Millions of people truly believe that raising the minimum wage to $15 will result in millions of workers receiving a large wage increase, and a living wage . . .
More below the fold.
. . . reality is about to make a house call on those millions of employees.
Knock, knock, pink slip calling!
Tragically, the mostly middle class and upper middle class progressives who will have voted these minimum wage increases into existence will be blissfully ignorant of this chaos. They will be amazed as these businesses increasingly automate, but they will also be blissfully ignorant of the consequences of this automation.
However, to the progressive this sounds like a wonderful story, and if one closes her eyes, and covers her ears, and shouts "peas, and carrots, peas, and carrots, peas, and carrots" as loudly as possible perhaps one can avoid seeing or hearing the consequences when the economic Grim Reaper comes calling on minimum wage job holders.
But is it moral?
The answer is, of course, no. The moral thing to do would be to eliminate the minimum wage, and allow potential workers and potential employers to negotiate the wage. But instead we decide that no man should be able to agree to work for less than $15 per hour! Which is simply saying to those who do not have the skills sufficient to be worth $15 per hour, "Eat cake."
We should do everything in our power to make sure the people most hurt understand it is the politicians, the socialists, and the progressives who engineered their poverty, and relegation to permeant second class status.
It would only be fair to avert our eyes while they extract their revenge.
What makes this all the more awful is that the people hurt will not be the middle class, or the upper middle class, or the wealthy. It will primarily be the poor, and secondarily it will be the people earning too much to feel a wage bump from the minimum wage rise. Those earning $18-25 per hour are unlikely to feel a bump in wages, but the businesses relying on minimum wage workers will have to raise prices. So, those in the lower middle class will pay more for products without a bump in pay.
The progressives have simply engineered a policy to pay for the minimum wage hike without affecting the progressives, instead they hit the lower middle class.
Renzi, the former CEO at McDonalds, makes some points:
"'They’re making millions while millions can’t pay their bills,” argue the union groups, suggesting there’s plenty of profit left over in corporate coffers to fund a massive pay increase at the bottom.
In truth, nearly 90% of McDonald’s locations are independently-owned by franchisees who aren’t making “millions” in profit. Rather, they keep roughly six cents of each sales dollar after paying for food, staff costs, rent and other expenses.
Let’s do the math: A typical franchisee sells about $2.6 million worth of burgers, fries, shakes and Happy Meals each year, leaving them with $156,000 in profit. If that franchisee has 15 part-time employees on staff earning minimum wage, a $15 hourly pay requirement eats up three-quarters of their profitability. (In reality, the costs will be much higher, as the company will have to fund raises further up the pay scale.) For some locations, a $15 minimum wage wipes out their entire profit.
Recouping those costs isn’t as simple as raising prices. If it were easy to add big price increases to a meal, it would have already been done without a wage hike to trigger it. In the real world, our industry customers are notoriously sensitive to price increases. (If you’re a McDonald’s regular, there’s a reason you gravitate towards an extra-value meal or the dollar menu.)
Instead, franchisees can absorb the cost with a change that customers don’t mind: The substitution of a self-service computer kiosk for a a full-service employee."
Some amount of change will be through price increases, but Rensi is correct, the customers will only allow a fairly small price increase before they simply cuts the budget for these items. Most people will continue to eat at McDonalds, but spend pretty close to the same amount as they did before. So, if the price rises 50%, they only buy half as much or half as often, or they buy cheaper products. Automation will also help, and this will ease the path to the fully automated fast food kiosk. Which means even more, and unrelated job losses in the future.
The likely outcome is actually the worst outcome for the workers. These large increases are likely to cause mass firings, automation, and some price increases. This means that the lower middle class will see a large increase in costs in their budgets, but no wage increases; the minimum wage workers will mostly be out of work, and $0 per hour makes it hard to afford pretty much anything, and the money transfer will be to the franchises to purchase automation, not employee wages. Many of these businesses which can make it today will be bankrupt tomorrow.
Another likely outcome is that employers are likely to have a mindset change, where before small incremental minimum wage increases were thought of as difficult but doable for the business. It is likely hereafter that the employers will see low wage workers as a big negative. These workers come wit the potential for a huge increase in wages, and the chaos this creates. Why have them at all, or employees at all? This will create much greater pressure to automate even if there is no additional pressure on wages. Before the pressure to automate was triggered by external events. After this it is likely the desire to automate will simply become an independent goal.
Minimum wage workers, don't forget to thank President Obama, the progressives, and their fellow travelers!