Menu prices are higher here. But not as much in proportion to housing hikes. That's the current dividing line between haves and have nots. It doesn't seem to let up either given all the money flowing from the East and wall street hedge funds buying them as an investment. Honestly, it'll be interesting to see if there are any inflationary pressure but keep in mind the state min wage was already higher than the national average
Hmmm... Imagine how much we could drive down menu cost if we had slave labor for restaurants Sign me up to re-instate some slavery!
If McDonald's has to increase pay five dollars an hour for five employees working 30 hours a week, 2400 a month, where is the extra money gonna come from?
Do you live in southern or northern California. Whats about the cheapest one bedroom you can find in your area
Is any of this surprising? Of course they will raise menu prices, and of course they will cut hours/employees. If they could absorb a nearly 50% wage increase and not raise prices, then there is something really wrong with wages. The real question is what are the long term effects and we really do not know. This is an issue that I view as gray, not black and white like a lot of people do. We will need to wait and see the long term impact. I expect some good and some bad to come out of it.
A combo of prices, efficiency, and increased sales most likely. Remember, McDonald's customers are often minimum-wage people, so they now have more to spend at McDonalds. If you're a minimum wage employee and your wages go up by 33% while McDonald's and other food prices go up 15%, you're better off and willl likely spend more at those places. For the restaurant, since not all their costs are labor, their prices don't have to go up nearly as much as people's incomes rise. In your example, at $5/hour x 30 hours x 5 employees x 4.5 weeks/month, that's $3375 in extra expenses per month. If they do $200,000 in sales per month, that's a 1.7% increase in prices to cover that, while their customers are often making 20-30% more. (realistically, McDs employs a whole lot more than 150 hours of labor per week, but I don't know much they make or how much the increases would be, so I went with your numbers.) That said, a big wage hike is disruptive and affects different industries differently. Labor-intensive industries will be different than goods-driven. High-end will be different than low-end. Etc. Generally, you want any wage increase to happen incremently over many years.
Why are minimum wage people spending more at Mickey D's. They weren't eating enough They actually probably go some place nicer Your example isca big assumption. The wage hike is a given Edit: i think minimum wage should be $10 an hr. Thats still a 2.75 increase and thats significant. I think 15 is extreme. On costs for small businesses i think you obviously factor it in the decision but really the government should really consider things like helping people afford rent whereas you dont increase it too much driving things like rent up
They don't have to spend more specifically at McDonalds for the model to work, since the wage increase is not exclusive to McDonalds. They will spend more somewhere, and that is the point.
You're right. I apologize to @Major. I was arguing to argue. Even if McDonald's guy has to close he wll find something else. I edited my post to say the real concern on minimum wage is making sure people can afford things like rent
I tend to agree on this - the big problem is that we don't just index minimum wage to inflation, so it goes long periods with losing buying power and then has to get jacked up in chunks whenever there's enough political willpower for it. This is the effective minimum wage over time: What government really should be doing is trying to figure out where that blue line should be and keeping it relatively flat or only slightly increasing (if you want to raise the effective minimum wage). Indexing it to inflation would be such a simple solution. Instead, we do a terrible job with how we manage it right now.
Perhaps unsurprisingly, I'm of the opposite opinion. Government tends to screw up markets when they try to help make things affordable for people -- rent, utilities, healthcare, education, etc. I'd rather they stayed out of all that and focus government power on making sure people earn enough to pay market prices for all these things. Therefore minimum wage hikes, progressive tax policy, UBI, empowering collective bargaining, etc.
Well, how about a little math. Take a Big Mac. Wages in Houston $10.00/hr. (probably generous) California $15.00 hr. Roughly one quarter of the price of a Big Mac is labor. The dollar menu would go up to $1.25 if we are just talking about the labor. All the little arguments transmitted from the libertarian/conservative, biz press and think tanks incorporated by little guys have been proven wrong. I was in California twice this year. Restaurant prices are not that much higher than here in Houston. lol for the "math" of the argument of the proponents of the $7.25 minimum wage we have in Houston who fear that if others have a bit more they will have less. According to their fears most of the restaurants should have all closed in Los Angeles and they should all cost double. Maybe I will resurrect some of the old threads on this forum about this topic for grins. For those who read the Biz Press and Fox you would think that they would be writing lots of articles about the disaster that should be happening on the West Coast.
My intended point is that Cali's case is fairly unique to the West Coast because of tech IPO money and Far East investors driving up Real Estate valuations and rent. The state mandated gradual min wage hikes serves both as a reason and a plausible excuse to their customers for a price hike. Rent is not cheap. I live in OC and work around Newport Beach/UCI and the Irvine Company is probing for every reason to exact rent hikes on business while pruning out the dead weight. When I lived in Culver City, things weren't exactly cheaper, but you could find places 2/3 dollars cheaper if you knew the area. After the hike, things rose up a buck or two. I think they were always feeling the crunch impacting their already low margins. This made it more noticeable to raise prices without pissing customers off. I've lived in both. SF is riduc and I wouldn't live in tech Everest again unless you gave me five lotto tickets with a 50k guaranteed payoff to suffer the random people and the CoL. The rent question you could answer on zillow, but we all know it's about how old, how big, how far, and how well off you feel like you want to live.
The bogeyman that gets trotted out is that all these folks who'll now have two nickels to rub together will cause inflation, making their raises self-defeating while eroding everyone else's wealth through higher prices. One, I rather doubt it. Two, no one ever complains about the inflationary effect rich people have. Three, if minimum wage were tied to inflation, it might create a vicious cycle but it won't be self-defeating -- their wages would just keep going up apace. Four, if it did somehow create a vicious cycle and erode everyone else's wealth, that's not necessarily a bad thing. Other workers will also demand higher wages to cover inflation, which will eventually work its way through. The only loser, who can't demand compensation from somebody else, is the stockholder, who has been taking the lion's share of the wealth we've created in the first place. Meanwhile, yes some restaurants might close because their business model of relying on paying below subsistence wages to workers may no longer be viable. That's fine; I'd rather not have industries that only exist on exploitation. That means some folks are out of work, which is not great. It is why I rather like a UBI. If your labor isn't valuable enough to make $15/hour, stay home and write poetry and take $18k UBI (150% of the poverty line, or whatever number we settle on) -- or go to school, or take an apprenticeship, or whatever -- because I'd rather a person spend his time elsewise than work for insufficient pay (this is where the conservative posters tell me their going to quit their good jobs so they can take $18k to sit on their asses). As it is though, without UBI, the higher minimum might put some low-skill workers in financial distress from the disappearance of jobs in their pay band. That doesn't mean you don't do it. It means you do something more to mitigate the financial distress.
Apologies if it's been said already, but here's what's happening in SF (definitely a "ridic" place to live, as has been said above): The $15/hr isn't driving additional restaurants out of business right now, BUT they just can't find workers who can live within a healthy commute of their establishment and survive on $15/hour. More and more restaurants, even fairly nice ones, are doing away with table service. You order at a counter and take a number to your seat, even if you're, like, paying $16 for a plate of (fairly good) pasta and $11 for a glass of wine. LOL.
Raising the federal minimum wage would be a good thing. California raising its minimum wage will not undo the problems mass immigration has caused.
Actually the same thing is happening at Houston. More and more of the places where you order at the counter and maybe even pick up your food at the counter are trying to get you to add a tip. So far the old fast food chains are not trying to get you to add a tip to the credit card. I was surprised a relatively new ice cream shop in midtown where you order and pick up at the counter was trying to get you to add a tip for your cup or cone.
