Take a fake employee named Susan. Presently you pay her $12 an hour for an average of 24 hours per week. In a normal month Susan receives 4 weekly paychecks for a grand total of 1152 before taxes or deductions with which to pay per bills.
Susan is serving you a plate of food for $15
Now imagine you raised her wages to $14.40 and offered her full time. Her wages are now 2304. She is making twice as much money and now the food sadly must cost... $15.90.
But you say Susan doesn't want to work full time she has other responsibilities, other jobs for example!
This is because you and your industry have specialized in each paying Susan to run around between her 2-3 jobs so she can afford to live so she can get enough hours to live without any of you having to pay benefits. It could also be because your industry pays too little for anyone to afford to live so you have collected workers who have lesser need because for example they are spouses of well paid workers earning supplemental income. As the cost of living rises faster than incomes this isn't a stable equilibrium. Even Sam spare time may find he needs to earn more to live and if Sam moves on to a real job, graduates college, moves out of his parents home etc you can't be sure you can replace him at your less than survival wage.
The service industry isn't a benefit to America its a diseased kidney and if the entire industry as it is died not much of value would be lost.
right, businesses are all malign and evil, and they could raise their prices by 6% (without losing any business), but they just haven't, because they prefer to... have an excuse to pay less?
> But you say Susan doesn't want to work full time she has other responsibilities, other jobs for example!
any of my staff who didn't want to work full-time usually wanted to spend more time with their kids. or take classes.
Let's assume that the reason you'd supposedly lose business with higher prices is due to competition not raising their prices. If you're struggling to find workers such that you have to raise prices to cover better wages, then it stands to reason your competitors are in the same boat, so either they keep struggling due to lack of labor or they raise their prices to match. Alternatively, they have a much more efficient business than you and you should go under anyway. Nobody owes you a successful business.
Now let's assume that the reason you'd supposedly lose business with higher prices is due to people not being willing to pay that much for your product. Well, if your business revenue can't even afford to pay the labor that keeps it running than your business is a failure and should go under. Nobody owes you a successful business.
I absolutely do not subscribe to the idea that the purpose of society should be to ensure there are enough desperate people to fill labor positions for untenable businesses.
Your moral impetus isn't an important factor in trying to understand underlying dynamic of the situation.
There's a basic operating competitive dynamic going in small business & services that is almost as old as time, or at least it goes back to even before antiquity before we even had the language to describe the economics of it all.
Huge swaths of the economy operate on this basis.
Most small business owners are not particularly rich, and if you add up the risk premium they take on, they're probably not that far ahead at all, if at all.
Wages are what they are due to input costs (including labour) beyond their control.
They have no market power and they are 'price takers' not 'price setters'.
There's generally no situation in which they can magically raise wages and give longer hours as the OP fantasized.
The only thing they can do is hope to be especially prudent, intelligent, conscientious and of course lucky.
Larger entities & chains (i.e. Starbucks) probably could raise wages a bit. Regulations such as minimum wage will obviously have an affect but have side effects. And of course large pools of illegal migrants who's presence hugely skews the above board market for labour (this is major factor in Texas and Cali).
No, but I read the implication of all this whining about business having small margins and not being able to find workers as a call to action to, well, intentionally make people's situation more desperate so they'll work shitty jobs for shitty pay so these business owners can make more money.
> Most small business owners are not particularly rich, and if you add up the risk premium they take on, they're probably not that far ahead at all, if at all.
How is this my problem? They started a business, they accepted the risk, it's their problem.
If allowed they will continue to do this until they go out of business then insist that the government destroyed their business. Then the banks will lend more money to the next round of idiots who will happily do the same.
"companies you could fill those labor hours trivially by making existing staff full time drastically increasing their wages" ?
So the company will 'trivially' have 2x more revenue to be able to offer everyone full time jobs?
While raising prices by 'only 6%' - you understand how Supply and Demand works?
You are the one paying for those services. If you were willing to pay any material amount more, there'd be higher wages.
