize as it's a complex topic and the model is not perfectly exportable. Partially for "real" reasons, such as Japan has so many earthquakes that many houses are not intended to last for 100+ years which affects the home economy. Partially for social reasons, e.g. wealthier nations view homes as investments (more-so than as a place to live, like we view an apartment), and people push tons of local/state/federal rules to ensure their investment always grows in value. The easiest way to make the value grow is to ensure there are no more homes e.g. NIMBY

One article to get you started (nothing special about this one, it's just the first I saw from google): https://www.wsj.com/articles/what-housing-crisis-in-japan-ho...


I live in Japan and can tell you that those conditions lead to ugly, low standard buildings that seem to me to be among the very top complaints foreigners living here have about the place. The incentives are completely skewed here and seem just as likely to be corrupt as any other place. There's plenty of discussion about it on these boards, this one comes to mind https://news.ycombinator.com/item?id=26399071

As to the earthquakes/natural disasters bit for why they build relatively disposable homes - does that happen on the west coast of the US, for instance? I'm genuinely interested, if anyone knows.


> ugly, low standard buildings

ugly is subjective so I won't touch on that.

The low standard one is reasonable as that is what keeps costs low. The alternative is high standard and high cost. You can't really get high standards for low costs.

If the government dictates that all housing needs to be high standard, the collateral damage to that policy is that you can only build housing that prices people out of the market.


> You can't really get high standards for low costs.

I agree but here they're also expensive, which, in my view, is a symptom of the corruption and lack of a free market.

> ugly is subjective so I won't touch on that.

Again I agree, but if you're into industrial estates with lots of concrete and overhead wires galore, then Japan is the place for you. I'm sure someone likes it, maybe the brutalists who made the ugliest parts of my country (the UK) after the war.


Tokyo. Prices have largely remained flat for the same unit of housing for decades because there aren't nearly as many government restrictions on construction of new housing.


> Oh sweet summer child.

Please try to keep the snark out. If they were snarky to you then I say go for it but I didn't notice they were snarky to you and, regardless of whether you agree with them, their contribution to this discussion is worthwhile.

Let's try and keep HN a cut above.


> many people need more than one job as it is now

Needing only one job is a historical anomaly as a result of an industrial society. Historically, people would have to perform a variety of tasks to provide for oneself.

Furthermore, more than one job de-risks someone's situation just like a consultant with many clients can handle the loss of a single client and not see their income fall to zero.

It's the total hours of paid labor over N jobs that you should look at instead. If you do 60 hours a week at one job or three jobs for 20 hours each, you're doing the same amount of labor with less risk.

The only qualitative difference between one 60 hour job and three 20 hour jobs is the benefits received from working 40+ hours for a single employer, but this isn't an issue with how many jobs you work. It's an issue with an artificial asymptotic condition created by an act of legislation by government.

Every time legislation creates artificial asymptotic conditions, you're going to get actors that optimize around that artificial boundary condition. If you want to avoid the circumstance, you need legislative solutions that are continuous in nature instead of asymptotic.


I'll just point out: if you need 60 hours of income to survive you actually increase risk by having it split between several jobs. That is because having a portion of enough rent to not be evicted is equivalent to having not enough rent to not be evicted. You only need one of your jobs to collapse for you to only have a portion of your rent therefore the more jobs you have the more likely you are to have one fail and to be in that position.

In other words diversifying your income only decreases risk when you don't need all of it, you'd be hard pressed to argue that that group includes those earning minimum wage.


> This is, to begin with, not true.

I will never stop being amazed at how Americans argue that something decent is wrong, or untrue, or even impossible... when Europe exists.


It does get old eventually.


> I will never stop being amazed at how Americans argue that something decent is wrong, or untrue, or even impossible... when Europe exists.

In Europe there are zero businesses operating at the margin that would go under if unable to staff their operation? That was the thing you are responding to.


The thing I was responding to was, "we can't raise the minimum wage because if we do businesses will go under"

Well, Europe did raise minimum wages. Undoubtedly, some businesses did go under when that happened... So what?

Did business cease to exist in Europe?


Only 30 percent of the USA travels abroad.


I will never stop being amazed that European's think Europe is a Utopia that the rest of the world should look to as a model.

I do not want the US to be Europe, that is nothing short of a dystopia for me a person that wants Individualism, and individual freedom. rejecting Authoritarianism and Collectivism

If people in the US like the EU model soo much then i encourage them to expatriate to that location. Stop trying to make the US into the EU


> I will never stop being amazed that European's think Europe is a Utopia

I never said Europe was Utopia. All I said was, decent living.

> that is nothing short of a dystopia for me a person that wants Individualism, and individual freedom. rejecting Authoritarianism and Collectivism

Ah yes. Says the person from a country where charities stop giving aid to poor African countries and redirect their aid to Americans.

> If people in the US like the EU model soo much then i encourage them to expatriate to that location.

Those who have the means to, do.


I've never known anyone here in the US (friend, coworker, family member, acquaintance etc - Internet forums don't count) who has moved to Europe permanently. I know that many do, obviously, I just don't one personally. At the same time, I personally know many Europeans living here and have seen many more coming over the years.

I can't find hard data, but probably we should not say that "those who have the means to, do". It's likely more of "a tiny percentage of those who have the means to, do".


> It's likely more of "a tiny percentage of those who have the means to, do".

Yes. However, the main reason I phrased it the way I did is that "if you don't like it, move to a different continent" is a very arrogant approach.

An American barely surviving on minimum wage is very unlikely to move to Europe.


> An American barely surviving on minimum wage is very unlikely to move to Europe.

And even if they did they would be far less likely to contribute meaningfully to the commons in Europe to support that social safety net. Therein lies the rub.

The only way to provide the productivity that funds the social safety net is when those providing the safety net far outnumber those consuming it. As this gets out of balance, those providing it start to resent those consuming it.

When it gets out of wack, you get situations like the DDR and North Korea, where the government needs to erect walls to prevent the productive people from escaping that shitty deal.

You can only achieve this balance in a high trust society where there is social pressure not to be on the consuming side for longer than is reasonable to get back on the producing side.

Guess what destroys that high trust condition? Bringing in outsiders faster than can be assimilated and/or eliminating the expectation of assimilation as the US is doing and Europe is now starting to do.

It's not that you can't bring in outsiders and maintain a high trust society. You can. But that takes work and it requires an acknowledgement that a high trust society is something that we should be trying to preserve while we do things that can hurt the current state of trust in a country.

From a trust perspective, the US is at a low probably not seen since either the Civil War or the Great Depression. We should solve the trust issue if we are to have any hope of building the social safety net features that rely on high social trust as a foundation.


Yes, the obviousness of the limited capacity of multicultural integration should have been easily deducible to anyone in a position of real power back in the 70s and 80s when the decison was made. Yet, for several decades major countries, having decided to go down the multicultural road, also decided against a sustainable rate of integration over centuries, such as a constant 0.2% annual immigration influx until 2200 CE. The key decision makers instead favoured a destructive course of short term profits within their lifespan, and immense long term costs, that has led to the current outcomes with all the eventual consequences.


Interestingly, America is one of the best places to be if you are wealthy (part of the motivation on this thread). So it's also unlikely for a wealthy American to move.

Believe it or not, a lot people, in poverty or otherwise, really like the unique things in this country and most would rather have it this way than to move to Europe (which has its own share of major problems despite being a cool place overall).


This article is still relevant: https://www.theguardian.com/commentisfree/2012/sep/19/europe...

Also, poor people rarely know the reality of other countries. I have friends in the States who firmly believe that Europe is a hellhole even though they are literally a medical emergency away from a bankruptcy.


Maybe that is because they value something more than Free Healthcare. Maybe they are not willing to trade this liberty for the safety of government services.....


What is an example liberty that pertains in the US and not in Europe?


Hmm Actual Freedom of Speech (we are not putting people in jail for jokes on YouTube as an example), The right to Self Defense (aka 2nd Amendment), the relationship between government and the people (i.e we believe rights transcend government and are not granted by same), I could go on and on


Ah yes. The liberty to die. The liberty to go with untreated chronic diseases. The liberty of not being able to change shitty jobs.


Housing cost is directly link to wages, when wages increase then the rent goes up, sometimes more than wages. This is because housing is in very limited supply (some artificial due to zoning and regulations) and extra income will be sucked out as rent.


>>15 USD is still less than if you had adjusted the original minimum wage for inflation, so come on.

This is a myth that is often repeated, but I have yet to see it proven.

The Original Federal Min Wage was passed in 1938 and was $0.38 per hour, Adjusted to 2021 that would be $7.14

In 1981 it was raised to $3.35, in 2021 dollars that would be $9.76

In 2009 it was raise to where it is today, $7.25 ($0.66 lower than a pure inflation increase should have been) and is 9.26 in 2021 dollars

So if you want to do a pure inflation adjusted min wage it would be no more than $10 not $15

I can find at no point in the history of Federal minimum wage would have wage inflation adjusted be more than $15/hr today. I can debate the merits of minimum wage, the ethics, etc, but we have to be having a debate with actual facts not political talking points.


What is inflation?

If computer processing power becomes cheaper an cheaper, but real estate housing value double in a decade, we have 2% inflation?


That is moving the goal posts, the comment I was responding to was "15 USD is still less than if you had adjusted the original minimum wage for inflation, so come on. "

Given the context this would be the standard model upon which dollars are adjusted for inflation over time, tools like usinflationcalculator.com make this easy to factor in what that would be

If you want to shift the debate to "what is inflation" that is fine, but that is not the debate I am having in this comment thread


> because not getting a job is existential for those seeking the job

Before jobs offered by others existed, not working in some form would have been existential for those people. This is the de facto state of existence. You'd have to at least do some form of hunter/gathering or subsistence farming.

This increasingly common idea that individuals no longer are obligated to provide for themselves is wild. The only way around it is to obligate others to provide for you instead of providing for yourself. The last time this was a common idea in the United States was in the in the antebellum South.


People are required to eat. Charging for food and only being able to work at X wage is force through collusion.

It wouldn't be by force if people did not need to pay for the basic necessities


You don't think needing to survive forces or keeping your human dignity forces you to find a job?

That's the way I see it.


That job might not exist at all if the government mandates your wage to be higher than the value of your labor.


The government has much better options than mandating a living wage.

It can simply pay you the wage as an indirect subsidy to stimulate production.

It can employ you in the construction of infrastructure. The infrastructure of the US is dilapidated to the point of national disgrace.

It should still mandate living wages, the same way it should not allow employers to lash their employees or own them as chattel, or any number of other practices which are both immoral, and cannot find any temporary justification due to exigent circumstances (eg. literal struggle for national survival...)


I think something is missing from this equation, which is the balancing act. The value of labor is dynamic, it depends what people are willing to pay, and what is the price of other costs.

How I see it, labor cost have been cut, while rent has gone up and prices have gone down.

If you increased minimum wage, it would put pressure on prices to go up and rent to go down, both would increase the value of the labor itself.

I think this whole dynamic is way way harder to model and predict how it'll play out then everyone makes it out to be. None of people's simple projection account for it all. Even economists with fancy models backed by simulations, math, and all that can't figure out the real outcome and often disagree with one another on what would happen.

It's not as easy as saying, half the restaurants are going to shut down, and leave empty all those commercial space. What happens next? Maybe some customers start to be willing to pay even more to get back some of the great restaurants they lost, or their proximity to them. Maybe landlords have to lower their rent for something else to fill in the vacancy, etc. Maybe everyone is happy with only half of the restaurants remaining, and each of those restaurant is making twice as much now allowing them to hire more staff and pay even higher. There's a lot of balancing act that could happen.


Certainly, it's a balancing act.

But equally is it ok for people to work hard and long hours and only barely make Or not quite make ends meet?

Sorry I should note that I am not saying you are advocating for the above(could be misread).


I guess the question is what do you do when you find people who present with that situation: that they’re perfectly capable to hold down a job but only to create $10/hr of economic value by their labor.

If you set the minimum wage at $15/hr and do nothing else, you have made that person worse off than today. Everyone around them now has more money, so everything is becoming more expensive. They now can’t find or keep a job, because any employer who employs them is losing at least $200/week, $10K/year by employing them.

I don’t know what the optimal solution is, but it’s not clear to me that the above is it.


Generally the math works the other way. I worked in a Wendy's for a while; I made minimum wage and most of the people made a little bit more. We cleared $30,000 a month profit for the owner ($100K revenue, $70K for expenses including all of our wages). If a company is so inept they can't generate a bit of value from people, then to be frank, as a society we can afford to be without them. Look at the minimum wage as a filter to remove companies that are so unsuccessful, that they disappear before dragging down the citizens.


Pretty amazing! Way way better than any of my friends who have owned restaurants. Did that $30,000 profit include paying off the mortgage, various forms of insurance, legal fees, accounting fees, taxes, and so on?


30% profit for a fast food restaurant is not credible. It's too competitive. I worked for McDonalds (a long time ago, but...) the best store in the market made a little over 10% profit. Others made less, or even lost money at certain times of the year.


That’s an amazing level of transparency to share all the company financials with the minimum wage workers.


So if someone else is willing to work for those wages (they don’t really need the income or have minimal expenses) you’d tell them “tough, it’s illegal to work for that wage now”?


