Hacker News Reader

Comment by staticautomatic | Hacker News Reader

There are somewhat hard limits on the availability of labor though. I know a guy who owns a very popular and expensive restaurant that had to start closing one day a week because he couldn't find enough staff, and not because he pays them peanuts.

View on HN

There are hard limits on the supply of skilled labor. Less on the supply of semi-skilled labor. The situation implies that some people will substitute less-skilled cooks for skilled ones. Hence the overall quality of SF restaurants will decline but restaurants will continue to exist - those dining out will simply choose the best of a less-good collection.

> not because he pays them peanuts

Not paying peanuts still doesn't mean it's enough.

But if customers pay in peanuts and you have to offer staff cashew or macadamias to attract enough skilled employees, you might find you have a non-viable business.

This is my general response whenever these types of articles appear. If your labor costs are insanely high, you need to raise prices. If people won't pay more for your products, you need to create better products worth more money, give staff equity and reduce profit, or shut down.

These types of articles are based on the assumption that we would like to continue having restaurants & the fact that they are (slowly) becoming economically nonviable is a social problem.

If rising prices reduced the demand so much that they become economically nonviable, then it means that we actually don't like having restaurants all that much, otherwise we'd pay.

Voting with your wallet is only one way of expressing a preference. San Francisco in particular also likes to vote with its votes. We may not care enough about restaurants to pay what they really cost, but by all accounts we’ll care enough to vote for a ballot measure that makes “big developers” and “the techies” pay for them.

Indeed, residents of Bay Area definitely like trying to vote away the microeconomics of supply and demand.

Then charge customers more. If they won't pay more, your product might not be worth it and your business was never viable.

Anyhow, my opinion as someone in the restaurant business, the blogger's business had plenty of flaws.

> If they won't pay more, your product might not be worth it and your business was never viable.

That's what I wrote.

There is a market-clearing price where supply of labor equals demand for labor.

If your friend can't find enough people then the wage he's paying is less than the market-clearing price.

Doesn't matter if you or I think their pay is peanuts or not.

Even if that's true, it doesn't mean he or others can afford to pay it.

When the market price of jet fuel increases, airlines don't cry that they can't find jet fuel, they pay the higher price and then they raise fares.

When the market price of coffee increases, coffee shops don't cry that they can't find coffee, they pay the higher price and then they raise prices.

But when the market price of labor increases, employers don't raise their wages, and then they say they can't find workers and can't afford to pay more.

Why is labor pricing treated differently from any other economic input?

Has he tried raising the prices of his products? Based on the average rents cited in the article, and what the average tech salary is there, his customers may well be able to afford it.

With alcohol it's not that much cheaper than somewhere like Boulevard or Gary Danko, so unless he were to rack up some Michelin stars, I think the answer is probably no.

In a way I guess he is helping fix the problem by closing one day a week. If the supply of open restaurants go down and the demand stays the same, everyone will be able to raise prices.

Reply on news.ycombinator.com