Seattle's Minimum Wage Killed the 'Five-Dollar Footlong'(reason.com)
reason.com
Seattle's Minimum Wage Killed the 'Five-Dollar Footlong'
https://reason.com/blog/2018/01/10/seattles-minimum-wage-killed-the-five
41 comments
I'm pretty right wing and have opinions about minimum wage that a lot of other hn users would disagree with, but this article is garbage. Basically one store owner said that he can't afford to offer the new promotion because of the minimum wage and other social spendings. That is all the facts we are given. Of course another reason could be because people don't want that product, or that the store owner isn't running the store as efficiently as other nearby stores are. The article then criticises the new sugar tax because the cost of soda is higher. Of course the price of soda is higher, that is the intention.
Everything I know about economics tells me that anytime that you artificially put price floors and price ceilings on anything - including wages - there are unintended consequences. I don't think they should have raised the minimum wage at all. Let the market decide what a fair wage is.
On the other hand, I do care about other people and think that people who are willing to go to work everyday deserve some minimum amount of money. I don't know what that minimum should be.
How do we square that circle? Increase the Earned Income Tax Credit and come up with a way to allow businesses to distribute the credit back to their employees just like we have a way now for employers to take payroll taxes.
Historically, raising the EITC has been popular among Republican and Democratic presidents. Giving more to the poor - who will definitely spend it - does a lot more for the economy than giving it to people who already have enough.
On the other hand, I do care about other people and think that people who are willing to go to work everyday deserve some minimum amount of money. I don't know what that minimum should be.
How do we square that circle? Increase the Earned Income Tax Credit and come up with a way to allow businesses to distribute the credit back to their employees just like we have a way now for employers to take payroll taxes.
Historically, raising the EITC has been popular among Republican and Democratic presidents. Giving more to the poor - who will definitely spend it - does a lot more for the economy than giving it to people who already have enough.
One thing I am curious about is what really would happen if we had no minimum wage. Anchoring bias is a pretty well known phenomenon. If you have a "cheap" item priced at $10, an "economic" item priced at $15 and an "expensive" item at $20 and they are functionally the same. People will choose the middle item.
I wonder if something similar is happening with wages. Because of the minimum wage, a business owner can hire someone to the minimum wage, or something slightly above, without too much thought other than knowing they can afford it generally. So the minimum may be artificially "sticking" wages lower than what they may otherwise be. Of course this is all conjecture and I have no kind of proof for this.
Also, while minimum wage laws are almost universally praised, they (along with a lot of things in the US) have a pretty sad history. https://mises.org/blog/racist-history-minimum-wage-laws
I wonder if something similar is happening with wages. Because of the minimum wage, a business owner can hire someone to the minimum wage, or something slightly above, without too much thought other than knowing they can afford it generally. So the minimum may be artificially "sticking" wages lower than what they may otherwise be. Of course this is all conjecture and I have no kind of proof for this.
Also, while minimum wage laws are almost universally praised, they (along with a lot of things in the US) have a pretty sad history. https://mises.org/blog/racist-history-minimum-wage-laws
Minimum wage laws are not universally praised, those from the Austrian economic side would disagree with that statement. The minimum wage is as bad as licensing for hair wraps, it is a program to drive undesirables out of a market.
I said "almost" because I happen to be a person who pretty strongly agrees with Austrian economics. I'd think that linking a mises.org article might hint at that pretty strongly.
> One thing I am curious about is what really would happen if we had no minimum wage.
For what it's worth, Switzerland has no minimum wage.
For what it's worth, Switzerland has no minimum wage.
Another author who advocates for the removal of the minimum wage is Thomas Sowell, primarily because he views it as enforcing racism (similar reasoning as the link you referenced).
But I'm not sure about this line of thinking. We already do have this in that we have a hidden economy of undocumented workers, and while the lack of a MW provides more work, it also creates different tiers of society, and there is quite a lot of lock-in that perpetuates the cycle.