That question never happens in places with a minimum wage. What you can do is support your employer by showing up early and/or helping out a few extra hours after the shift. Nothing in writing or by force.


As an employer you’d be crazy to do that. Nothing would stop that employee from turning around and demanding back wages.


I've really had a lot of jobs. I would just do anything for a while just to see what it is like. In some places it is as if Hitler won the war, in others the boss or manager becomes a good friend. You don't demand back wages from a friend.


Since that is how the relatively uncontroversial minimum wage law (which has been around since 1938) works, yes, society has generally decided that we do want to tell people, "it is illegal to work for some very low wage." And, while not the parent poster, I agree that it is a useful policy.


That’s a very US centric point of view and appeal to authority. Just because it’s been the law for almost 100 years doesn’t mean it’s the ideal approach.

And several developed countries have no floor other that agreed by through collective bargaining.

https://www.investopedia.com/articles/investing/080515/5-dev...


The problem here is, most peoples' wages are defined by their leverage, not their value. For people in those situations, the benefit of minimum wage is that most people below that wage immediately get leverage in the form of legal requirement to pay them (or anyone else) min wage.

This isn't a matter of improving the situation for everyone, it's a matter of improving the situation for the majority of min-wage workers.

If someone genuinely can't provide $10/hr of value, then either 1) they need to upskill (and there are social services for that, although perhaps not in the US idk) or 2) they're like one of those literal retards who are becoming literally unemployable, and the solution is either to subsidize their employer (which is okay in this instance because you're not subsidizing a race to the bottom like you are with subsidizing normal e.g. McDonalds wages) or put them on a disability pension.

But realistically, most people are capable of upskillinng and that's what they should be doing if they're not valuable enough to an employer.


Equally the status quo is not tenable and clearly not the solution.

There are many people coming up with solutions but clearly 'free market' adjustments have failed an increasing number of workers.

But I will disagree with your economic value question, I think service workers are undervalued greatly.

There is a giant disconnect between wage and economic value, the market is terrible at connecting the two.


More specifically, the value of your labour minus the profit that the capitalist wants to make off your labour


I think we as a society have put in place lots of social programs, to the tune of billions and billions of dollars a year to ensure "survival" is not at play here.

Further at the end of the day wages are not the problem, cost of living is, economic value of labor is. Waving a magic wand and proclaiming a new min wage does not resolve those root issue, it may in some limited circumstances help a few people for a limited amount of time, but you need to resolve the root issue which mandated minimum wages increases is not going to do and often harms the very people you are looking to "help"


Literally everyone who is taking jobs paying less than a living wage is forced to - by the lack of better options.

You know this and are making a bad faith argument.

What is your goal?


No one is “forced” to pay rent or food or for education or healthcare. Yes, you are correct.


Please, define what is a poverty wage, it is important. How much stuff one should afford to avoid being called poor.

What is the change of the model in case of the restaurant? I can see only one, automate the jobs away to reduce the costs, namely replace humans with robots.

But, if we consider these crappy jobs, what about people that are not qualified/able to do any more advanced jobs? People have vastly different cognitive abilities, it is not like we can teach everyone to code. It will not work.


> Please, define what is a poverty wage, it is important.

The ability to afford adequate housing, food, and clothing. I'm not saying we should mandate people can afford a 1500 sq. ft. home, ribeye steaks every evening, and Ralph Lauren Polo threads, but how about at least a one bedroom, one bathroom apartment; nutritious, nourishing food; Walmart clothing at a minimum.

> What is the change of the model in case of the restaurant?

Removing the "tipping" system. Increase prices such that an employee can afford the above mentioned necessities.

> I can see only one, automate the jobs away to reduce the costs, namely replace humans with robots.

I think the industry will go here no matter what changes we do or do not make to policy, business models, etc.

> But, if we consider these crappy jobs, what about people that are not qualified/able to do any more advanced jobs? People have vastly different cognitive abilities, it is not like we can teach everyone to code. It will not work.

We either decide these people are expendable, or that they are human beings worthy of a baseline of a dignified life. I define a dignified life as the ability to have at least the minimums I described above.


Do workers who receive tips want it to go away? The friends I've known who worked jobs with tips seemed to think they would be paid less if tips were replaced with wage increases on the employer end; my understanding is that they made a significant amount of money in tips. Obviously this varies by individual, job, and establishment, though.

There some restaurants that tried to go no-tipping, but I think it didn't work out for them because they had a hard time finding/retaining staff.


everyone i know who has worked tipped and untipped service models preferred the untipped model for stability and the reduced interference of sadistic/irate/careless customers. in fact these people have been pretty instrumental in wider implementation as they have moved on to other work environments and advocated for that change. this is in a state that doesn’t count tips toward minimum wage.

the largest harm of the tipping model is in states that do count tips towards minimum wage. the wage paid by employer may be under $3/h and the employee mostly survives off tips. this means that tips are only subsidizing the employer, because an increase in tips is matched by a deduction in the wage paid by the employer, to a limit.

there are some rare instances, mostly luxury dining, where tips can far outpace typical restaurant wages. in this context the employer can afford to massively increase wages. there have been arguments made that these tips pay for the quality of service, but there is no reason this incentive and expectation can’t come from the employer directly, and it would remove the uncertainty of irresponsible customers failing to tip.

in all contexts, switching from tips to a real wage has many benefits to the employee when wages are adjusted properly, no detriments to the customer, and only harms businesses that are currently exploitative and doing harm.


If that were the case, then why did restaurants that switched to no-tipping models see the departure of much of their staff? [0] I would have expected servers to flock to those, but by the sound of it, tipping is reliable enough that servers can leave and go to a restaurant with tips and earn more money.

> “Andrew was very disappointed,” says an employee of Tarlow’s restaurant group, Marlow Collective, who asked to remain anonymous. “But when we went to non-tipping, we pretty much lost our entire staff that had been there for ten years. He wanted to make it work, but it just became really difficult.”

> ...

> But, it turned out, many front-of-house staffers were more concerned with making money than with maintaining the moral high ground. This February, Meyer admitted that he had lost 30 to 40 percent of his “legacy” staffers since 2015. (One Meyer employee told Grub last year that her wages dropped from $60,000 per year to $50,000 under the new policy.)

> ...

> Without widespread buy-in from other restaurants, it’s just too easy for front-of-house workers to leave to make more money elsewhere. “About 40 percent of our servers were like, ‘Hey, this is awesome, but I’m going to go to State Bird Provisions, where I can make 10 percent more,’” Vogler says. “And who doesn’t want to make 10 percent more? They’re not freedom fighters.”

To be sure, maybe they didn't do a good job implementing it. But the cases I've read about restaurants switching to no-tipping usually seem to run into problems with servers being able to earn more money with tips than without them.

I think perhaps part of the problem is that a uniform increase in prices will make people who would have tipped poorly decide not to go, and people who would have tipped generously now pay less. So before with the tipping model, the well-tippers were in effect subsidising the poor-tippers, but now the poor-tippers are gone so there is overall less revenue for the business and servers. But another issue is that they took some of the income earned from the higher prices and gave it to the kitchen staff, which would have been money that would have been available for the waitstaff.

[0]: https://www.grubstreet.com/2018/12/restaurant-tipping-return...


of course you'll see staff leave if you cut pay. that's a deliberate choice by management, and not a question about tipped or untipped work.

i doubt there is real effect on the orders that customers place, but nobody's publishing their books, so who can say. in a systemic change in which every restaurant transitions to an untipped system, there would be no concern about losing out to a restaurant that continues to lower prices by exploiting servers.


Is it a deliberate choice by management, or an economic reality? Perhaps they could have kept kitchen staff wages low and used the extra money to pay waitstaff more, but since it seems like other restaurants that adopted no-tipping eventually switched back to tips, it sounds like there just isn't the money to go around.

Sure, if every restaurant switched to no-tipping, then waitstaff couldn't simply switch to a restaurant that did tips. But I would suspect they would make less money overall.

Are restaurants without tipping losing out to a restaurant that is 'exploiting' servers if servers are choosing switch to that restaurant rather than stick with the restaurant with the 'non-exploitative' no-tipping model? I cannot see the logic in that. Are you saying servers who leave a no-tipping restaurant for a tipping restaurant are choosing to be exploited?


what? all that is required in the transition to fully-waged labor is to pay an equivalent wage to the former wage+tips. if management pays a lower wage, that is a choice, because management has full control over what they rate hourly and what they write on the check.

if the concern is that workers may be paid less, the solution is simply don't pay less.


It would be difficult to pay an equivalent wage if after transitioning to no-tipping the restaurant is making less money than it did before.


If you can demonstrate that happens, to the exclusion of other reasons, publish it. I haven't seen that effect or known anyone to see that effect during such a transition. What I have seen is a lot of bosses cutting wages and blaming everyone but themselves for turnover, and a lot of business owners with an ideological agenda making bad-faith arguments.

The money is already there, and the current situation is that customers are literally giving most of it without obligation. It makes sense to formalize the relationship, and properly allocate responsibilities to the business owner.

The entire debate is a deflection of responsibility for employee compensation.


There don't appear to be any direct studies on revenue, but the GrubStreet article mentions a study by Lynn (2018)[0] which looks at the impact of eliminating tipping on online reviews, which have an impact on revenue (but of course it's difficult to judge, since perhaps not all declines in Yelp scores are equal; maybe in that study declines/improvements in score had more to do with the quality of the food):

> This study examines the effects of such moves away from tipping on restaurant’s online customer ratings. The results indicate that (i) restaurants receive lower online customer ratings when they eliminate tipping, (ii) online customer ratings decline more when tipping is replaced with service-charges than when it is replaced with service-inclusive-pricing, and (iii) less expensive restaurants experience greater declines in online customer ratings when replacing tipping with either alternative than do more expensive restaurants.

> ...

> Given the already ubiquitous and increasing popularity of online reviews, and the influence that such e-word of mouth has been shown to have on consumers’ purchasing/patronage behaviors (see Kim, Li, and Brymer, 2016; Ong, 2012; Zhang, Ye, Law, and Li, 2010), our results also have important implications for restaurants’ bottom-line that warrant being underscored. For instance, in a longitudinal analysis (2003- 2009) of Yelp online reviews and revenue data for every restaurant in the city of Seattle Luca (2016) recently estimated that restaurateurs can expect a 9% increase in revenue for every one-star Yelp rating improvement. Thus, if the results of our study are shown to be reliable and Luca’s (2016) estimate generalizable then it follows that low and moderately priced restaurants that decide to replace voluntary tipping with either automatic service charges or service inclusive pricing can expect to experience a nontrivial loss in profits as a function of lower online satisfaction ratings.

The paper notes that raising prices whether through services charges or what will be a price increase for a significant percentage of the clientele:

> Additionally, tipping is a form of voluntary pricing and price discrimination that results in approximately 25 percent of customers tipping less than 15 percent of bill size and 65 percent of customers tipping less than 20 percent of bill size (Lynn, 2017a), so replacing tipping with service charges or service inclusive pricing will raise dining costs for a quarter to half of restaurant customers and this is likely to reduce the overall satisfaction of those customers.

One restaurant that had switched to no-tipping before abandoning had tip averages of 21%.[1] I don't know anybody who tips that much, but apparently they exist. But if you increase prices by 21% on all clientele, then the restaurant becomes more pricey compared to restaurants that do tipping. Someone who would have tipped 15% might just go to another restaurant and tip that much, whereas a particularly generous tipper who would have paid 25% to make the average about 20% between these two is now just paying that 21% price hike - that's an overall decline in revenue. And the restaurateur said his mistake was not raising prices high enough to cover both the waitstaff wages that they had been getting from tipping ($25-40/hr) and raises for the back-of-house staff; he says he should have raised them 40%! Perhaps he could have done so, but it seems likely he would have been doing less business and had to downsize.

But OK, let's assume that somehow restaurants earn the same amount of income as before with hiked prices and no tipping, and that extra income is paid to the staff. If any money goes to the back-of-house staff, that means that the waitstaff would be making less than they did before. Do you think it's reasonable for waiters to be making $25-40/h while the kitchen staff is making $13-20?[1] I don't particularly think it is, and if tipping culture eventually ends (which, make no mistake, I am no fan of tipping), we would see waitstaff being paid less because now they can't switch to a restaurant where they can make more than tips, but we might see kitchen staff make more. However, this would necessarily mean that waitstaff are making less money.

[0]: https://static.secure.website/wscfus/5261551/7004898/ijhm-ti... [1]: https://www.npr.org/sections/thesalt/2016/05/15/478096516/wh...


You're still talking about administrative decisions to compensate certain workers more or less. Again, if there is concern about workers being paid less, the solution is to not lower their compensation.

I have no problem with raising back-of-house wages, they are typically undercompensated compared to front-of-house, even though the work is comparable and all of it counts towards the dining experience. Raising kitchen wages does not necessitate lowering server wages, and suggesting it does only encourages division and confuses the situation. It is worth noting that tip pooling with kitchen staff is standard practice in many restaurants despite being flat out illegal until recently, so the situation you fear already exists, and could be remedied by moving away from a tipping system to explicit wages.

Again, it is worth formalizing the relationship and clearly allocating responsibilities.


> Again, if there is concern about workers being paid less, the solution is to not lower their compensation.

