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To: Cincinnatus.45-70

You don’t think it’s reasonable to analyze facts before making decisions? What do you think decisions should be based on? Emotional reactions?

Don’t you think it is reasonable to calculate what actual impact on businesses will be for this proposal, which really isn’t that hard to do?

Here, I’ll lay it out for you.

Let’s assume a business has a cost of labor that is 25% of sales. Let’s assume its labor cost increases by 50% due to an increase in minimum wage.

That business will have to, if all other things were held equal, which of course they never are, increase its prices by 12.5%. Then if unit sales stay the same, which they won’t, at least initially, the business will break even. The total profit will remain the same, although profit percentage will go down slightly. If you wanted to keep profit as a percentage of sales the same, prices would need to be raise somewhere between 1 and 2% more.

I suspect, in this hypothetical situation, prices would actually have to go up by somewhere around 15% to keep profits the same, assuming customers don’t go elsewhere. But since every other restaurant around is faced with the same situation, they don’t have the option of switching to a lower-priced restaurant. They have the option of packing a lunch, of course, but I suspect most people would get tired of that quickly and adjust to the 15% increase.

See, that wasn’t so difficult!


39 posted on 05/25/2015 9:04:47 AM PDT by Sherman Logan
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To: Sherman Logan
Your posts remind me of Econ 101, taught by the TA. One class he was explaining how union negotiators decide an "acceptable" wage demand. I don't remember exactly the formula but I believe had to do with marginal return of something or another. That wasn't the point, the glaring weakness of the construct was the point.

"Mr. TA Sir, that's an interesting analysis. I noticed you didn't analyze how it would impact the owners ROI, or whether the business was currently profitable, or would be under the wage assumptions. Will the business be profitable?

We don't know.

Is that a concern?

No.

And on he went.

Far be it from me to be critical of your economic analysis, of facts no less...but you're tossing assumptions like Pike Place fish.

Far be it from me to stand in the way of " analysis," even when the lives and property of others becomes grease for the tracks of your analysis "tank"... but where is the analysis of current profitability and ROI of the business?

Am I the only person to notice that the interests of the business are not of interest?

I hope you're doing well, Mr. TA.

51 posted on 05/25/2015 10:32:44 AM PDT by gogeo (If you are Tea Party, the eGOP does not want you.)
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To: Sherman Logan

You have the perfect attitude to make a great commissar. Now if we just had a totalitarian state for you to run.


65 posted on 05/25/2015 3:16:24 PM PDT by Cincinnatus.45-70 (What do DemocRats enjoy more than a truckload of dead babies? Unloading them with a pitchfork!)
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To: Sherman Logan

What will end up happening is those businesses will setup shop right near the city border of LA.


66 posted on 05/25/2015 3:18:03 PM PDT by dfwgator
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