No, you have to increase prices with the labor cost but raising prices doesn't hurt the customer as much as low wages hurt the employee, customer service and the company due to turnover. I can have all of the personal opinions I want, but there is a very strong argument that raising wages helps everyone involved as a whole from a business perspective.
We've had to increase our prices this year for delivery to pay our drivers reimbursement (even the bike drivers who spend money on their bikes, even though that's our choice and not required) and raise prices on food because of rising labor cost. It's very, very tough to get quality workers these days unless you stay competitive on wages.
The blessing this year has been that food cost have come down which takes some of the heat off of the rising labor cost. When it comes to managing the cost for us you have to keep food cost and labor cost at around 50% to make a profit. Making a profit isn't only important for the company but it also helps keep our wages competitive because 25% of a store profit each period (every four weeks) goes back to the store management.
I fully understand the example early about the accountant at $40K, but the new regulations are helping us long term. We went from salary to hourly three months ago and our turnover has decreased drastically with management. In my particular industry, that pays dividends over time. I know the response will be that you don't need the government to tell you that but in food service it's all about instant gratification with profits which is often at the expense of the employee.
Thank you, I appreciate your perspective on this and an honest reply.
Increasing minimum wage in what are considered traditional entry level jobs into the workforce is a rickety economic see saw. I’m well aware there are families where both spouses might work two minimum wage jobs apiece to keep afloat. While the emotional part of me wants those people to be able to feed their children and keep a solid roof overhead, sudden changes in wage conditions can end up costing those folks their job if their employer is unprepared for a sudden uptick in wages, assuming they work for smaller enterprises rather than a national chain.
Granted, a Royale With Cheese going from $3.50 to $4.50 overnight doesn’t alter the rest of the economy like it does with commodities such as gasoline going up $1.00 suddenly since most people can get by without a cheeseburger or there are other options. When gas goes up significantly, the consumer economy in general feels the pinch.
When all wages are set to rise by government edict, it would stand to reason that consumer prices would go up in the end and really no one has better purchasing power than they had before. Someone might net $10 per hour instead of $5 but if all that person’s day-to-day living costs have doubled, they are no better off than before. Perhaps there is an economic theorem where someone’s cost of living does not go up by a commensurate amount and I’m simply out of the loop and talking out my a$$.
When gas was near $4.00 a gallon in July of 2008 that certainly did not help the overall economy since people living paycheck to paycheck essentially had to choose between new shoes or a pair of jeans or filling up their car to be able to make it to work for the next few days or a week in order to still buy meager groceries.
For someone with means, if their local deli has to raise the price of a pastrami sandwich by $1.00 or $1.50 to cover higher labor costs it’s no big deal and probably goes unnoticed. To the family of six living near the poverty line which considers the occasional family meal at a national chain fast food restaurant as a nice respite from boxed and canned food, I get where it is a struggle.
There is good reason for government to make sure workers are not exploited like they were during the industrial revolution, no doubt. But there is a point where the government can do more harm to industry and consumer economics by setting somewhat arbitrary wage structures without concern as to what happens to employers wage costs and how those costs are passed down throughout the economy.