Then kitchen staff will continue to be paid poorly. Just understand that's the tradeoff.

> Raising kitchen wages does not necessitate lowering server wages

How?

> It is worth noting that tip pooling with kitchen staff is standard practice in many restaurants despite being flat out illegal until recently

It's still illegal in many states. Meyer, one of the restaurateurs who switched to no-tipping and back, is in New York, where it's illegal both to add a service charge and to collect part of the tips to share with kitchen staff. Switching to no-tipping allowed him to compensate the kitchen staff more fairly, at the expense of the departure of his entire waitstaff.


>Then kitchen staff will continue to be paid poorly. Just understand that's the tradeoff.

If it’s a tradeoff it’s only a tradeoff that management chooses to make.

>How?

How what? It’s a business operating within a market. They will do something.

None of this is a binary mechanistic outcome determined by a boolean of tipped or untipped service. The restaurant has a budget and they will spend money and set prices as they think best, and succeed or fail based on that. There is no law that dictates zero-sum competition between kitchen and server wages, and all else static! Clearly in a market in which tipping is not practiced, a business will behave differently than the current market, and employees will expect appropriate wages.

>meyer etc etc

this is still another case of an employer making administrative choices about how much to pay different workers, and workers reacting to those decisions. if the waitstaff were given an equivalent or better wage to their previous wage+tip compensation, they would have had no reason to depart. this was explicitly not the case: the servers left because the transition gave them a pay cut.

it makes no sense to blame tipping or not tipping for bad budgeting and failed wage negotiations. the issue is in the allocation, not the concept.

again, this is a case of employers deflecting responsibility for compensating their employees.


If you're making the same amount of money as you did before, and you're paying the kitchen staff more, how are you going to pay waitstaff more?


the economic calculus of a restaurant does not massively change based on a switch from tipped service to untipped service. there is still money coming in and food going out.

i am advocating that employers be held responsible for paying their employees. the current tipped service regime fails to attribute that responsibility to employers, and leaves employees vulnerable.

i have seen no-tip service implemented in a way that satisfied employees. i have seen also it done in a way that drove staff to quit, and in those cases the fault lay entirely with management trying to reduce compensation.

stop asking questions about a fantasy budget. i do not care. if tipped service was abolished tomorrow, employers would figure it out.


> i have seen no-tip service implemented in a way that satisfied employees.

Have you seen no-tip service implemented with waitstaff earning as much as they did before?

> if tipped service was abolished tomorrow, employers would figure it out.

Of course they would figure it out if tipped service were abolished. But I am confident the outcome of whatever they figured out would result in lower take-home pay for waitstaff, as waitstaff would no longer be able to earn more money by switching to an establishment that allowed tips.


>Have you seen no-tip service implemented with waitstaff earning as much as they did before?

Yes. This entire thread is just me telling you repeatedly for twenty-four hours that equivalent compensation is the only thing that works.


That was my experience as well. Tips can often outstrip your hourly wage on good nights.

If the choice was $10/hr + tips or $15/hr, I’d take the tips.


> how about at least a one bedroom, one bathroom apartment

to me, this part sticks out like a sore thumb. a 1BR where? I make well above the median wage for my area and I can't afford a 1BR anywhere near the place I work. literally no one would consider me to be poor. a 1BR, coming with a private kitchen and bathroom, is a luxury for a single adult. it's not at all an efficient use of housing space.

a more reasonable threshold would be a private bedroom with space for a desk.


> how about at least a one bedroom, one bathroom apartment; nutritious, nourishing food; Walmart clothing at a minimum.

It's interesting to see how standards have shifted over time. Not too long ago, it was considered sufficient if people could afford their own room in a boarding house. Those frequently had shared bathroom and dining facilities, and provided nutritious and nourishing meals. That was considered a worthy, dignified life by a great many.

Boarding houses went away in no small part because they were zoned out of existence. Often on the grounds that they were an immoral existence and it was the duty of the best of us (read: richest) to mandate a correct social order for the lower classes.

I find this interesting because it implies that we're going to continue to have this problem - a lack of dignity - no matter what we do. You can already see the ratchet turning. There are people who earnestly believe that food isn't nutritious and nourishing unless it's Organic (by some definition) and thus that universal access to Organic food is a moral requirement.


> The ability to afford adequate housing, food, and clothing. I'm not saying we should mandate people can afford a 1500 sq. ft. home, ribeye steaks every evening, and Ralph Lauren Polo threads, but how about at least a one bedroom, one bathroom apartment; nutritious, nourishing food; Walmart clothing at a minimum.

Now, what does adequate mean? I guess a place to sleep, a place to clean oneself, food and clothing seems like a reasonable bar for a wage above poverty. Are there many full time jobs in the US that do not allow that?

> Removing the "tipping" system. Increase prices such that an employee can afford the above mentioned necessities.

Removing tipping and increasing prices beyond the tipping, it reduces to just increasing prices. I guess not very smart people create these enterprises, if only they hiked prices… And seriously, they definitely increases them, it is just a necessity. But I would not call this as a change in the model.

> I think the industry will go here no matter what changes we do or do not make to policy, business models, etc.

We do not have to necessary speed it up. People are already having difficult with keeping up with the changes.

> We either decide these people are expendable, or that they are human beings worthy of a baseline of a dignified life. I define a dignified life as the ability to have at least the minimums I described above.

Are there really only two options? Is not that a bit simplistic? And what does that even mean, do you think we should provide everyone with the job that ensures they have the mentioned stuff. What if they have different needs. And what if they do not qualify for any job, should we provide them with the exact stuff that people who work 40h a week get, or the equivalent in money? How is that fair for those who do these boring jobs.


> Now, what does adequate mean? I guess a place to sleep, a place to clean oneself, food and clothing seems like a reasonable bar for a wage above poverty. Are there many full time jobs in the US that do not allow that?

I would say, a place where you don't have to share quarters with strangers, be exposed to violence, drugs, have your sleep interrupted, where the housing is stable enough that you don't need to leave work in the middle of the day to attend an emergency court petition to prevent your immediate eviction due to landlords non-payment of mortgage and interception of mailed eviction notifications, where you don't have to leave under cover of darkness with colleagues who know how to handle themselves as your bodyguards so that you can spend a month or two sleeping on a friends sofa while you try and wait for a room to open up in something resembling a half-way house for recently released prisoners.

Cos I mean, those were about the best conditions I could afford while working for a profitable multinational tech company while I was developing a key piece of the Internet infrastructure that everyone on this site uses daily (in a wealthy area of the UK).

I won't name the company, but it rhymes with "Clit Tricks"

> Are there really only two options? Is not that a bit simplistic? ... should we provide them with the exact stuff that people who work 40h a week get ... ?

Is _that_ not a bit simplistic? Is it really so difficult to imagine a world where working 40 hours a week is either a) dignified enough not to be totally demeaning and exploitative _and_ meaningful enough to carry some intrinsic reward, or b) pays noticeably more than the bare minimum required for an existence at least befitting the dignity of animals in a zoo, never mind human beings?


A lot of the issues you reasonably want to avoid seem like they could be solved more directly by other means. The argument seems to be, "America is a hell hole, so everyone needs enough money to escape it." There are poor countries where people dont live in fear of eviction and the slums arent full of violence and drugs. Maybe it's too difficult to change culture though, and we should just throw money at the problem.


The fact that it can be done in a poor country is all the more reason that it's a scandal that it is not being done in a rich country.

These poor countries don't have any special techniques or mystical cultural powers. For example, the fact that south Korea has adequate flood defences and the UK does not is not because Korean culture lends them a racial character uniquely cognizant of water management passed down from their ancestors over generations of rice cultivation or whatever... There is absolutely no reason the UK is unable to "throw money" at constructing flood defences (altering planning policy, etc.) if they were to so chose.

The idea is not to "escape the hellhole" but to transform it in to "not a hellhole", through the direct, rational application of readily available, and completely straight-forward policy mechanisms.

But maybe it's too difficult to use political policy as a tool to achieve desired outcomes and we should blame the victims, turning it in to a nebulous cultural or moral failing and then wait around for the culture to just spontaneously change itself, eh :)


Countries like Australia and France seem to have figured out the non-tipping thing. What makes us so special that it won’t work here?


American exceptionalism... for every single thing... <image>1000_eyeroll_smileys.gif</image>


> Are there many full time jobs in the US that do not allow that?

Very many.


>Now, what does adequate mean? I guess a place to sleep, a place to clean oneself, food and clothing seems like a reasonable bar for a wage above poverty. Are there many full time jobs in the US that do not allow that?

https://www.cnbc.com/2020/07/14/minimum-wage-workers-cannot-...


And as an aside: This is for a two bedroom - and it is important to afford a two bedroom. Single parents often need to keep a two bedroom even if their child or children only visit every other weekend. A one bedroom often isn't significantly cheaper, and a studio isn't always cheaper than a one bedroom.


read the entire first sentence


There are definitions and I believe another commenter in this thread has defined it very solidly about poverty.

There will always be service sector jobs, this is the argument luddites were having in 1815 (I don't want to get into this as it is distracting from my main point).

We should be ensuring that anyone putting in 40 hours a week should be able to support a family. The wealth is there to be able to create this society (not saying it's easy not saying there are not problems).


Support a family? How many kids should I be able to support on my unskilled 40 hours/week?

Look, I might be convinced that minimum wage is too low, though I'm much more inclined to leave that as a matter for the employee and employer to reach agreement on.

But if you have no marketable skills and the only work you can get is entry-level minimum wage, you have no business starting a family as the sole income-earner. None.


That’s a rather eugenic standpoint. I think the argument is actual children are part of those family’s, it’s up to society how to deal with it. Currently we subsidize business and families, but perhaps we could remove the business subsidy.


What does it mean to support a family? Is getting them sheltered, clothed and well fed good enough? I think it is way easier to achieve today than in almost any other time in a human history, even for the low earners.

Restaurants are a part of the service sector. A service job does not imply that it is attractive. And they differ in requirements. The well paid ones get more and more complicated and hence, proportionally to the whole population, less and less people will be able to qualify for them.


Wow---you need to look around.

Finding shelter is exponential Harder now than any time in my memory.

We have a homelessness problem that it unpresidented. I would bet more people are now than anytime in history. (Pioneers could camp when they were tired. Cavemen weren't ticketed for sleeping under a ledge.)

Hell--30 years ago certain states were still offering homesteads. There's not an inch of land in the USA that live for free. (BLM land requires you to move every two weeks. Only some BLM land us open to camping.)

Try taking a nap in your closest park, or open field. You will get poked by a angry cop. You will understand loitering/trespass laws innately.

People, especially in service jobs, are living on top of each other. Why was the Corona virus so prevelant in the hispanic communities?

As to your previous statement, "We all can't be Coders." I have personally know three older Programmers. Two died because they aged out of the industry, and became homeless. The other is currently being harassed in Richardson Bay by Sausalito cops, and the coast guard, over a dispute of the seaworthiness of his sailboat.

One was Jim Fox. A huge contributor to Word Star. He ended up in San Rafael wearing a fuzzy Penguin outfit begging. He died a few years ago.

You might be one of those Service applicants in a decade?

(I'm not going to debate this guy. My biggest worry post Covid is the huge increase in homelessness we are going to see. The government needs to open up any excess federal, state, and local to to free camping. We need to put up tent cities. I feel it's going to get very ugly.)


At least in the US, that's just not true. Rent and healthcare costs (which together are the majority costs for low income people) have risen way faster than inflation since the 1970s.


What does it mean to ask questions in bad faith?


To ask those questions of which everyone knows the answers and of which raising the subject is 'impolite' :)


> I can see only one, automate the jobs away to reduce the costs, namely replace humans with robots.

This is generally not possible at twice the cost. The robots generally suck and break down a lot. Now you've replaced a bunch of low-skilled, interchangeable staff who work like dogs with a fleet of mechanics and an engineering department.

Half of the McDonald's automated kiosks I see are broken - and it's usually the store's entire system down, for weeks or months on end. I went to Home Depot today to grab some WD-40, and when I went to do the self-checkout, each of the four stations had a clerk helping the customer "self" checkout. To circle back to McDonald's - it's always been a joke how difficult some fast food clerks find their POS systems - where does this fantasy come from that customers are going to be better at it?

When it is possible to automate a job away, it is desirable. It's good that raising labor costs drives technology development. The better technology we have, the more comfortable we can all be, and the less we have to work as a species.


> This is generally not possible at twice the cost. We get better at automation constantly. Thinking that just because today our technology sucks it will stay this way, is not reasonable in my opinion.

> When it is possible to automate a job away, it is desirable. Yes, it reduces the cost (of the workforce). However, this change comes with a nontrivial social cost and a problem, what to do with the people that are not able to do more advanced stuff.


> define what is a poverty wage, it is important.

If you work full time as an adult and are Medicaid eligible, you’re being paid poverty wages.

> What is the change of the model in case of the restaurant?

Raise the prices.

It’s already happened anyway, the market has plenty of elasticity. Restauranteurs always whine about how impossible it is to raise prices, yet they seem to manage to do so just fine.


That’s a really excellent idea. On the off chance that you may be wrong in a few cases, what happens if you go out of business after raising your prices enough to get wages high enough to be where you think they should be?


