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Paying $15 an hour would raise fast-food restaurants’ total costs by approximately 15 percent.
If the restaurant's costs increase by 15%, why would they have to raise prices by ~40%?
Paying $15 an hour would raise fast-food restaurants’ total costs by approximately 15 percent.
If the restaurant's costs increase by 15%, why would they have to raise prices by ~40%?
Perhaps because labor is only part of the cost equation.
If the minimum wage is raised to $15 basic raw foods costs, packaging and transport costs will also go up, perhaps much more as the costs filter through the economy .
Most union wage scales a tied to minimum wage and automatically go up if the minimum wage is hiked up.
In reality, costs will increase by at least 40% in the fast food industry and also to some extent in just about every other industry as well.
This is really an attempt by the commissars in the Obama Admin to ignite a wage driven Wage-Price inflationary cycle.
What it will end up doing is killing the economy and killing any entry level job opportunity or possibility for upward mobility for our increasingly permanent underclass.
Was recently at a reunion most of my old mates have become very skilled, very well educated and very, very successful.
ALL of us worked for nothing more than minimum wages to start our careers with and most of continued to do so so until after graduation from college.
Looking back, we all laughed at our entry level jobs and how, from our more experienced perspectives, we were barely worth (if at all) the minimum wages we were paid.
That's how it works in our society - low skilled workers get paid what the market will bear and they get paid more as they become more experienced, skilled and valuable.
People don't become CEOs over night and many CEO started their careers at minimum wage if one looks back .
The higher labor costs would initially force fast-food restaurants to raise their prices by 15 percent, which would drive down sales by 14 percent. This would force restaurants to raise prices again, pushing sales down further.
In equilibrium the average fast-food restaurant would have to raise prices 38 percent.[10] Prices would rise roughly twice as much as the initial increase in labor costs.[11] Total sales and hours worked would both fall by 36 percent.
Fast-food restaurant owners would also have to accept a 77 percent reduction in profits in order to stay in business—leaving them with an average profit of just $6,100 a year per store. Otherwise they would have to raise prices to an extent that would drive away their customer base.
Actually, that's not quite correct. A $15 per hour raise = 38% increase in the retail sale price of your favorite fast food.
To control costs and keep business, you can count on the franchisee to: 1) layoff staff; 2) cut hours back (more part time employees); 3) loss of perks such as free food, free parking, etc.; 4) invest heavily into automated preparation, sales, and service to eliminate employees. The people being paid $15 per hour will maintain the equipment that serves up the product.