I could see us abandoning the minimum wage, but only if we make sure to foster the capitalist flexibility with incentives and protections to ensure that flexibility doesn't lead to a race to the bottom.
But I'm not sure about this line of thinking. We already do have this in that we have a hidden economy of undocumented workers, and while the lack of a MW provides more work, it also creates different tiers of society, and there is quite a lot of lock-in that perpetuates the cycle.
I could see us abandoning the minimum wage, but only if we make sure to foster the capitalist flexibility with incentives and protections to ensure that flexibility doesn't lead to a race to the bottom.
I worked for a subway in college... before 9/11... and we could barely afford the promotions back then.
The franchise owners are at the mercy of the Subway corporation-- how it works is, they take all your money by requiring you to buy EVERYTHING from them at inflated prices. You're buying their meat, their bread, their cash registers, their people are remodeling your store, etc.
There used to be something called a sub club card. Basically, after 12 footlongs, you'd get a free one, which was tracked with stamps with your store number printed on them. We had to buy the stamps from corporate, the cards from corporate, and did they reimburse us for the free sandwich? No.
The franchise owners are at the mercy of the Subway corporation-- how it works is, they take all your money by requiring you to buy EVERYTHING from them at inflated prices. You're buying their meat, their bread, their cash registers, their people are remodeling your store, etc.
There used to be something called a sub club card. Basically, after 12 footlongs, you'd get a free one, which was tracked with stamps with your store number printed on them. We had to buy the stamps from corporate, the cards from corporate, and did they reimburse us for the free sandwich? No.
I assume the Costco they mentioned in passing still has the nation wide 1.50 hot dog and soda deal and Costco is a lot better place for workers in terms of wages and benefits over Subway. Did the writer forget this detail or did he drop it because it didn't match his narrative?
Subway is a franchise. Costco can spread the loss of the 1.50 hot dog over membership fees, and marginal markup of products from across the country. A Seattle Subway franchise can not, as they are not charging a membership fee nor do they have other business areas that they can spread the cost over.
Oversimplification and False Analogy.
Oversimplification and False Analogy.
> Costco can spread the loss of the 1.50 hot dog over membership fees,
Costco is profitable before membership fees, though that profit is less than the amount of membership fees. It's not covering any loss with membership fees, it's piling them on top of a small profit to make a bigger profit.
Costco is profitable before membership fees, though that profit is less than the amount of membership fees. It's not covering any loss with membership fees, it's piling them on top of a small profit to make a bigger profit.
If we are going to be pedantic, Costco doesn't subsidize anything with the membership fee, the average and median spending by a member in a month is way more than the annual membership fee. About half the stores near me have the food court outside the store - they don't care if one is a member or not at those stores. In addition, Costco doesn't use loss leaders according to interviews I've read.
Costco's food court benefits from matching store hours and getting customer traffic from the store (and taking the same narrow-margin approach as the rest of the store takes, because low-but-just-profitable product prices sell memberships which make the final profits less low). This gives it more consistent utilization than most subways would have, which means less labor hours for someone sitting around waiting for customers. And subways sandwich approach is fairly high-interaction tional for fast food, while Costco’s is not, which also keeps labor time per customer down even outside of the idle time.
If you’re interested in this story, Google for “Tim Horton’s minimum wage Ontario” and you’ll find plenty of similar coverage, and not just Timmies... A few weeks ago, minimum wage was CA$11.60 an hour in Ontario, it’s now $14 an hour, and will increase to $15 in 2019. But most chain stores haven’t raised prices, so you get conflict, and where there’s conflict, there’s no end to the news coverage...
Businesses in Ontario and Seattle were handed a perfect opportunity to raise their prices. Normally a price increase would cause a loss of business to competitors, but a price raise blamed on the minimum wage hike would have been tolerated much better.
- competitors should be raising their prices too, so there shouldn't be competitors to desert to - opponents of the wage hike will blame the government instead of the business for the wage hike - supporters of the wage hike should be happy to support the higher wages
Yet businesses in Ontario have responded by cutting employee benefits and increasing tip splitting, resulting in significant negative publicity and boycotts.