That’s why the government has minimum wages, which help the market deal with that.

Fast service restaurants have already adapted. Five Guys or Chipotle cost more for a better product. McDonalds has to remind you on the wrapper that their burger contains beef.


There is a working restaurant a few blocks away.


And they're fully staffed. What do all the employees of the shuttered restaurant do?


60% of restaurants fail in the first year. The employees get unemployment (they aren’t gig workers) and find another job.


This is the system we are using. I don't have to like it. Scaling is done something like: If there is room for 4 shoe stores and there are 7 its going to be difficult for all of them until 2 close.


I don't see it. McDonalds pays minimum wages in most european nations, yet their menu isnt that much more expensive than in the US.

Maybe they have a slimmer margin over here, but they are still profitable. That implies that the model is (in principle) just alright, but there are financial flows that will have to change in the US. Of course you don't like to pay more for the labor you use to generate profit — ideally you wouldn't have to pay anyone at all!

If you can't run you business with minimum wage labor, maybe tou are not good at doing business and should change careers instead? Because many businesses in many nations have not the slightest issue doing just that.


Their menu may not appear much cheaper in the US, but McDonalds is much more aggressive with price discrimination here. You won't find the same promotions, value menu, and coupons in Europe.


There is generally not a big coupon culture in Europe. Most people don't bother wasting their time. People with a money problem usually collect bottles for recycling purposes.


What are you talking about?


McDonald's here pulled way back too though (last I checked before trying to eat healthier and deleting the app). Probably not the worst thing in the world to have fast food be a little more expensive.


Well, without knowing how the Corp is setup, that’s a bad example as this could easily exist: an international company can very easily be paying for high wages in one nation (ie loss leading) by low wages in another. Or staying profitable and with open doors. And so on.

Unless you’ve done an FSA class and you can explain me your thinking more, it’s worth appreciating there are a ton of levers that impact Corp finance. Same way you have performance trade offs for one algo vs the other.


It makes zero sense for McDonalds (or Starbucks or anyone else) to operate a money loosing restaurant.

Furthermore, 82% of McDonald restaurants are franchises i.e. not owned by McDonald. https://www.fool.com/investing/general/2016/04/03/what-perce...


The franchise part is interesting, although McD’s owning them or not doesn’t matter as the cash flow is what’s relevant. In this case I wonder what the terms are for franchise owners in EU vs USA and if they account for higher wage laws.

There are a number of reasons corporate entities operate certain or many stores at a loss. Very well known example is flagship locations that are locally at a loss, but earn for the brand on other ways. Example being Times Square NYC locations. This still makes sense at a franchise model, but less likely I bet.

EU isn’t a flag ship obviously, but I also didn’t say loss. Loss leading is similar, but not a perfect analogy (sure).

My earlier example still holds, even with franchisees per the term, but you should expand your bad event set to loss or low profits. On the net, being in Europe is worth it despite higher operating costs, but maybe USA operating costs need to be lower as a result.

I mean this all to say, there are so many factors involved such that it’s a false premise argument without controlling for intra-market differences.


Are you seriously arguing that yhe entire EU McDonald's market is operating at a loss? That makes zero sense.

Clearly it is possible to operate McDonald's in the EU and not burn money. Thus clearly there is a fast food business model that involves paying higher wages. Does this mean that every fast food store will remain profitable with the same hours? Probably not, but it does clearly mean that some fast food stores would be able to stay open and profitable.


No I said loss leading probably wasn’t a good analogy. Did you not read that?

However, McD EU could be less profitable, McD picks up the slack.

This is fairly straightforward financial accounting.

Which is all to say: without discussing this from knowledge of a form 10k or similar details is a very weak argument approach.


Then your whole point is pointless, the OP granted the possibility of McD EU being less profitable in their original post.


Yes, and then OP said this which is why I responded:

“ That implies that the model is (in principle) just alright”

It implies any number of things, but not that if the model works in EU it can also coexist with the same model in the US. The scenario I said is an easy and fairly common example of why they could not coexist.

Without breaking out a form 10k and a fair bit of financial statement analysis, it’s somewhat like saying that “well I get 1GB internet in NYC, it implies the model for fast internet works so we could do it in Montana tomorrow.”

To the extent that it’s important to know and discuss the actual factors involved such that the MBAs doing these decisions at McD will take you seriously, that implication is seriously flawed. Hence, why this hasn’t changed since Milton Friedman and the 80s. Ever wonder why that is? It’s because arguments made without any Corp fin awareness don’t work with the audiences with the power to change it.


I am not arguing that McD should take a particular policy. I am arguing that there are clearly functional business models for fast food under a higher minimum wage so that is not a valid excuse to avoid raising the minimum wage.

What are you trying to argue?


That when talking about a company like McD: public, multi-National...

Those functional business models are quite possibly/likely able to exist, or figure out how they exist per corporate policy, by opportunity costs other areas of the business, namely - American wages and/or American franchise terms.

I’m not sure if you’ve looked up an SEC Form 10K before, but that’s a good place to start to examine how this can look.

When McD EU, or similar, can function basically as its own corporate entity, this is even more possible.

When spanning national boundaries and regulatory space, you’re comparing an orange to an Apple by saying it works in EU, QED it should work in USA. Especially when it all flows through a choke point of SEC reporting and investor expectations/public listing in the US.

Really need to look at the financial statements to make that sort of claim, not just “it works there it can work here.”


Asserting that high minimum wage makes the fast food model untenable is a strong claim. Given that it is made in tha face of the apparant profitability of fast food in high wage minimum wage countries, then burden of proof falls on you.

So as far as I can tell, you are just trying to spread doubt without doing any work to justify that doubt.

IMHO fast food is a durable industry and while prices/locations/hours may change, it seems absolutely ridiculous to argue that there isn't a business model that will be profitable.


Yeesh… feels like a deliberately misreading of what I’m saying yet also you’re inadvertently agreeing with my point.

I have pointed out a couple known and realistic examples why wages in one country doesn’t imply they’ll work in another, under the umbrella of a single corporation.

As you say, making that implication as OP and you did is spreading a claim Without doing any work to justify that claim.

That work needed is financial statement analysis, starting with breaking open a 10K. It’s not my job to do that, as you’re the pair that made the implication in the first place.

I’m pointing out that by you not doing the work to justify the claim, there are numerous straight forward financial accounting reasons for why the claim could be wrong.

If you don’t know much FSA, that’s fine, but from that knowledge base you should know that you’re basically saying it could rain purple and it’s my job to use standard weather data to disprove why that’s not the likely answer.


If their entire European, Australian and New Zealand operations weren't profitable, why would they run them at all? They wouldn't use American profits to support them, they'd shut them down.


Mm does this make sense: Profitable is a spectrum, end of the day it all reports back through McD USA. ebtida in EU might be a bit lower than ideal because of laws changing over time. So, to make numbers, they can juice things in USA.


You are aware that when you say "they can juice things in USA", "things" stands for people?


You are aware that you can either use soft language, or discuss in the terms that are actually used, right?

What’s more important: sensitivities or understanding how the decisions actually work so you’re in the mix to change things with the audience to change it?

They can wait out ethics based arguments for decades, and they do.

The moment a community activist actually starts calling corps out on their sh*t from the perspective that’s actually used to build these policies, then the corps lose their main advantage which is ignoring calls to ethics like this which don’t work as they’re not at all related to the MBA’s incentive structure who makes that decision.


A lot of people who support minimum wage increases don't think that way though. They _do_ think the local McDonald's is raking in cash and not sharing the profits.

Conceptually, I agree with what you're saying (I also feel very strongly about off shore manufacturing for the same reasons) but, practically, when you increase the minimum wage, the poverty jobs will disappear and _eventually_ be replaced. The problem is the transition period. The real minimum wage is always zero.


> but, practically, when you increase the minimum wage, the poverty jobs will disappear

If we're talking about raising the minimum wage arbitrarily high, then this is true.

But this argument also gets made a lot when we're talking about a specific proposal (such as $15). For a specific proposal this argument is not always true.

It was raised a ton in Seattle when Seattle was considering a $15 minimum wage. Endlessly. The main argument was that it would devastate employment for the jobs it was supposed to improve.

Then the minimum wage increase passed and it didn't do that. Employment in those jobs actually went up slightly (probably not a casual increase, probably more coincidental). But it certainly didn't devastate the employment in minimum wage jobs.

So, the argument is one that feels compelling since it is true in the extremes. But it needs to be evaluated with the facts of each proposal.


Do you have anything to back that assertion up, that the poverty jobs will disappear?

The only articles I've ever found that say that come from the Heritage Foundation or the American Enterprise Institute, and neither of those is anywhere near an unbiased source.

All the research (excluding the pieces from those two think tanks) suggests that the job markets remain stable through minimum wage increases, and in some cases the labor markets actually gain jobs -- possibly because more money in the hands of poorer people is going to go right back out into the community, as a matter of need.


A combo meal at many fast food places is nearing the $10 mark, and has passed it for places like Firehouse or Panera.

Labor is typically 20-30% of a restaurants costs, doubling that from say $9 to $18 would add another $2-3 to the price of a meal.


>These business have a model that relies on poverty wages changing the minimum wage will disrupt these businesses greatly and I don't see a problem with that.

Doesn't that just end with bankrupt businesses and unemployed workers?


Not really.

Look at empirical studies of past minimum wage increases and you don't often see unemployment increase. The employment rate is often stable through a minimum wage increase.


A teenager making change on bagel purchases isn't working for "poverty wages". And a business that providing tennagers jobs isn't being exploitive.

I do think employers should be conscious about the kinds of lives they set their employees up for, though we can talk about that without overgeneralization.


Two things:

1. According to the US Bureau of Labor Statistics, about half of people making minimum wage or less are older than 25 years old.

2. A single person working a full-time job (32 hours) at minimum wage makes $12,064. The US federal definition of poverty for this individual would be anything below $12,880. So yes, minimum wage workers are literally, by definition, working for poverty wages.


Where is a full time job 32 hours? We work 40 hours in most of the world, that is 25% more.


Many companies in the US limit their employees to 32 or 36 hours a week so they don't have to pay benefits. It's a horrible system.


I don't find those talking points convincing.

For one, even with your statistics, half of folks employed are school-age. Also, poverty is measured by household. Confusing the math isn't a good way to make a quantitative argument.

But mostly your argument is a semantic trick around the word "poverty" to rationalize weighted terminology.

Again, I have strong feelings that employers should be conscious of the lives and prospects of their employees. For instance, having policies that lead to irregular patterns of night and day shifts that have to be unhealthy long-term. But we can have rational discussion about these issues.


> Also, poverty is measured by household. Confusing the math isn't a good way to make a quantitative argument.

The figure they used was for a household of size 1, so I don't think they confused the math and I think they made a perfectly strong quantitative argument.

https://aspe.hhs.gov/2021-poverty-guidelines#threshholds


Be careful with this argument, it's a talking point that over-represents the amount of these jobs held by teenagers earning pocket money. Quite a lot of minimum wage jobs are held by single parents or people just trying to stay afloat.

By the way, even if it is just teenagers, I don't think that should somehow disqualify them from earning fair wages. They aren't being "provided" jobs, they work to produce value for a company, and and should be compensated fairly regardless of their financial situation.


I'm more concerned that teenagers in poverty won't be able to get jobs at all.


But you have said yourself it's 'bagel' money, it doesn't seem to be coherent to be defending both teenager after school jobs and teenagers in poverty.


You seem to have read too quickly, the poster was talking about someone working a cashier in a store that sells bagels, not about someone making money to buy bagels.


Teenagers getting whatever after school jobs they can contribute to incomes for households in poverty. If the McD's kiosk takes the cashier job, the family loses income. I don't want households in poverty. I'm just unconvinced by this mechanism. I'd rather see minimum incomes or policies to deflate housing costs.


https://www.epi.org/publication/wage-workers-older-88-percen...

88 percent of people making the federal minimum wage are older than 20. A third are older than 40. Median age is 31. More than half work full time.


You have a good point, and I appreciate the evenhanded approach. I'm still far from sold that "poverty wage" is a useful term if we want to have a healthy discussion. It leaves too much nuance out.


It doesn’t though. Poverty is well defined (and is defined based on the number of people in the household).

https://aspe.hhs.gov/poverty-guidelines


So wages should be linked to the number of people in the household? Workers with more kids should earn more by law?

We do this is Europe, we pay something called 'kid allowance'. In some places people make 10 kids for the allowance, ignore them or mistreat them and live on that money.


Name one state where someone making minimum wage can afford an apartment, food, healthcare, and utilities, and some form of transportation. I think it's fair to say that if you can't, that counts as poverty.


Who says that's the point of minimum wage? That's where we disagree.


If you're agreeing that anyone living on that wage is in poverty, I think it's fair to call it a poverty wage.


I was a teenager working a minimum wage job. I also had to pay for housing, meals, healthcare, etc. Don't assume a teenager has a life less complex than yours.


With all due respect, you don't know me or what I've been through either.


Sure. Point stands: I was literally a teenager making change on bagel purchases. (Yes, actual bagel shoppe.) I was absolutely making poverty wages. If I did not have free meals from work as a perk I would have starved.


And I worked minimum wage and it allowed my poor household to make ends meet. And another minimum wage job helped me stay solvent enough to survive university.


