A good question arises. I post this not to make a point, but because I do not know the answer. If business declines 5.7%, does that at some point reduce the number of workers that would be needed at that location? If so, then by increasing the minimum wage we would be contracting the number of minimum wage jobs. For those impacted, they would go from $7.50 an hour to zero.
My proof. The study is dealing with the effects that raising prices have on soft drinks, but it also notes that the price elasticity of demand for fast food is slightly higher than that of soft drinks. Consequently, if soft drink sales would decrease by 10%, so should fast food. And? Is there a point to be made here? Because aside from magnetik's ramblings, no one's called for pure capitalism over these last few pages. I haven't. Refman hasn't. So why are you rambling about the side effects of raw capitalism?
No, because if you increase prices 10%, and your business declines 5.7%, you make more money, not less.
I don't see the numbers for fast food or the reference you are making. Spurious data. Here's my source: http://www.hindawi.com/journals/jobes/2012/857697/ I have no idea what in the world you are talking about. Also I did not write that.
ROBOT SERVES UP 360 HAMBURGERS PER HOUR http://singularityhub.com/2013/01/22/robot-serves-up-340-hamburgers-per-hour/ Many minimum wage earners ARE easily replaceable. Just something to think about.
Uh, what? Sure, you increase prices 10%, but according to you, the whole point of increasing prices is that you're paying your workers more, so your profits don't increase at all from it, and they decrease from the smaller business. If increasing prices 10% and your business declines 5.7% would net a business more money, why hasn't McDonald's done this already? As for your source? Well, your source uses mine. #24. And your study says using the data from my study, "A systematic review of time series and household survey studies on price elasticity of demand for food found that consumption of food away from home was more responsive to price changes than any other food category with a 10% increase in price associated with a 8.1% reduction in consumption". Perhaps not 10%, but still 8%. And 8%, 5%, this is still a major loss especially since they won't be getting new profits from those higher prices.
You'd still have a decrease in sales of 5.7%, which is the relevant factor to employment. A business doesn't just keep employees it doesn't need for the hell of it.
Good catch. Regardless, fast food prices are still inelastic (below 1.0 being quoted above). These businesses will do fine with minor minimum wage increases. Most likely they don't pass much of the price increases on to the consumers but it take it out of their corporate profits. Let's keep in mind that u.s. companies have more cash then they have ever had. They are sitting on so much wealth that it is part of the reason the economy is in the doldrums.
Wanna see what happens when you jack with the minimum wage? Take a look at what just happened in DC. DC's city council tried to implement a "living wage" (note the attempt to persuade people with the words "living wage") and Walmart, who previously was going to open 6 new stores in DC, told them, "uh, we're just going to open 3 new stores if we have to pay that much more, and we may decide not to even open those 3." The "living wage" law was aimed squarely at Walmart -- it was for companies with sales over $1B, 75,000 sq ft or more in the location and no unions. That's Walmart. DC government at its finest. So take your pick, higher wages and fewer jobs, or lower wages and more jobs. That is the question. http://www.nytimes.com/2013/07/21/us/washington-push-on-wages-has-walmart-balking.html?_r=0
unfortunately, many minimum wage consumers aren't. Try to get that robot to buy some burgers, instead of making them. (i don't think so)
Will a lack of Walmarts leave a niche for small business owners? Is more small business, with more ownership better for the prospects of a middle class than a mega corp that pays poverty line wages and avoids corporate taxes?
haha and like drones, FranchiseBlade and Dubious attack "big bad Walmart". Dubious with even a decades old retort (e.g., walmart pharmacy evilness) The choice was plain for DC -- more jobs, or fewer jobs. They chose fewer jobs.
that dichotomy has been disputed in the economic literature (most notably by Alan Kreuger and David Card). A VERY good paper on this that can explain--- http://dspace.mit.edu/bitstream/handle/1721.1/10843/35264065.pdf?sequence=1 TLDR: if you assume in an imperfect search model (i.e the real world where a worker does not have accurate information about the current market wage) than a higher minimum wage actually increases the distribution of wages and leads to more hires, and less quits, in certain markets. (more workers satisfied with wage offers) This effect can actually lead to aggregate increases in employment in certain industries. maybe the question you should really be asking is higher wages, or higher purchasing power. Given how inflation lags behind wages but is theoretically, inevitable, that's a more interesting argument. (especially when you think of COLAs).
ramble, ramble, ramble, no point. So you are in favor of higher minimum wages or not? Enough with your academic papers that are inconclusive and not addressing the point at hand.
McDonalds operates largely on a franchise basis, so it's hard to shove through price increases uniformly off the bat (especially with international branches). It's hard to take aggregate economic analysis and apply it to one firm as well, even a firm as large as McDs. It is possible (in fact even probable) that price elasticity is to the point where they can safely raise prices and make up for volume loss with that price increase on a purely theoretical basis, but that's subject to corporate considerations (value positioning and brand in comparison with competitors). There are also probably significant menu costs (http://en.wikipedia.org/wiki/Menu_cost), which encourage static prices unless a situation forces their hand. With that said, an analysis that demonstrated economic profit from elasticity would indicate that forcing their hand would not be fatal, and perhaps, in aggregate, be of benefit to all.