In addition to Supply and Demand you have 'competitiveness' - service industries run on razor thin margins not by choice (!!), it's the nature of competition.
By having tons of illegal workers, willing to work for less, you guarantee lower wages.
The #1 driver of low wages in America is essentially illegal migration, which is encouraged by the same people who want higher wages.
But all of this is moot: It's immoral (and probably illegal) to collect unemployment benefits if you can be working. In addition, smaller service industry companies cannot afford to pay substantially more, and they will be hit much harder by 'worker subsidies' than Starbucks across the street who will put them out of business.
Supply and demand pushes a market towards an equilibrium state it isn't gravity the market is still made up of human choices. It doesn't constrain you to a specific set of decisions. Don't base your argument on economics if you don't understand economics.
Just because you have chosen to value a labor hour at $11 an hour and a burger at $14.99 doesn't mean its fate. You CAN pay more and you can charge more and because wages aren't most of your labor costs the price doesn't rise linearly with the cost of labor.
This is also complete bubkis
"The #1 driver of low wages in America is essentially illegal migration, which is encouraged by the same people who want higher wages."
Please feel free to back it up.
Millions of managers and CEOs will be ever grateful for that deep insight they couldn't otherwise fathom themselves ... if only they could read HN!
Or maybe we can assume 'They Have Thought of That' and that it's a dynamic already in play. Obviously.
"Supply and demand ... It doesn't constrain you to a specific set of decisions. Don't base your argument on economics if you don't understand economics."
If you understood economics, you would realize they fundamentally constrains your choices. They are literally 'the biggest constraints'.
Small businesses are competitive, and generally keenly aware of what their margins and pricing pressures are. If they could magically create worker stability with a simple price increase -> wage increase function, they'd do it.
Raising prices by 6% across the board is not a solution to anything, it's just inflationary.
FYI California has 3 million illegal aliens [1]. That's about 8% of the population. If you consider that they have no benefits, are slightly younger, they're more likely to be working, that's a 'very solid and probably greater than 12% of the labour market'. Given that they are likely in the lower income bracket, it's probably well more than 20% of working class jobs.
That's a massive proportion and it will fundamentally affect prices for everything.
California's wealth is derived as much from illegal labour practices, paying illegal wages, and illegally not providing worker benefits.
The surpluses go into the pockets of every Californian in the form of cheap prices all the way through the value chain.
A solution could be to work very hard to ensure that every business was ruthlessly enforcing labour standards, wages, conditions and benefits. But that would price those illegal workers out of the market (the only reason they are employed is because they are very inexpensive) and they'd likely have to return home - or be permanent wards of the state. Hence the giant and obvious hypocritical paradox of the California economy.
[1] https://en.wikipedia.org/wiki/Illegal_immigration_to_the_Uni...
" Don't base your argument on economics if you don't understand economics."
Nobody is interested in you proving that minimum wage is the primary force driving down pay by virtue of you making up the numbers for what portion of the labor force immigrants make up and then concluding since its a really big number of workers it MUST have the effect you describe and then busting out the wikipedia entry on illegal immigration.
This isn't moving the discussion forward.
If you want to avoid a billion businesses paying shitty wages for mostly unnecessarily part time jobs the path forward is simple.
Increase minimum wage and make it a function of total dollars AND hourly. The greater of 600 per week or 15 per hour. Make it expensive to rely on part timers. Meanwhile we can make benefits especially health benefits not the employers problem by rolling out universal health care.
Everyone's costs WILL go up but they will go up evenly and if we end up with a few less Taco bells the world will probably be a better not a worse place.
How on earth did we just just dropped all pretense at being civic?
And also: "It's also obvious what employers need to do if they are short-staffed."
That's actually not obvious. Have you owned a small business? Like a cafe, especially through a pandemic? Do they just have magic pools of profit from which to pay people more? Some places do, but usually they're the big chains. These kinds of situations just push regular owners further downhill vis-a-vis the Starbucks down the street which some might argue is 'good for efficiency' but I'd argue that we lose in choice and authenticity quite a lot.