In what location though? Living costs are notably different by location


Apologies, but I'd rather not reveal too much personal info. But I did get need-based financial assistance in university. And I did attend a low cost school for financial reasons.

I didn't "pay my way through school washing dishes" or anything like that.

I wasn't supported by my family so the extra income through low pay jobs was critical.


Oh no problem, I'm just pointing out that both your experiences can be valid at the same time


Also, one can make ends meet and still be in poverty. Those aren't mutually exclusive.


> A teenager making change on bagel purchases isn't working for "poverty wages".

Aren't they though? You don't get a discount on rent because you're not 20 yet, and being under 20 doesn't mean you have rich parents that can subsidize your lifestyle.


I'm not arguing for low wages. But it's dishonest to conflate household income and individual salary.

More specifically, having a roommate or two or living with some family unit is fairly normal at that age. So other income needs to be accounted for to make that semantic argument stick.

Of course not everyone can have employed housemates. But even in those cases, it's not clear to me that banning 16 year olds from working those jobs helps all those 16 year olds. It seems likely that many of them end up worse off.


I'm sorry, but I think you absolutely have to give reasons to create a subclass. People do not need to explain why they should be treated the same.


How is paying a teenager to sweep a floor making a subclass? Seems like we're on a trajectory to replace that teenager with a vacuum drone, and I don't see as many teenagers employed in that world.

The wealthy wouldn't notice. Their teenagers are entrepreneuring and racking up unpaid volunteer hours to pad resumes. The teenagers with jobs are the ones that could use the money.


It's pretty asinine to pretend these entry level jobs teach anyone anything. Let it be automated.

The kids that are hard-working and poor will find something else to do. You don't have a right to exploit kids.


Any gap in labor law leads to exploitation by a business owner, anything that can lead to business advantage gets used.

Besides I found really distasteful when I was in my 20s being told that I didn't need the additional money because I didn't have a mortgage.

I don't think we need to rely on employer moralism, so Dickensian.


I'm not arguing for ageism. I'm only arguing that "poverty wage" isn't a helpful term.


How do you feel about kids saving for or working while attending college? It's pretty rich to say people don't deserve money when they need it.


I worked while attending college. I suspect the supply of those jobs will be affected, meaning marginally employable youth will just be unemployed.


But they are supposed to pay for an ever increasing tuition bill with 1990's minimum wage?


> This article unfortunately doesn't address the business side of the problem.

Good! I've been hearing about "the business side of the problem" my entire life -- lectured sternly about it, in many cases. All while few of the Adults and Experts - people with Real Power, in other words - dare even mention some of the topics laid out in the link.

> I'm just saying that both sides of the equation need to be examined, i.e. the plight of the worker AND the plight of the business.

There is no "plight of the business". There's a business that's making money, losing it, or breaking even. The people working there may feel the consequences, but a business cannot "suffer".


Imagine scenario where you have $100k and you can open a small restaurant, create jobs, maybe not best jobs but still some people will be putting food on the table with your help, some students will pay for their collage.

But you count the costs and it turns out you will break even in 50 years or if anything goes bad never, like, one bad hire will drown you.

You look at Google, Apple, Facebook stocks ... there is always a risk but no one got fired for buying IBM right? If you put your money in that stocks you don't have to worry about bad employees, sanitary inspections, paying rent, bad customers.

That is what those Adults and Experts are trying to tell you, local business is not some "magic" that makes money or loses it. Behind every local business with shitty jobs there are people, don't make every business equal to faceless Facebook, Google or Apple. Your local pizza shop has an owner who is as much an employee as his staff.


https://academictimes.com/economic-news-reporting-suffers-fr...

No. News sources are focusing on business instead of labor's issues, because news statistically favors business interests, not labor's.

If your hypothetical business owner is unable to start a business without paying a reasonable wage, then that business should not exist. And your hypothetical business owner should invest in Apple, Facebook, or otherwise.

If this causes less business entrepreneurship, then so be it. A business that cannot pay employees is not a business that adds value to society, and nothing of value is lost. This is a fundamental tenet of capitalism, the same way we say that businesses that cannot sell their product also deserve to fail.


But that is creating tragedy of commons that we have now. People who are having money are investing in stocks or ETFs, buying real estate because it is still better than having cash. Which inflates stocks/real estate bubble and when it bursts it will be much bigger mess than paying low wages but in constant manner, spread out over multiple people and multiple years.

I definitely did not write about business that cannot pay its employees. I wrote about business that lets people put the food on the table, which means also pay the bills.


> buying real estate

Tax positive externalities at 100%


What's a reasonable wage? Should any business in developing countries exist, given the incredibly low wages? Their wages can't be considered reasonable, right?


You just compared the US to developing nations.

It's an apt comparison.


"A business that cannot pay employees is not a business that adds value to society, and nothing of value is lost."

Value is a tricky expression here. There is a short term value and a long term value, and they may be very different.

Let us say that a mom-and-pop restaurant that cooks fairly healthy meals is squeezed out by McDonalds and shuts down. 50 years down the line, the fast food triumph has serious consequences on health of the nation.

But immediate market interactions cannot capture this development. The short term "Yay for salty and sugary food for less money!" win does not include the fact that you are buying an invisible "Type 2 diabetes and morbid obesity at the age of 40" item, too.


"If this causes less business entrepreneurship, then so be it. A business that cannot pay employees is not a business that adds value to society, and nothing of value is lost. This is a fundamental tenet of capitalism, the same way we say that businesses that cannot sell their product also deserve to fail."

This is a false and dangerous, in that it ignores that the world isn't a free market, wage markets don't exist in a vacuum. Businesses might be able to pay higher wages if they weren't hindered by high rents, or if other restaurants raise prices in unison (e.g., in reaction to higher labor prices).

Just because a business can't pay a living wage in some setup doesn't mean it has no contribution.


'suffering' for a business is just code for being on a path towards the workers suffering the consequences of no profit. That might mean not paying shareholders dividends and the company's share price losing value, but not all companies are public or pay dividends. If the money runs out, suddenly the business can't pay rent or pay the workers and thus goes bankrupt. No, the business's feelings aren't being hurt and it's not being physically assaulted.


The thing is, “the business” tends to always treat the employees as if money is running out. To the limit permitted by law.

This limit needs be adjusted, that’s all.


hmm the vast majority of people in the US work jobs that offer FAR more in wages and benefits that the smallest amount permitted by law, so clearly this statement is objectively false


> There is no "plight of the business". There's a business that's making money, losing it, or breaking even. The people working there may feel the consequences, but a business cannot "suffer"

For a small business, the business and the owner can be practically one in the same. So in some cases I think that verbiage is pretty spot on.


plight: "a dangerous, difficult, or otherwise unfortunate situation."

Pretty sure a business can have plight.


It was hyperbolic, yes, but only a little, I think. The point I was making is that we've drunk a lot of koolaid about corporations being legal persons, as having rights, etc., such that no one bats an eye at anthropomorphisms like "the suffering of a company". My claim is that a) those words in that context are anthropomorphisms, metaphors, and b) that I don't think we've had much of a conversation about the koolaid I'm alluding to. (Outside of wealthy educated elites like ourselves, I mean.)


Nobody talks about “the suffering of a company” - that’s a made up example.

People do say things like ‘the company suffered losses’, but isn’t anthropomorphising.


A company is just a group of people right? Like people talk about the plight of the Syrian people or whatever. What's the difference?


Maybe we're getting a little philosophical here, but I don't believe inanimate entities can experience "difficulty" or "misfortune".

Would you say that a rock suffers "misfortune" if it topples off a cliff into the sea? Is it "difficult" for a glacier to maintain its integrity in the face of global warming? Is my car unfortunate to have been scratched in a parking lot? (OK, I do believe that last one, but I'm anthropomorphising my car to talk about my own human misfortune)


Definitely philosophical. If we can use statements like “a business had a bad quarter” and “a business had a good quarter” and understand that these mean that the financial statements were negative/positive. It isn’t a stretch to say something like “a business has had 10 straight bad quarters” is a plight considering a business can cease to exist.


Is a group of people an inanimate entity to you? Are there only certain types of groups of people that you think are an animate entity?


If you want to get really pedantic about it, a company is not a "group of people": a company is a particular legal structure for organising a profit-making enterprise. So yes, it is an inanimate entity.

When we say things like "that Lions football team suffered a crushing defeat", we're engaging in metonymy -- referring to the suffering of the members of the team but speaking metaphorically about "the team".


We'll have to agree to disagree here. I don't think whatever arbitrary legal structure there is around a group of people somehow makes the organization not human.

For example, I think it's perfectly normalized to say "that Detroit Lions team suffered a crushing defeat", even though the Detroit Lions are a profit-making enterprise.


I'll go with, there is a group of people involved with a corporation, but it's largely decoupled from the corporation itself.

The group of people are the labourers being exploited, and they're separate from the group of owners that the corporation represents.


Good point, I can think of 1 right away: Toys-R-Us. Miss having them around!


If a business closes, lots of people lose employment + business owners become more employment competition. Increasing unemployment wrecks wages.

It is also not free to give unemployment benefits, it requires higher taxation which moves the sustainability bar higher and more businesses close, etc etc.


This really just raises the question on why employees don't get a share of profits.

They take on all the same risk as owners do


Most small businesses require the owner to take significant financial risk, or work for free for years or more.

Each growth stage presents tough choices of additional risk, as well.

An employee doesn't shoulder any of this. There is a world of difference!


It's because the law and financial system exalt capital at the expense of everyone else. There's no reason that labor couldn't translate into equity.

Also, the current system enforces the artificial scarcity of capital available to those who need to work for a living instead of living off of their assets.


It's certainly not the same risk. If a business goes bust the owners lose capital, the employees lose opportunity cost at worst.


If a business goes bust, those losses can be written of at tax time. A worker losing their job faces homelessness, the inability to see a doctor or pay for their medications, and hunger.


To avail the benefit of writing off taxes, the ex-business owner requires future income. Who's to say that he/she won't be unemployed for a long while after devastating their life savings?


Then they can get a job. Why are they taking on risks that they can't bear with their investments?


What does write off mean to you? If you lose money the government is not giving you money for that loss.

The vast majority of businesses are small businesses, if they go broke the owner is just as broke as the employees.


You know how people avoid being impacted by a business going bankrupt? They don't take jobs there.

Jobs at more stable places are available and people will take them. The businesses need to fail or be sold.


There will always be businesses on the margin that barely survive, and you want as many of those as possible always to increase employment and wages, even if your world vision is only pro-worker.


I think the effects of price stickiness (on goods and labor) aren’t being adequately considered in these discussions. Yes, these restaurants could raise their wages to compete with unemployment, and many have. They’ll also need to raise their prices, which they have leeway to do, because everyone is facing the same costs.

The problem occurs in a few months when the bonus unemployment runs out. Then there will be millions more people looking for work. At that point, expanding employers will be able to hire at lower wages again. They’ll also be able to offer goods at lower prices. Employers who stepped up to pay higher wages won’t be able to compete. They’ll need to cut prices and cut wages or lay people off. That will be painful, which makes holding out until wages lower more attractive.

Employers can get around this by offering signing bonuses instead of higher wages, but they need to be large to compete with unemployment checks, and it may not make sense to do that for a few months of work.

These conditions may present a unique opportunity for policymakers to increase employment by raising the minimum wage.


> The problem occurs in a few months when the bonus unemployment runs out. Then there will be millions more people looking for work.

Maybe this won't happen? Unemployment is officially at 6%. Better-capitalized firms have hired a ton of people over the last year. It's possible that marginal businesses like the weaker local restaurants mentioned in this thread will just have to adapt.

Besides, given that their jobs are apparently so crappy that they are losing employees to the likes of McDonalds, certainly they have high turnover. If a labor glut happens, they can just lower wages and deal with the resulting turnover, which they already know how to handle.


Rising the minimum wage is exactly the thing that should not be done, if one cares about the employment levels. It prices out the least qualified workforce of the market. To put it simply the less able/educated/experienced are not productive enough to cover own costs. So that no one wants to employ them and they are stuck. They start to rely on the government to provide them with resources and it means that have to vote for politicians that promise to keep the free money flowing. It creates a perverse relation between politicians and citizens, which may resemble a dealer addict situation.


Oh how I wish this was a more popular view. Minimum wages have a history of exluding a group of people from employment to protect the higher wage earners jobs.

Minimum wage absolutely prices some people out of the job market.


Realistically, GDP has grown substantially with the owners receiving nearly all the benefits.

Raising the minimum wage is unlikely to affect employment much because of just how profitable companies are today

Mind you I think a better tslternative to a specific minimum wage is to have a guaranteed government job at a specific wage. That sets a bar that all labourers have an option, while some lower paying jobs can still exist if they're otherwise competitive in other experiences


Corporate profits as a fraction of GDP hasn't changed much.


Just remember that very sane corporation in the US does their very best to realize their profits outside of the US.


> raise prices and hope that customers won't just go down the street

I always found the idea that restaurants need to compete on price strange. A typic Mexican restaurant is always going to lose to Taco Bell on that, so raising the price of your enchiladas or margaritas probably won’t have much impact on traffic.

