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About half of my work is advising corporate executives on profitability, and my take on the minimum wage thing is that the people doom-tweeting about how the inevitable result will be $12 taco bell burritos are just showing how little they understand about money
Quick thread:
Quick thread:
Gonna explain this using the obviously arbitrary example of, uh, taco bell. In the past year, their store expenses (all of them) represented 31% of revenue. In general, about 30% of fast-food store expenses are labor -- so thats 30% of the 31%, or about 10% of revenue. K?
Obviously the store managers get a chunk of that and are well above minimum wage, but let's say 80% of the store labor expenses go to minimum-wage employees. So that's 8% of revenue (80% of the 10% that goes to store labor overall)
And let's assume that with a new minimum of $15 an hour, you have to double pay for all of them (this is an exaggeration, but we'll go with it for simplicity). And if you double costs that account for 8% of revenue, that means the total increase is an additional 8% of revenue
So to recover *all* of that cost increase (i.e. to pass all of it through to your customers) and have no hit to profitability, you'd have to increase prices by ... 8%
that's it
that's it
If real-life numbers make this a little easier to understand, the 5-Layer Burrito, which currently costs $2.49, would now have to cost ...
*crunches numbers*
... $2.69
*crunches numbers*
... $2.69
granted, I haven't been to many sit-down restaurants recently given that there's an ongoing global pandemic, but I ... I do not think that would be considered a "sit-down restaurant price"
one other thing: it perhaps shouldn't be surprising that the people who spout conservative economic talking points are the ones who have no idea how little of large companies' revenue actually goes to frontline employees
but personally, I'd be cool with paying 8% more for my tacos and whatnot if it means everybody gets a living wage
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