About the Minimum Wage argument..

McDonalds-KioskMcDonald’s has recently announced a new store concept where traditional cashiers are being replaced by kiosks, not only to improve service, but to reduce labor costs.

Andy Pudzer, CEO of Hardee’s and Carl’s, Jr. franchises says, “With government driving up the cost of labor, it’s driving down the number of jobs,” Pudzer said. “This is the problem with Bernie Sanders and Hillary Clinton and progressives who push very hard to raise the minimum wage. Does it really help if Sally makes $3 more an hour if Suzie has no job?”

It is probably true that the industry has been looking to move in this direction for some time. Now, it seems that critical mass has been reached as progressive liberal policies are taking hold and businesses are scrambling to compensate for forced increases in labor costs from government edicts rather than market principles.

Liberals, and particularly Democrat candidate for President Bernie Sanders – as well as recently moving to the left Hillary Clinton – have maintained the current minimum wage is not a living wage and that employees who work 40 hours a week, whether they are skilled or not, should not be in poverty.

This philosophy is part of Sanders larger economic model of a “moral” economy; one where all citizens will be able to make a decent living, have affordable health care, and free education all paid for by the one percent.

I don’t think Sanders moral argument holds up to scrutiny when you examine the bigger picture.  Low skilled workers will necessarily be paid less as part of the overall labor market.  Forcing businesses to pay more for labor costs works in exactly the opposite way.

 

Businesses have two choices:  Raise prices or cut costs.  Raising prices in a specific market segment where there is fierce competition will cause the competitors to make adjustments.  In almost every case, loss of business will occur if you are unable to keep prices low.

So the alternative is to cut costs.  Usually, companies will reduce the payroll by either cutting staff and/or reducing hours.  This will result in a loss of customer service if you are dependent on human forms.   This has already happened in Seattle,  although the data is still incomplete.  On the flip side, there certainly has been no spike as predicted by Sanders economic advisors.

When the economy in general is slow, businesses struggle against cost pressures.  Obama’s economy has yet to experience the rapid acceleration promised when he took office.  None of his economic stimulus actions have worked.

Obamacare hasn’t produced the millions of jobs promised.  His two percent payroll tax lasted barely two years, with growth failing to take off. Alternative energy investment has dried up causing most solar energy firms that have received government grants to go under.  GDP growth has been anemic.

The National Debt has practically doubled and put the Federal Reserve in a precarious position of having few options should the economy go into a deep recession.  These “fringe”, untested progressive methods to grow the economy has failed.

However, instead of letting market forces dictate the minimum wage, the Government is making sure it gets ahead of the game.  Good thing we have such comprehensive unemployment and social support programs – maybe.

And now that dates have been set for those minimum wage hikes, the fast food industry is now looking to find ways to reduce the payroll and automate taking and delivering your order.  I would imagine these systems will be in place well before the wages reach their forced peak, which means no employment growth in that sector.  Anyone looking to keep their job better look hope the economy turns around.

As a side note:  Soon, no kid will know the phrase, “You want fries with that?”  Don’t know whether that is good or bad.

 

 

 

 

 

 

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