We read a lot here about founders not setting prices high enough (see patio11 for tons of discussion). Or comment on backblaze being very hesitant to raise prices [0], but then buy into this idea that restaurants have set their prices optimally and that business will plummet if the $15 dish is suddenly $17. The truth is very few decisions on where to eat are driven by price (except at the high end) and instead are driven by experience and location.

[0] https://news.ycombinator.com/item?id=20996555


That $15 vs $17 difference per dish might be immaterial to you, but if you include tax and tips, it’s a difference of a full hour of wage labor for a night out of a family with 2-3 kids with parents earning average wage.


> With such a small profit margin, arbitrarily raising everyone's wages is likely going to kill the business.

There have been past minimum wage hikes, and that's not what has happened. The costs get passed onto consumers.

Of course, there's presumably some hypothetical minimum wage that would be too high and destroy the industry, but the amounts being discussed in the US are below what other countries have already tried.


Your second sentence is debatable, as it appears that many European countries have high enough minimum total compensations (including benefits and other indirect costs) that unemployment is relatively high, and it can be very tough to get on the economic ladder.


But equally a poverty wage job doesn't get you on the ladder it makes you an indentured servant.


The company I work at has hired a number of employees whose only previous work was very low wage, and that (low wage) experience definitely weighed in their favor.


A verified history of showing up in time and not getting fired for theft or negligence is definitely valuable.


My second sentence is suggesting that fast food restaurants will pass higher labor onto consumers. Your point seems entirely unrelated to that idea.


You are correct, I missed that period, and was in fact referring to your second paragraph.


Which countries are suffering from this?


France and Italy have long had chronically high unemployment, particularly among young adults who struggle to gain entry into the workforce due to the high cost floor on labor.


> The costs get passed onto consumers.

Regarding this, from this[1] paper:

> Many business leaders fear that any increase in the minimum wage will be passed on to consumers through price increases thereby slowing spending and economic growth, but that may not be the case. New research shows that the pass-through effect on prices is fleeting and much smaller than previously thought.

> By looking at changes in restaurant food pricing during the period of 1978–2015, MacDonald and Nilsson find that prices rose by just 0.36 percent for every 10 percent increase in the minimum wage, which is only about half the size reported in previous studies. They also observe that small minimum wage increases do not lead to higher prices and may actually reduce prices. Furthermore, it is also possible that small minimum wage increases could lead to increased employment in low-wage labor market.

[1] https://www.upjohn.org/research-highlights/does-increasing-m...


> But they will, they will go down the street

But... why? To save a couple bucks on a burger? This is a serious question.

Is this really how consumer behavior works in the restaurant industry? Restaurant food isn't actually a commodity. A burger from one place can be quite different from a burger at another. Even at the low end -- I much prefer McD's to the other fast food joints. Atmospheres can be very different as well, even at the low end. Etc.

This is not at all how I behave. I have two local bars. I like both way more than all the other bars. I have one local brunch place I like way more than all the other brunch places. All 3 places can & have increased prices. In one case substantially. I go anyways.

Granted, I have more expendable income than the average American. But this is even how I behaved when I was on a pretty tight budget during grad school -- a few regular places and I went as much as I could within my budget.

Maybe I'm just a weirdo?


> Maybe I'm just a weirdo?

Yes. The data clearly shows the vast majority of the restaurant business be a low margin, high risk venture. That must mean a majority of the customers are very price sensitive.

I can easily afford to pay double and triple what most restaurants charge today. But I’m not going to pay it because I can easily make a meal at home of better quality for less, just have to add in my time and energy.

Moreover, I don’t trust restaurants to not cut corners most of the time due to the volatility of their business.

But that’s all personal preference. I suspect most people just have limited budgets, so increased prices means less times they go out.


> The data clearly shows the vast majority of the restaurant business be a low margin, high risk venture

I think what I was suggesting was that perhaps restaurants as an industry have systematically under-estimated consumers' willingness to pay.

You see this in software pricing discussions a lot, actually: small shops that leave a lot of money on the table by not charging enough. Is it really so crazy to imagine that restaurants might be doing the same thing?

> That must mean a majority of the customers are very price sensitive.

It's this "must" that is always asserted but... I think might not be as true as we assume?

I am not a restaurant owner, so what do I know.


Restaurant owners aren’t leaving money on the table because they’re charitable people. There’s so many restaurant openings and closings for so many decades that I think it’s a pretty good indicator of their price dynamics.

Software is B2B many times and has efficiencies of scale that restaurants don’t.


People often open restaurants as a hobby project. They like the idea of running a restaurant, maybe because they like the idea of being sociable or cooking for other people.

But they literally have no idea how to run a profitable restaurant. Often they know next to nothing about business in general, and have no idea how to estimate costs/profits.

Plenty of other business types operate on a similar semi-amateur basis, including book shops, record stores, independent garages, hairdressers and beauty parlors, craft and art shops, realtors, and others.

Sometimes they get lucky, or they're started by people who have actual business talent and can deal with challenges creatively.

But often they don't, which is why they fail.

Many also pay very poorly. Both super-professional and super-unprofessional owners can nickel-and-dime their employees, but for different reasons.

Failure is bad because these kinds of small businesses often add life to a community. But there's little or no support or training for them. It wouldn't take much to help them avoid the more obvious mistakes, give them more stability, and turn them into more of a local and national resource.


Bingo.

A lot of people who open businesses aren't doing so to open a business. And most of them don't even know it. A lot of them are trying to open a clubhouse they charge people to be at.

You see it often in the board game/comic/hobby sector. Someone gets it in their head that they could open a shop and it will be great and blah blah blah. But yeah, it goes south because what they really wanted was to play games for a living.

They want to be a business owner, but they don't want to run a business. If that makes sense.


I'm not suggesting thy are charitable. I'm only suggesting that they are not omniscient.

> There’s so many restaurant openings and closings for so many decades that I think it’s a pretty good indicator of their price dynamics.

This may well be true.

But I mean, if this were the case, a common failure mode for restaurants would be full tables right up until bust, right? Low prices due to unprofitable margins would mean lots of demand. Losing money on every head, but lots of heads.

But, IME, in my area, restaurants that fail in the first year or two do not fail in that modality. They usually have some of the lowest prices, but empty seats none-the-less. Because the food isn't good, or the menu is weird, or they don't do marketing right, or the location is wrong, or a million other things. But in my area at least I basically never see restaurants will full tables fail.


>I'm not suggesting thy are charitable. I'm only suggesting that they are not omniscient.

Sorry, I was just being snarky. I meant that there's so market is so "deep", that it surely represents the true prices.

>But I mean, if this were the case, a common failure mode for restaurants would be full tables right up until bust, right? Low prices due to unprofitable margins would mean lots of demand. Losing money on every head, but lots of heads.

They're not unprofitable margins, they're low margins. Restaurants have a high fixed cost, but low marginal cost. Every day they have to have some amount of staff and food, but once they have sold enough for the day to cover those costs, each extra doesn't cost them much at all due to the relatively low price of food and water and electricity and gas (compared to the labor).

I'm not sure on the statistics of the exact failure mode, but I do know that your run of the mill restaurant can't charge people $30 per entree and get away with it. There is a cap on how much people are willing to pay most places, with the exception being a select few that cater to the rich, have a certain ambiance, reputation, quality of food, etc.

>But, IME, in my area, restaurants that fail in the first year or two do not fail in that modality. They usually have some of the lowest prices, but empty seats none-the-less. Because the food isn't good, or the menu is weird, or they don't do marketing right, or the location is wrong, or a million other things. But in my area at least I basically never see restaurants will full tables fail.

You're right that there are many reasons for them failing, but many can't work on things like marketing location, or quality food, because they can't charge enough money for those expenses in the first place. Celebrity chefs can come out swinging with high priced menus, but not the vast majority who might be doing it because it has low start up costs and they don't need credentials.

Where I live, entrees cost $15 minimum, and with tip, you can budget at least $20 per meal per person. Even with that, I doubt the cooks are making anywhere near a desirable living, and I doubt the restaurant owners are making a decent living, especially if they're paying rent.


> There’s so many restaurant openings and closings for so many decades that I think it’s a pretty good indicator of their price dynamics.

There have been many startups that have opened and gone bust in the past 15 years. I don’t think I would say that startups have terrible profit margins. In the context of tech startups the understood answer is that their product sucked. I think the same is true for most restaurants - I think running a restaurant is underrated and if the food is bad or atmosphere is terrible people just won’t go no matter how low the price is.

If restaurants were struggling solely due to low profits they would look a lot more like MoviePass or WeWork. Incredible demand but unsustainable business model. Most restaurants are more like Blockbuster. No demand while trying maintain fixed costs.


Tech startups are not very comparable to restaurants. Restaurants have limited capacity, limited ability to scale, usually pay rent (so any success can be partially sucked up by the landlord), and have limited times of the day and week to earn most of their money.

To support terrible profit margins (relative to the risk), I also would look at the financial status of restaurant owners/operators, who by and large, aren't in the higher end of the income scale. Almost no one tells their kid to grow up and aspire to be a cook or open their own restaurant (unless they already have a a trust fund).


Yeah I think you're unusual.

I and my family each have price points in my head, once a restaurant charges more than that on the total line, we look for other options. $5 for good enough lunch, $10 for a great lunch, $20 for gourmet lunch, $20 for a great dinner, $40 for gourmet dinner.


Price changes do work...


Consider the quality of a McDonald's burger/meal. It's not hard to find something considerably better and marginally more expensive yet they are still in business.


What about franchise fees? Independent fast food restaurants basically don’t exist in the U.S. anymore. An individual McDonalds may be scraping the boundary of profitability, but corporate had a net income of $1.5B last quarter[0], or about $7,500 per employee per quarter[1]. That’s net income, not revenue.

[0] https://corporate.mcdonalds.com/content/dam/gwscorp/assets/i...

[1] https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/numb...


Dicks, Burgerville (mostly unionized), Burgermaster, In N Out and other regional chains exist, along with a plethora of single location independent fast food restaurants.


All those regional chains you mentioned pay significantly better than McDonalds, YUM, etc. as well.


Yes, the point of most franchised chains is to extract wealth from communities rather than invest in a stable, skilled workforce delivering a good product.

McDonalds, YUM Brands, et all charge large franchise fees and force use of particular vendors and business practices to ensure they extract as much income as possible from their franchisees.


Then we are in agreement!


~200,000 is number directly employed by McDonalds. They have 5-10% of stores. There doesn't seem to be a current accurate number for total including franchisees - but seems to be in the 1.5 - 2 million range.


I feel like there's never been more independent (or local chain) burger joints, food trucks, and just fast food in general.


I agree but let's continue with that story. Let's remember that the beginning of the story was the labor shortage. So not enough people to serve in all restaurants at a competitive price.

Let's suppose some restaurants decide to raise prices. Customers decide to go to a place that's cheaper but... it is packed. Shortage, remember? Free market dictates that higher demand than supply makes the prices go up.

If client CAN go to a cheaper venue then we are not in a position of shortage.

In the end, look at places like Scandinavian countries: salaries are high and going to the restaurant is very expensive. When you think about it, being served by humans is actually a luxury and as global wealth progresses, this should become less and less common.

I really hope that the future of restaurants is either fully automated fast foods or high end luxury restaurants that people work out of passion, and that you can afford maybe oncee every months.


I think a big factor is that a lot of restaurants in the US are throw-away businesses. The average life span of restaurant is five years. A lot of people enter the restaurant out of a weird desire to create something - which is to say they're shoveling money into the business 'till they're out of capital and then another "entrepreneur" takes their place. And oppositely, landlords and local government pretty expect that the sequence of failures is going to continue. Everyone else (landlords, restaurant suppliers, consultants and so-forth) makes money.

But watch out for technology and automation...that is the part of the equation that has been "solving" the labor problem for some time now...

Restaurant is a little bit convenience but mostly entertainment. If a robot is going to spit some stuff for you, why not buy an cheaper even microwave dinner, they're not that bad (or cook it yourself for something good tasting and which you can entertain yourself with).


10% profit is not necessarily very modest. 10% of $50M is a lot of money. 10% of $50K is not a lot of money. 10% only sounds 'modest' in relation to SaaS/software margins which are ridiculous. Walmart's gross margin is only ~28%. Many manufacturing companies compete across 3-5% margins. If the base number is big enough, that's a ton of money still!

%'s are a bad way to measure this, for that reason. Labor isn't even the majority of cost for restaurants (avg is apparently around 34% fully loaded [1]).

[1]https://totalfood.com/busting-restaurant-labor-cost-myth/


> The only choice is to either automate, which will reduce the labor requirements, or raise prices and hope that customers won't just go down the street. But they will, they will go down the street--until everyone's prices go up and there is nowhere else to go.

That's why governments created a minimum wage. If the salaries are written into law, there is no place down the street to go. That's also why environmental and hygienic regulations are so successful. Those things simply can not be done without government intervention.


There are plenty of countries who have had minimum wage for some time and have increased that minimum wage over time. So there have been lots of studies done on the impact of it. Here’s one:

https://assets.publishing.service.gov.uk/government/uploads/...

> This report includes the findings from a meta-analysis of the empirical UK national minimum wage literature. Similar to a previous UK minimum wage study by de Linde Leonard et al. (2014), this study finds no statistically significant aggregate adverse employment effect of the NMW and also no publication bias in the NMW literature. However, estimates for different sub-groups suggest some relatively larger adverse employment effects for some labour market groups, such as part-time employees.