- competitors should be raising their prices too, so there shouldn't be competitors to desert to - opponents of the wage hike will blame the government instead of the business for the wage hike - supporters of the wage hike should be happy to support the higher wages
Yet businesses in Ontario have responded by cutting employee benefits and increasing tip splitting, resulting in significant negative publicity and boycotts.
The companies do not need to raise prices, they have a few strategies to take:
1. Keep prices the same and hope to make it up on the increased traffic if competitors increase prices; employment costs stay the same.
2. Keep prices the same; adjusting the costs in employees to offset the higher value they must be returning.
1. Keep prices the same and hope to make it up on the increased traffic if competitors increase prices; employment costs stay the same.
2. Keep prices the same; adjusting the costs in employees to offset the higher value they must be returning.
Higher minimum wage, IMHO, leads to a zero sum game. Wages increase, then prices increase, returning us right back to where we started. Businesses are not going to give up profit, and I think it's basic Econ 101 that if your fixed costs rise, you increase prices, or you shut down. The minimum wage in Sydney, Australia is $17.70 per hour. This has led to an increase in everything - from food to apartments. Sure you're making $17.70 an hour, but that apartment that was previously 1,000 a month is now $2,000, so you've really gained nothing.
Any real data to back all these assertions up? Say, a price/minimum wage chart?
One Subway does not a correlation make. Neither does a price hike that can be caused by a myriad of causes not necessarily related to minimum wage.
One Subway does not a correlation make. Neither does a price hike that can be caused by a myriad of causes not necessarily related to minimum wage.
If you compare minimum wage hikes to inflation you can see they're very closely linked – to the point that a minimum wage hike only ever results in very short buying power increases.
We made it illegal to sell something for what it's worth. What's the worst that can happen?
Economics 101 says supply equals demand at all price levels. So there is no one "what it's worth."
Baking in (no pun intended) externalities into the price is better than just shuffling it off into the wastelands of government deficits.
The market and I are not obligated to make a profit for Subway just because conditions have changed. If their entire value proposition was to be the lowewt cost food provider, that's on them.
Baking in (no pun intended) externalities into the price is better than just shuffling it off into the wastelands of government deficits.
The market and I are not obligated to make a profit for Subway just because conditions have changed. If their entire value proposition was to be the lowewt cost food provider, that's on them.
"The net outcome: In 2016, the 'higher' minimum wage actually lowered low-wage workers' earnings by an average of $125 a month."
No, it turned some of the low-wage workers into higher-wage workers, leaving not as many low-wage workers and therefore less total work done and money earned by low-wage workers. Which was the goal.
Now if the goal of raising the minimum wage were to ensure wages were low, you're right, it's a disaster!
No, it turned some of the low-wage workers into higher-wage workers, leaving not as many low-wage workers and therefore less total work done and money earned by low-wage workers. Which was the goal.
Now if the goal of raising the minimum wage were to ensure wages were low, you're right, it's a disaster!
I bet that the people priced out of a job totally love getting $0/hour vs the evil wage they were receiving before.
> The biggest cost driver, as Jones' sign mentions, is Seattle's highest-in-the-nation minimum wage. It went from $9.47 to $11 per hour in 2015, then to $13 per hour in 2016, with a further increase to $15 per hour planned.
Good thing businesses just got a big tax cut which will help offset those wage increases. Some companies even voluntarily raised their minimum hourly wage to $15 as a result of it.
Good thing businesses just got a big tax cut which will help offset those wage increases. Some companies even voluntarily raised their minimum hourly wage to $15 as a result of it.
If the business was breaking even before the tax cut, how would it help them to absorb increased costs?
I lived in LA several years ago and there were quite a few places that did not honor the same pricing as the rest of the national chain including Subway so I think there’s more than a minimum wage impact.
The real "minimum wage" is actually "zero."
It's slightly above zero but a race toward zero.
I think the parent was implying that the real minimum wage is no job.
