There have been a steady stream of solid retail businesses closing in San Francisco and Oakland. Oakland has a minimum wage of $12.25 in force now. That is where San Francisco’s is now too, on its way to $15.00.
In Oakland, Walmart has closed. In San Francisco, two McDonald’s have closed. Because of the minimum wage.
There are two problems. The first is that no business is willing to say publicly that the minimum wage is the reason they are closing or have closed. They know they won’t be believed and that angry voters will see their explanation as partisan politics. That will create deep hostility among their employees, friends, associates and other customers.
The consequence is that the Lefty public will not know how much damage they have done with minimum wage laws.
The second problem is that I am surrounded by people, all Lefties, who believe that a high minimum wage can’t hurt business and is good for workers. They believe this with the same certainty that they believe the sun rises every day in the East.
Can you sense my frustration?
I realize how difficult this concept is. Most people have no idea that businesses survive on a revenue stream they have found and cultivated, that is always precarious. The prices of all the goods and services involved are all sensitive to comparable prices in surrounding areas. A restaurant changes prices on the menu regularly to find out what is too high and drives customers to eat something else on the menu and often too high that they will not come back.
Then there is the issue of costs. Since the revenue stream is relatively fixed, price changes have to be dealt with by substituting one cost for another, reducing inputs, finding greater productivity or some other cost saving. Minimum wages have an effect on the largest variable cost of any business. Going from a $10 per hour to $12.25 (where it was) is a 22% increase in all labor costs. Including overhead of medical coverage, vacation, workers compensation, social security and sick time. Most importantly, every one who’s wages are above the minimum gets a raise too to keep the authority and management structure in the same place.
Simple therefore: if wages are 20% of all costs then costs go up to 24%. If labor is 40%, as it is in many businesses, then labor costs go up to 50%. Just with the raise to $12.25. It is going up to $15.00 in many cities. Intolerable. But to understand this one needs competent arithmetic and some understanding of inflexible revenue for most businesses.
How was I born and raised in a country where such incredible ignorance reigns supreme? I’m serious; I have never met a person who believes this climbing minimum wage nonsense who will change their mind for any reason. Nobody.
All I can say, that is positive, is this is another chance to study mass hysteria. The problem is that thousands of good businesses will be destroyed, jobs lost, new entry level positions obliterated, low income people punished and the message still won’t get through to the large world of Lefties.