Even with minimum wages at 15 dollars, it is still hard to say this is a decent job, although this is the already among the highest globally.

The problem lies that the value of assets, especially housing etc, increase much faster than wages can catch up.


I honestly think that part of the problem is that the older people who make decisions on things like minimum wage remember their own minimum wage jobs. My first job paid $3.35/hr. $15/hr is $30K a year full-time. I barely made more than that at my first professional programming job out of college. It sounds insane to me on first hearing that $15/hr is not "decent" pay for an entry level, non-skilled position.


> the financial model is set by the fixed or imperative costs, i.e. the cost of rent

Rent for commercial spaces is set to what the market will bear, and that is also determined by the same financial models with labor prices as input. "Restaurant owners aren't getting rich off of exploiting labor; their landlord is" just means that the haircut should be getting taken off of the landlord's profit margins.

Now, this isn't a panacea - there are some distortionary effects from squeezing the rents that landlords can charge, and it favors high-skill and low-labor businesses by competing away higher bidders on commercial real estate, but it's not like business owners will feel 100% of the incidence of a minimum wage hike. Some will go out of business, which will lower commercial rents as vacancies rise, which will save a portion of the businesses that would die based off first-order effects alone.


The problem is not that the margin is small, is that big companies get to cover the losses of the uncertain(unforeseen situations) with the foreseeable profits, while at the same time (as an extra bonus from their government lobbying) maintaining a minimal labor cost. The price of their product is unreachable to small business, small business are not failing because the labor is too demanding (I know you did not explicitly stated this, but it could be construed as if). They are doing so because the competition is too big.

This is my cynical approach... A right-to-center leaning person is in no position to argue "handouts are to blame", or "zoomers/millenials want it easy"... a truly right-to-center political commentary should be telling restaurant owners "Work smarter".


Firms in a competitive market are price takers. None of them individually can raise prices. But an increase of the minimum wage increase affects all of them together, and will cause a new equilibrium at higher prices.


That assumes no substitutes, but in reality this will increase the relative cost of restaurants compared to home cooking which will reduce demand for take out.


Sure. But labour is only a third of costs. And given the relative bargaining power of landlords, owners, and labour, the flow through to retail price might be less than you think.


Ah yeah. You can always look at how Europe is empty and has very few, if any, restaurants with their minimum wages and healthcare. Oh wait...


I said that it would reduce demand, not that it would eliminate it.


Has it reduced demand in Europe?

In general. Americans regularly have deep-rooted fears about giving fellow humans a chance at a decent life. Are any of those fears substantiated?


Economic theory says yes. If prices of A go up and B is a close substitute, some people will shift from A to B.

I doubt anyone has studied that rather specific question empirically, though, and even if they had it's not an easy question to study. So theory and common sense is our best bet when it comes to forming expectations here.

I'm sure there are empirical studies about how demand shifts from A to B for other examples of substitute goods, though. Maybe start there?


> some people will shift from A to B.

1. Is this number at all significant?

2. Should theory prevent working Americans from having a decent life given that empirically restaurants and cafes are plentiful in Europe and are filled to the brim with customers?


1. Perhaps. Difficult to know the extent exactly. My guess would be yes, given theory, but we'd need a natural experiment to find that out.

2. This particular thing isn't really an argument against minimum wage, although I personally am not automatically in support of it for other reasons.

I can see an argument that it creates poverty by making unskilled workers unable to compete with lower skilled labor overseas for manufacturing jobs. Effectively it's a ban on their ability to work (if their value add is less than the minimum wage) and make a living and can possibly go some way towards explaining the black youth unemployment rate. This robs them of their ability to get a foothold in their economy from which they can stabilize and level up. Why would a manufacturer keep their operations in the US if they have to pay minimum wage? Of course they're going to be inclined to move overseas where it's cheaper, especially if it's a low margin business.

It's also rather intrusive and authoritarian, if two people want to get together and exchange one hour of X for $Y then I don't see that as any of your business, but this is more a point of personal values and it's more productive to focus on the utilitarian part of the argument.


> This robs them of their ability to get a foothold in their economy from which they can stabilize and level up.

You're kidding, right? You're sayig that minimum wage robs people of ability to get a foothold in the economy?

Please enlighten me how "getting a foothold" works for people that have to work several jobs just to barely keep afloat?

> It's also rather intrusive and authoritarian, if two people want to get together and exchange one hour of X for $Y then I don't see that as any of your business

What about if a bunch of people come together and agree this is a good thing? Oh, wait, that's called a government, and laws, and common human decency.

> this is more a point of personal values and it's more productive to focus on the utilitarian part of the argument.

Indeed. Because your personal argument basically devolves into: if you want to keep slaves or indentured servants, who am I to keep you from doing that?


  >  You're sayig that minimum wage robs people of ability to get a foothold in the economy? Please enlighten me how "getting a foothold" works for people that have to work several jobs just to barely keep afloat?
I explained why already.

(1) If their value to an employer is less than the miminum wage, then that's going to contribute to unemployment, because an employer would now rather pursue automation or some other solution, or simply go out of business. That's what happens when you fix prices. This robs those people of the ability to get that first job that they can leverage for better opportunities later, and pushes people to drug dealing (which pays worse than minimum wage most of the time) and so on. It is terrible for social mobility and keeps people stuck at the absolute bottom.

(2) Domestic unskilled labor is now uncompetitive with foreign unskilled labor. The government has effectively banned domestic unskilled labor from working those particular jobs which means manufacturing moves overseas and benefits foreign unskilled labor instead. This devastates communities that used to function on the back of manufacturing.

  >  What about if a bunch of people come together and agree this is a good thing?
Democratic != not authoritarian.

Internment of Japanese was done by democratically elected representatives, and it was authoritarian.

  >  keep slaves or indentured servants
You can frame it like that, and I can point to communities that have been devastated and people that are chronically unemployed because of these kind of supposedly well-intentioned laws that fix prices. Who has the real moral high ground?


1. If a business cannot pay its employees a living wage, it literally doesn't matter if you decide that "an employee's value is less than the wage".

2. If a business cannot pay a living wage, and has to cease existing or has to automate, let it cease to exist or automate.

3. "Cannot compete with third-world countries that offer shit wages and shit standards of living, and are ruthlessly exploited" really isn't an argument you want to present when advocating against minimum wage.

4. Price fixing !== setting minimum wage to a level that lets people, you know, live.


> (2) (3)

This is fairly ruthless towards the victims of this ideology - those that live in the communities left literally destroyed after manufacturers pulled out and those trapped in chronic unemployment.

You can use emotive and loaded terms all you want (slavery, indentured servitude, exploitation), but the real-world negative human consequences and rather racist outcomes of these ideals are on full display for everyone to see.


> This is fairly ruthless towards the victims of this ideology - those that live in the communities left literally destroyed

It's only ruthless in the US which couldn't care about people and doesn't provide them with safety nets.

> You can use emotive and loaded terms all you want

Says the person talking about "ruthless destruction". I don't use emotive and loaded words.

> the real-world negative human consequences and rather racist outcomes of these ideals are on full display for everyone to see.

In the US? Of course. However, the moment you look at the world not through US-tinted glasses, it turns out that:

- you can provide minimum living wage to your citizens

- you can provide healthcare to your citizens

- you don't have to force a large portion of your citizens into barely surviving


Sorry but that's moving the goalposts to safety nets. We're not talking about that.

Minimum wages still cause many of those negative human outcomes (chronic unemployment, lower mobility, rural towns full of unemployed people, and so on) even with safety nets. Safety nets + no minimum wages would provide a much better humanitarian outcome than safety nets + minimum wages.

And even if it didn't (which it does) this ideology is still responsible for significant human suffering and racist outcomes in the US right now, and is being pushed by zealots irrespective of this suffering.

This is fairly typical of ideologies, no matter the actual human toll, the ideological vision must come first. I suggest you to visit a town that has faced factory closures and see the actual human toll to make this all a little less abstract.

Leaving the discussion here, my friend.


You could have made this same point without being antagonistic about it. The parent's comment was valid and not in disagreement with yours


Or unemployment..oh wait...


Unemployment varies from country to country.

https://www.statista.com/statistics/268830/unemployment-rate...

5.8% to 16%

Comparable to the U.S. https://www.statista.com/statistics/273909/seasonally-adjust...

4.4% to 14.7%

Something tells me though that you really don't want to be unemployed in the US... And that a huge number of those jobs in the US are indentured servitude in all but name.


Spain has a youth unemployment of 30% in 2019, vs 9% in the US.

Spain is worst case, but also one of the EU founding countries. Even sweden has 20%+ of youth unemployment.

It is not the land of opportunity!


This assumes demand is inelastic to price.


For any of this to be a valid arguement you're going to have to explain why places like Australia haven't imploded.

We have a decent minimum wage, social welfare, and hybrid socialised / private healthcare.

Increase wages and conditions gradually, businesses that can't innovate or charge more will fall by the wayside. That happens.


They can charge what they need to be profitable, after discovering how much they need to pay workers to apply and show up.

Which will drive away many customers who have become accustomed to cheap service built on "shit jobs."

At some point an equilibrium will be reached, the customers who can't or won't pay more will drop out of participation, and we'll have the true market for service built on good jobs.

No customer deserves cheap drinks and service built on shit jobs.

"Oh, but all those jobs will be lost."

They're already lost, the difference is that it's the workers making the decision.


> But watch out for technology and automation...that is the part of the equation that has been "solving" the labor problem for some time now...

This claim in particular was examined in studies on minimum wage increases, and found that increases in the minimum wage had no impact on the adoption of automation[1].

[1] https://research.upjohn.org/up_workingpapers/260/


Automation may merely not yet be readily adoptable.


Real estate prices are also part of the problem, especially in urban cores... some Seattle and SF rents are just stupid, to say nothing of NYC


Real estate prices and rent are driven by how much people can only just afford it.

If people earn more, they can afford a bigger mortgage, so house prices rise.


Yeah, but the counter to all that is building new housing, which unsurprisingly very difficult in these areas.


> but the counter to all that is building new housing

I would like to see some stats on that meme.

Anecdotally, what I think happens is that people buying second homes, vacation homes, and more people living one person to a home. People without homes are not clearly advantaged.

I live in Christchurch New Zealand, with a truely massive increase in standalone houses, and significant densification in the city center. However house prices are still booming, and plenty of friends are struggling to find a first home.


Fast food restaurants do fine in other nations. In sweden, one survey puts a Big Mac combo meal at 15% higher than in Fresco. About 1.50 different.

https://www.expatistan.com/price/big-mac/stockholm/USD


> This article unfortunately doesn't address the business side of the problem.

She actually addressees this in the very last paragraph:

> if a business can’t pay a living wage, should it be a business?


You get paid what you're worth, not what you need.


So shouldn't likewise a business pays for what it needs, so if it doesn't find enough employees at a lower pay it needs to increase pay?


If a business can't pay a living wage, the workers will die off and the problem will be solved.


For start, people are allowed to work also in other places.


If they have a better option than their current one, why don't they take it?

Their second best option would typically pay less, meaning the workers would die off even faster.


There are many effects here, for start if food places start going bankrupt remaining ones can raise prices and pay some sensible wage.

And anyway, if getting unemployed means that you will die - then society has a large problems. (assuming country in XXI century, does not apply to historic situation where resources were not sufficient to feed everyone)


Yes? I dont understand how this is a question.

If a businesa is in operation profitably it is because it is providing more value than if it were not, otherwise it would not be able to remain in business


If a business is operating profitably by paying people wages below the cost of living, it is being subsidized by the government and therefore is not independently profitable in any meaningful sense.


I view the government as setting up a playing field which entrepreneurs than explore to find profit opportunities. With welfare and especially the Earned Income Tax Credit, the government created a class of people who can be profitably employed by paying $X below the cost of living. This was intentional, a way to keep people in the market economy even though they're not productive enough to survive in current conditions.

An entrepreneur who employs someone like this is like someone living in New York City in a rent-controlled apartment. You can't say they're not supporting themselves just because they couldn't afford rent in a pure market system. The actual system was purposely designed to make certain activities profitable that would ordinarily be losses. Without people taking advantage of those niches, the subsidies would be pointless.


The subsidies in this case do not exist so that businesses can exploit underpaid workers, though (and are not comparable to something like a rent-controlled apartment, where landlords are just prevented from charging so much that they'll drive out the workforce rather than actively subsidizing with things like food stamps or welfare). They exist because the US is reluctant to let people starve in the streets and die, the fact that you interpret them as an effort to "keep [unproductive] people in the market economy" notwithstanding.

The government bumping up unemployment to the point that people don't have to take certain types of jobs that rely on underpayment for profitability does not contradict that goal, which is why many people are not that sympathetic to small business owners complaining about it.


Employment is an explicit goal of the US welfare system. It's not supposed to keep you from starving if you don't work. That's why you are limited to three months of food stamps every three years unless you are working.

