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Comment by criddell | Hacker News Reader

This is something I thought about recently. Say you are managing a fast food restaurant that pays employees $15 / hour. If you are selling $10 of food every 5 minutes, then that's $120 of food per hour.

If you give your cashier a 10% raise, then you have to recover another $1.50 / hour so you have to sell $121.50 / hour or $10.13 every 5 minutes. So a 10% wage increase for one employee translates to raising prices by 1.3%.

I don't know what the economics look like for a warehouse worker, but Amazon can afford it and the community Amazon is a part of will be better off.

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It's incredibly naive of you to forget important business expenses that NEEDS to follow any price raise: exec bonuses, stock buybacks, etc. After all of that is done, maybe there is room for a 1% infreas in the cashier wage? Obviously, if the cashier isn't happy with that, that's because the new generations don't want to work and just want to TikTok all day. /s

I'd posit the majority restaurants in your /s example don't have executives, bonuses, or stock buybacks. They're tiny little operations with tiny little profit margins.

You're looking at it backwards I'll pay exactly what the market will bear, or I'll risk going out of business. My sales is irrelevant to the question of how much I need to pay workers. It's the same reason why iPhone costs $200 to build and sold for $1000. Because the market is willing to bear that price, everything considered.

It’s always fascinating to see how the simplest solution of all is never even considered.

Reduce profit.

Why would I invest in a company that returns less than just sticking it in the bank?

Raising prices by 1.3% also has some impact on sales. In theory it should be greater than 1.3% (or else why hasn't the restaurant greedily raised its prices already). To get higher wages for the workers you need one of two things.

1. Go upmarket in some way, either sell nicer food with a better margin or higher more oroductive employees.

2. Through collective action of some kind get all competitors to raise their prices and pass the cartel profits to the worker (for instance a minimum wage law could accomplish this).

I don't think that those are the only two solutions. Off the top of my head you could

1. Reduce expenses in other areas

2. Accept the reduced profit

3. Find that the cost is offset by more productive employees either through morale increase or improved recruiting

Profit in most industries is a few percent, esp. retail/food which are often c. 1%.

The markets are highly competitive, and consumers will compare two stores: A, B and choose the cheaper.

I think there's a lot more that goes into where someone chooses to eat than price, otherwise Taco Bell would be putting Chipotle out of business.

As explained above, I don't take it as a given that increased employee wages require increased prices.

Then have a look into how much a taco bell franchise makes: https://sharpsheets.io/blog/taco-bell-franchise-costs-profit...

It's 15% "profit" on paper, but a franchiser is typically in debt for the first 12 years of the store before they make any "net profit".

So we're talking an industry where most of the so-called "capitalists" are in debt.

This is a hyper-competitive market place, and one play only adding on %s to their products will be a hit to their competitiveness.

They dont decided prices, the market does.

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