Real minimum wage is chattel slavery. You get paid in bare minimum living expenses.
Tl;dr: Seattle firms need to pay employees decently which is bad for hungry right-wing journalist's wallet.
(Edit: my argument is not that this is somehow a bad thing to write, but that it's an opinion piece disguised as neutral reporting)
(Edit: my argument is not that this is somehow a bad thing to write, but that it's an opinion piece disguised as neutral reporting)
Seriously. "the consequences of high minimum wages, excessive taxation, and mandate-happy public policy are not limited to the death of cheap sandwiches." No leap to conclusions about causality there. Nope. Can't possibly be that greedy bastards simply used this policy change as an excuse to make a statement.
Haha. You and I both just simultaneously quoted the same absurdity and both followed it up with sarcasm. :)
Choice quote, “Sadly, the consequences of high minimum wages, excessive taxation, and mandate-happy public policy are not limited to the death of cheap sandwiches.”
I know, right? Isn't it just awful that the working poor might get a decent living wage and decent public services. It's enough to make you puke. /s
The blog is aptly titled: "Hit & Run"
I know, right? Isn't it just awful that the working poor might get a decent living wage and decent public services. It's enough to make you puke. /s
The blog is aptly titled: "Hit & Run"
Haha. You and I both just simultaneously quoted the same absurdity and both followed it up with sarcasm.
Not taking a stance, but this exchange seems kind of suspect:
braindongle 43 minutes ago [-]
Seriously. "the consequences of high minimum wages, excessive taxation, and mandate-happy public policy are not limited to the death of cheap sandwiches." No leap to conclusions about causality there. Nope. Can't possibly be that greedy bastards simply used this policy change as an excuse to make a statement. reply
igravious 27 minutes ago [-]
Haha. You and I both just simultaneously quoted the same absurdity and both followed it up with sarcasm. :) reply
mikeash 43 minutes ago [-]
I think the article grinds its axe way too hard, but I see no attempt to disguise it as neutral reporting. reply
igravious 44 minutes ago [-]
Choice quote, “Sadly, the consequences of high minimum wages, excessive taxation, and mandate-happy public policy are not limited to the death of cheap sandwiches.” I know, right? Isn't it just awful that the working poor might get a decent living wage and decent public services. It's enough to make you puke. /s
The blog is aptly titled: "Hit & Run"
reply
braindongle 40 minutes ago [-]
Haha. You and I both just simultaneously quoted the same absurdity and both followed it up with sarcasm. reply
braindongle 43 minutes ago [-]
Seriously. "the consequences of high minimum wages, excessive taxation, and mandate-happy public policy are not limited to the death of cheap sandwiches." No leap to conclusions about causality there. Nope. Can't possibly be that greedy bastards simply used this policy change as an excuse to make a statement. reply
igravious 27 minutes ago [-]
Haha. You and I both just simultaneously quoted the same absurdity and both followed it up with sarcasm. :) reply
mikeash 43 minutes ago [-]
I think the article grinds its axe way too hard, but I see no attempt to disguise it as neutral reporting. reply
igravious 44 minutes ago [-]
Choice quote, “Sadly, the consequences of high minimum wages, excessive taxation, and mandate-happy public policy are not limited to the death of cheap sandwiches.” I know, right? Isn't it just awful that the working poor might get a decent living wage and decent public services. It's enough to make you puke. /s
The blog is aptly titled: "Hit & Run"
reply
braindongle 40 minutes ago [-]
Haha. You and I both just simultaneously quoted the same absurdity and both followed it up with sarcasm. reply
I know you're not meant to kid around on HN (too much) but I couldn't resist copying braindongle's response to me with an added :) because as he pointed out we more or less at the same time posted the same reply to our parent comment and I wanted to acknowledge their pointing out the coincidence humorously. I assure, I have no idea who braindongle is. Great minds think alike and all that!
[deleted]
I think the article grinds its axe way too hard, but I see no attempt to disguise it as neutral reporting.