I do see rent control as directly comparable. Government observes a matrix of incomes and prices determined by self-interest in a market economy. Government determines some are not politically acceptable and modifies them. Now the military pays better than before, NYC rent is cheaper, and low-wage workers are more able to survive. Now people build businesses around contracting for the military, living in NYC, and hiring low-wage workers. If government later changes the payoffs to these activities, it's not the businesses' fault for relying on the prices the government set. Government set those prices to enable those businesses.


Usually, this question is brought up when a business is struggling; like in this case, where restaurants are struggling. So the implied context is that other actions are asked for (such as subsidies or laxer laws). The question, like in this case, is whether it should not simply be written of as not providing value, instead of trying to fix something fundamentally broken by, for example, allowing worker exploitation.


The need for wage controls is more apparent in the tech industry. If a hypothetical company with 100 employees registers 10 billion profit and apart from CEO and the board employees make 5 figure salaries, then there is something horribly wrong going on. I think we need a regulation that beyond a certain threshold company should redistribute 30% of profits annually among the staff on top of their salaries. There should also be other restrictions - for example I'd vote for complete removal of dividends. Only way to get paid from a company should be by being an employee and getting a salary taxed as everyone else. The rich have so many loopholes, it is crazy that we allow them to get even richer on the backs of the hard working no name people.


Making sure that dividends are taxed like other types of income could make sense - not sure how this currently works in the US? Removing dividends all-together? That doesn't seem like a good idea, because why would anyone invest in a business, if there is no potential for future cash flows arising from it? Even companies that don't generally pay dividends have value, because they could. So removing dividends would also require another mechanism to incentivise investing in businesses in the first place?


Think of the business side of the problem as a collective action problem. You want to pay your workers a living wage, but to do so, you have to raise your prices. If you raise your prices, your business will go to your competitor, so you can't exist if you increase your wages (and your competitor doesn't). Meanwhile your competitor wants to increase wages but doesn't for the same reason.

If the government mandated that when you raise your prices, everyone else had to too, then suddenly increasing wages won't put you out of business! Same story if the government mandated that you raise your wages (in this particular hypothetical).

You're right that both sides of the equation need to be examined, but it's actually a bunch of equations with a bunch of sides.


> If you raise your prices ... and your competitor doesn't

this means your business is less efficient than your competitor's, or you are asking for a higher margin than your competitor. Both means that the business deservedly fail under the raised minimum wage.

if everybody has to raise their prices to fund the higher minimum wage, then it means the original minimun wage was already at the optimal level for your business!


> Both means that the business deservedly fail under the raised minimum wage.

Isn't the point that it wouldn't fail under a raised minimum wage? It would only fail under an uncoordinated raised wage.


I'm of the opinion that if you're business model relies on paying people so little that they don't even want to work for you, maybe that business _shouldn't_ be viable. No one is forcing you to own a business, just like no one is forced to work for you.


The whole point of a minimum wage increase is that it will increase all restaurants' wage costs to the same degree, at the same time. Meaning that going "down the street", potential diner's will find that all restaurants' prices have increased equally. So the business threat isn't that American consumers will abandon "Dale's" in particular for some other restaurant. It's that they will choose to eat at home instead of eating at a restaurant, or that they will order less food when they do go to one.


"it will increase all restaurants' wage costs to the same degree"

In an ideal world full of law abiding citizens, yes.

In practice, restaurants that cheat are going to win.

I live in a country that has a lot of regulations in the hospitality sector and yet the "paid under the table, not officially employed here" phenomenon is everywhere.


Isn't that already the case, though? There's already a minimum wage in the US. The debate is about increasing the minimum wage, not creating one.


Maybe we need some sort of wage floor or mandatory "minimum"...?


> But they will, they will go down the street--until everyone's prices go up and there is nowhere else to go.

This is why higher minimum wages are so important. They force all businesses (not just the ethical ones) to increase prices to point that workers receive a living wage.


Well you're describing a situation where there needs to be general rise in the cost of labor. Its competition against competitors that don't raise wages that is the problem, right?


> But watch out for technology and automation...that is the part of the equation that has been "solving" the labor problem for some time now...

Brings to mind the growing prevalance of self serve kiosk for placing an order that so many fast food restaurants have now. Removing the need for the cashier all together. That and self checkout at a lot of big chain retail stores. I don't think the business concern is necessarily with making a profit, but making 1% more profit than not.


A 10% profit can be a lot, if like many restaurants you're pulling $5-10k in revenue in a day. Many owners own multiple restaurants, too.


It's a hugely risky business, especially if you're not a national chain. Most mom-and-pop restaurants don't last long. 10% isn't that big a return for that kind of risk.


It's not a 10% return on investment, it's 10% profit.


It would be somewhat a good thing that jobs/services with very little added value like fast food (or even a somewhat negative value) make little margins/profits. We are really way too much in a society of consumption, there are many intermediate and unnecessary jobs and services, and those are the first hit during a crisis


> The problem for the business is that the financial model is set by the fixed or imperative costs

What about profit sharing?

Hire an employee who agrees to get 1K currency units if company (store, resto etc) made 100K CUs.

But 500 if company made 50K CUs and 50K CUs if store made 5000K CUs.

There's always a max cap, but never a min cap. When someone talks about min caps we all get antsy.


>With such a small profit margin, arbitrarily raising everyone's wages is likely going to kill the business.

There are maybe ten lunch places within walking distance of my (suburban) office.

The variety is nice, certainly. I like having a bunch of options. I don't think it would destroy society if I only had half the choices, though.


Just raise the price of the burgers... its not that hard. If everyone raises wages at once then they’ll also raise their prices at once.

And the people you’re hiring won’t have to live off the dollar menu at fast food restaurants anymore.


Forgive my ignorance here, but won't capitalism sort this all out?

Businesses need to raise prices. Some do and less people buy from them. Some can't make ends meet and close. Now the number of businesses is less. So, the number of open jobs is less. Potential employees now have a lower 'supply' of jobs. The wage for those jobs then falls. Somewhere in there, a new equilibrium is reached and everyone is unhappy for a while.

I'm not trying to discount the emotional pain that comes with this process. Putting your life into something that just blows up is hard. Especially when you had nothing to do with it. I feel for those owners, the situation is the opposite of fun.

But this is how capitalism works. The US is not a planned economy like China. Capitalism is core to the system (bastardized as it is). Markets change and shops close up. It sucks, but this is the process as I understand it. If I'm understanding it wrong, I would very much like to know because then I really am missing something big, and that's not good.


There’s another option: reducing hours of operation. Some hours are much more profitable than others.

That’s not necessarily bad for workers. It might mean holding more than one job, which is common in the food business.


https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit...

"The tendency of the rate of profit to fall (TRPF) is a hypothesis in the crisis theory of political economy, according to which the rate of profit—the ratio of the profit to the amount of invested capital—decreases over time. This hypothesis gained additional prominence from its discussion by Karl Marx in Chapter 13 of Capital, Volume III, but economists as diverse as Adam Smith, John Stuart Mill, David Ricardo and Stanley Jevons referred explicitly to the TRPF as an empirical phenomenon that demanded further theoretical explanation, although they differed on the reasons why the TRPF should necessarily occur."

Consider that if the rate of profit tends to fall, and shareholders require greater profits each quarter, how that affects "inputs" such as labor?


No business is entitled to be successful. This is just a case of a business with a no longer profitable business model where they can't compete for employees with other businesses.


If a business makes very little profit - why not closing it? It makes no sense to keep something alive that only works out when you pay your employees basically nothing.


Yep - which is the appeal Universal Basic Income as Andrew Yang proposes...automation is inevitable, have it work for the people rather than increasing profits.


If a business model relies on the exploitation of the vulnerable, it deserves neither our sympathy nor our collective subsidization.


> And all of this is free market capitalism at work. It is a continuous process of reinvention.

I agree with this sentiment. Mostly. But I can't say it freely, or with impunity - I'm on the lucky end of the spectrum partly by my own hard work, partly blind luck to be born in a middle class family, partly because my country has racial equality laws that give me the opportunity. I can negotiate my own terms for work and when I'm out of work I can freelance or build a product. But I can't swallow looking at workers as a line on an income statement. Something about it feels uncomfortable, uneasy. Like casually throwing talent and skills into the ocean when theres still so much work to do.

Sure, it's great for some. Most people in this forum are part of the economic and cognitive elite. I would expect words like automation to be thrown around freely because "optimization" and "free-market" are fantastic myths to belive in. They might even be self-fulfilling prophecies. They just never come up to help people get a leg up. Those families that could be paying taxes are going on welfare, which means we get taxed more but do we have a right to complain and try to dodge out of paying taxes to support the people we've put out of work for the sake of automation and progress? Would we be happy to automate to our hearts content if you had to pay more taxes?


If businesses didn’t have to pay for health plans, would that free up enough to pay higher wages?


Almost none of the jobs in question include health benefits, so it's not really a factor.


What's the absolute number attached to that? 10% could be a lot or very little.


meh, if the only way you can get a piece of the pie is to take it from someone who has less opportunity than you I don't really feel bad.

Cities like Seattle raised their minimum wage, there was a lot of worry that everyone would go broke and there would be no food to eat. As it turned out, a few people shut down and someone else almost immediately opens a similar business in that place.

Not everyone runs a business that is properly priced, or properly managed to make a profit, but lots of people can do it, and they tend to fill the void that is left by businesses that can't offer a product that people feel is worth paying enough to support less than poverty wage.

Even for companies that pay really well, some don't make it.


You do know that businesses can also raise prices, right?


Perhaps those kinds of jobs should be automated.


>the cost of rent,

The real drag on business and progress


The tone of this article also sounded like she was spitting it through clenched teeth, which I found to be incredibly distracting and defeating to the point the author was attempting to make. Was the point small business owners at establishments like Dales are facing troubles because they're fat-cat capitalist Trumpian Covid deniers whose problems aren't valid as such? That's what it sounded like. I look forward to when we can have conversations about topics like economics without hyperbolic intolerance for outsiders serving an ultimately unproductive narrative that has been driven into the ground.

I live in Missoula. I am a regular customer of Black Cat Bakery and I can see them struggling. In fact most restaurants and breweries I frequent face the same issue, a few employees desperately trying to keep an inundated ship afloat. I will tell you this article largely ignores what everyone who lives here understands is the biggest problem faced by laborers in Missoula at the moment. This city is amid a dire housing shortage, expedited by lack of new construction and a migration of buyers from more lucrative economies. The median home price increased by 57% in the last 10 years, 8.6% in the last year alone to $315k. In the meantime the median family income remains only $46k. https://missoulian.com/news/local/missoula-housing-prices-se...

It is truly a seller's dream market and as such the availability of rentals has evaporated. You'd be lucky to find a 1 bedroom right now.

My wife and I bought a home here a little over a year ago and were fortunate to find the nut who, "didn't need a realtor, what with craigslist." Before then we had been outbid 5 times previously, during which we offered up to 30k above the asking price. Frankly, we wouldn't live here if we didn't get lucky. Our experiences weren't unique at the time and it has only gotten worse. I regularly hear of houses selling for 50K over listing price to people buying sight-unseen.

Frankly I don't care what the owners of Dales or Black Cat Bakery think about Covid or whether they voted for Trump. I really, sincerely, don't care. I only hope for the best for their business and their employees. I know what it's like to struggle in Missoula, I did for years and I still would be if not for dumb luck and a bit of privilege. The problems people face today are starting to pale in comparison to my own, and a solution is becoming truly urgent. I can only hope people will come to understand if we care about solving these problems, then we have to put down the tribalism and intolerance for those with different views and focus on the matter at hand.

To quote Vince Staples, "Ain't no money in havin' hate in your heart."


> Was the point small business owners at establishments like Dales are facing troubles because they're fat-cat capitalist Trumpian Covid deniers whose problems aren't valid as such?

You still have to understand the workers are also the one who's getting fucked here. The owner of the grill in the article is deliberately worsening working conditions because of his beliefs on Covid, and it's perfectly reasonable that the workers will leave you to get a new job where your boss doesn't spread Covid on you by not wearing masks. I understand businesses are hard right now, but business owners should care a bit about hygiene, it's not something that would cost you a lot.

> This city is amid a dire housing shortage, expedited by lack of new construction and a migration of buyers from more lucrative economies. The median home price increased by 57% in the last 10 years, 8.6% in the last year alone to $315k. In the meantime the median family income remains only $46k.

But I think you've correctly diagnosed the real issue here - skyrocketing housing costs. Everyone suffers from this, both the workers and the small businesses. And it's a shame that the Dems and Reps are making this an "us vs. them" issue. (There's a similar dynamic in my country too, where liberals try to raise the minimum wage a bit, and then the conservatives fiercely oppose it and latch onto small business owners for support. Of course both the establishment liberals and conservatives are totally incompetent at solving skyrocketing housing costs and general economic inequality, yada yada.)

I think the real issue here is not about workers or small businesses, but just plain-old economic inequality - in the sense that the minority rich at the top can invest on housing at their heart's content (numbers seem to always go UP!) but the majority can't afford those prices. So even though the majority at the bottom knows that the price is bullshit, the bubble will not burst unless the rich realizes that those prices are bullshit (And do they really have to realize? They can still afford those investments though! They can stay being delusional and still enjoy all the luxuries they have!) Market price is now not an objective measure of value, but instead becomes a power that real estate investors can collectively impose onto the poor. Ah, communism for the rich, capitalism for the poor...


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