Looking at California's $20 minimum wage impact 6 months later | Hacker News Reader

Looking at California's $20 minimum wage impact 6 months later

nbcbayarea.com

18 pointsalex_young27 comments

> It found that wages increased by 18%, employment numbers remained stable and menu prices increased by only 3 to 7%

> The study’s authors said that profit margins at fast food restaurants are relatively high compared to full service restaurants, companies have room to absorb higher wage costs.

This doesn't really look like companies absorbing higher wage costs. Labor is merely one expense in the cost of a good like fast food. You have managerial overhead, capital equipment, marketing, taxes, etc. Based on a quick googling, restaurants target a labor cost percentage of about 25-35% with fast food being skewed to the lower end. Then an 18% increase in the cost of labor passed directly to consumers would be a 4.5-6.3% increase in the total. This seems very much in line with the 3-7% observed.

[Edit] Looking at the actual paper, it's not a 3 to 7% price increase, it's 3.7% which they claim is 62% of the total cost increase. So they are using a cost of labor of 33%, while the price rise is equivalent to a cost of labor of 20% fully passed on. That's a much more defensible claim.

Right, they "have room" to absorb costs but are definitely choosing to pass cost increases (labor and otherwise) to consumers.

They aren't simply "choosing" to pass cost increases to consumers. There is extremely little "room" (restaurants have extremely low margins) so they reprice in order to remain profitable; other restaurants (subject to the same labor cost increase) do similarly or go out of business (supply declines) which also results in price increases.

> Anneisha Williams said she knows the impacts firsthand. She’s been supporting her seven children on this minimum wage.

I’m truly sorry if I offend someone for whatever reason, but it is just wrong to have so many kids if one cannot financially support them well.

What remedy do you suggest for low-income parents having too many children?

https://en.wikipedia.org/wiki/A_Modest_Proposal

Free basic Education, then Sex Education, and then financial education.

And, legalized free abortion to those who want it.

I’d like if the study would track the monthly rental prices for the lowest end of the rental market - studio apartments in subprime neighborhoods. I expect those landlords were the major beneficiaries of the minimum wage hike, and the actual workers were left with the same amount of monthly spare cash after rent.

I expect the slumlords are the major recipients of increased minimum wage, not the workers. In a perfectly inelastic market, such as Southern California housing, landlords can keep raising rents until the lowest end of the market can no longer afford housing.

Only big companies can handle these changes because of economies of scale. (Small companies can’t compete on cost).

If you can figure out how to bring automation to small restaurants, they can compete. Until then, these changes just slowly close small restaurants over many years that are less efficient.

the end of tipping for me.

You tip at fast food restaurants?

In OP's defense; Chipotle, Panera & Subway all ask for tips. I personally don't tip them.

I’ve never seen a chipotle ask for tip.

I'm not alone in being asked to tip there: https://www.cbsnews.com/boston/news/restaurant-tipping-surve...

It asks if you order via the app. The line workers don't know if you tipped, however.

https://old.reddit.com/r/Chipotle/comments/10pmu2t/do_line_w...

Why?

I don't believe it in.

IF a restaurant is legitimately requesting gratuities from customers, then they are exempt from the minimum wage, and they are underpaying their workers, in anticipation of the tips they're supposed to earn.

If you're not tipping at these places, you're hurting those workers who are definitely not making minimum wage.

> "It's very rare to really see a policy like the minimum wage lead to restaurants exiting the market unless they were already marginally on the edge of making it or not making it"

This seems like a gift to big corporations.

The big guy can take the hit from the raise.

It's the small guy who is affected the most.

> the small guy who is affected the most

The law only applies to the big guys. Ikeda’s isn’t covered; the law only applies to “a restaurant chain of at least 60 establishments nationwide” [1]. It’s a good idea that generalises to e.g. any firm with more than N global employees.

[1] https://www.dir.ca.gov/dlse/Fast-Food-Minimum-Wage-FAQ.htm

when the law for big guys go up, small guys have to accommodate otherwise they can't find labor

There are other potential employees available. If there weren't, the price would already have been bid up to $20, without the minimum wage increase.

seem ignorant to reality i'm sorry

No the price would not have been bid up. The state enacted a price floor, distinctly overruling the market clearing wage.

When two employers pay differently, the better workers leave the lower paying one. The higher paying one has their choice of workers. The lower paying one ends up either lower quality workers.

Compare Costco to Walmart worker quality in the same area. They have the same labor pool. Costco gets better quality workers by paying for them.

So you're saying because of the prior minimum wage, both large and small employers would pay the same, so they have an equal shot at getting a given employee. But now that McDonald's has been forced to pay more, they naturally get all the best ones?

If so, that makes sense.

I'm a huge fan of increasing minimum wage, but this definitely still impacts smaller companies, who have to compete for the same labor pool. Hard to hire people at $15/hr when your competition is hiring them at $20/hr.

A rising tide lifts all boats.

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