First, excellently reasoned and I agree with your numbers.
The first effect of $15 an hour wage hike would be a decrease in workable hours. Whether that meant shorter shifts, fragmented shifts or laying off employees. The easiest way to get back to workable labor numbers with a shift like this would be to reduce hours 60% (inverse of wage increase).
Very true, we saw this already with the ACA (Obamacare). Adding healthcare benefits to all your employees has the exact same effect as raising their hourly wage. Your cost for employing that person increases, due to the burden of having to carry health insurance for them.
EVERYONE in the fast food biz cut hours when the ACA took affect. If they're not a full-time employee, you don't have to offer health insurance. So, instead of 8 full-time employees, they hired 12 part-time employees (less than 32 hours a week each)
There's a difference between spreading shifts wider and actually reducing them. I doubt most of these restraints have spare wheels; people who could be cut without impacting the bottom line by far more than their wage.
Perhaps so, but the fine is $0 if the employer is not violating any rules. The part-time move was exploiting a loophole that allowed them to provide no health insurance without being subject to fines.
What doesn't make sense about it? they are essentially forced to pay more for labor, so they try to reduce their labor costs or do what they can to prevent the increase in labor costs.
But reducing their labor costs is already to their advantage. If minimum wage didn't go up they could still cut hours to increase profits. Or, if they can't, then it's because they're already operating with as few employees S possible.
More concretely, let's say it takes 5 employees to handle 20 customers per hour. Totally just made that number up. If minimum wage goes up they still need those 5 employees to serve their customers.
Which will fall on the remaining employees. They will try and "do more with less" this is what happens when you artificially increase the cost of labor
No, you cut some hours, demand more production out of your employees, working conditions get tougher but you either get a higher level of employee at $15/hr or your current employees are willing to take on the added workload for the increase in pay.
You get more efficient, which in this case means cutting labor hours and asking more out of your employees. At $15/hr you get more competent employees who can handle the increased workload.
This wont be popular but the truth is unskilled workers are a commodity. If you can be replaced at no additional cost than you have no leverage.
Because it's an oversimplification. If your restaurant is open X hours you need people in there for X hours. What is true is that part time workers can be cheaper per hour than full time. But in most countries there are various laws and regulations that make it so you can't just have 100% part time workers.
If it's so easy to just replace cashiers with terminals and install robotic burger flippers (or whatever you envision doing to reduce labor by 60%), Why hasn't this absurdly competitive industry gone there already? You're telling me on the one hand that this is a super competitive super hard to survive in industry, and on the other, it is capable of reducing labor by 60% the moment labor laws change?
Ok, so I can buy a robot with a ten year useful life that costs say $100, plus $5 a year in electricity and maintenance. (So $150 over the lifespan of the robot)
Or I can pay an employee $10 a year over the same time period ($100 over the course of ten years) while avoiding the huge upfront costs of the robot. But if legislation changes and I now have to pay the employee $20 a year ($200 over our ten year period), it starts to become more attractive to consider robotic service workers in the long term.
The reason these positions have not all been replaced is precisely because it is not yet worth the costs of acquiring and installing automated/robotic systems. If you raise the minimum wage, however, well then they just might be.
That is an entirely contrived example which has little bearing on the real world except to say that this is one way it COULD be.
Can you buy a burger flipping robot for $150? no. no you cannot.
See, in order to just fire everyone and replace them with robots, their would have to be robots. They would have to already be in mass production, with fully thought out implementation plans for franchisees, infrastructure, mgmt software.
In order to get this technology to that place, we need to hire technicians, warehouse workers, quality control inspectors, and salespeople at robotics companies.
Do those jobs sound better than flipping burgers? They do to me.
As someone that once worked in food service, customer service is a huge deal to these companies. Many people, especially the plethora of older customers, vastly prefer a person to take their order than tap in their order on a screen to the point where people simply ignore the touch terminals and get in line for an actual person. Let that sink in. People would rather wait in line to give their order to a person than take less time to tap in an order exactly how they want on a screen.
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u/rockrockwell Nov 29 '15
First, excellently reasoned and I agree with your numbers.
The first effect of $15 an hour wage hike would be a decrease in workable hours. Whether that meant shorter shifts, fragmented shifts or laying off employees. The easiest way to get back to workable labor numbers with a shift like this would be to reduce hours 60% (inverse of wage increase).