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View Diary: Warren politely SCHOOLS businessman at Senate hearing who tries to explain wage economics to her (219 comments)

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  •  I don't know if your numbers are accurate (1+ / 0-)
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    Shockwave

    but your general point is well taken, at least by me.  The largest takeaway is that you can't just extrapolate the $.04 price increase per meal for the $7.00 fast food meal to the $14 sit down restaurant meal and come up with a price increase of $.08 per meal.  It would be very interesting to find out how close your $2.30 figure is to being accurate.

    On top of that there IS an inflationary effect like Rutigliano may have been talking about.  Now he was apparently talking about the macroeconomic view but, for the sake of argument, let's limit it to the restaurant business.  There is a hiearchy of wage rates within a restaurant.  If you bring up the bottom earners there will be inflationary pressure to raise the rates of the other people that are just slightly above the new minimum wage.  So, if you are going to calculate the effect of raising the minimum wage you can't merely figure the cost of getting everyone up to the new minimum wage rate because there are other costs to consider.

    For those that are unclear on what I'm talking about, if a dishwasher was making a minimum wage of $7.25 an hour and a cashier was making $9.00 per hour and the minimum wage was raised to $9.00 an hour some people would be tempted to say that the cost to increase the minimum wage to $9.00 an hour was merely $1.75 for every dishwasher hour worked.  When, in actuality, the cashier's wage would also go up.  And then you would have to calculate the additional taxes on those new higher wage rates.

    We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

    by theotherside on Mon Mar 18, 2013 at 12:26:13 PM PDT

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    •  I think 10% is worst case (0+ / 0-)

      In response to a 25% increase in min wage. Basically assumes the highest percentage of costs go to labor found in the restaurant industry and that almost all wages are tied directly to minimum wage - but that might be true in his case.

      That said, the argument for inflation is much harder to make. Overall, very few workers wages are directly tied to minimum wage, and very few products costs are really impacted. The potential for higher restaurant prices eroding a substantial portion of the increase in wages for these workers is pretty much nil.

      The tipped wage thing is a big deal here. A lot of his costs are paying servers and barkeeps $6 an hour. If he has to pay $8 and hour that is a big deal to his labor bill, and he correctly states that they are already taking home several times that in tip income. Most states allow very low min wages for tipped employees, and lots of those folks are seeing much lower tip income. His type of full service moderate cost restaurant in a state with a high in wage for tipped employees is the absolute worst case for the min wage. Which is of course why he was testifying.  

      In most states, the tipped workers would get a tiny portion of the increase in the min wage. In fast food joints the labor bill is a much smaller share. In high end restaurants, the min wage is a tiny part of the overall bill.

      •  Thanks, what you write makes sense (0+ / 0-)

        If you are so inclined and have the time at some point, I would be interested in hearing your take on the debate that was started by that Applebee's/Pastor flap about the automatic gratuity.

        Do you know of any studies that have been done if we tried to eliminate the tip economy with just moving to a system where tips are discouraged and all people are paid a "decent" wage?  I heard this is somewhat common in some parts of Europe but I don't know if it produces a system where restaurant workers are better compensated or not and whether service improves or declines.

        Probably all academic because the tipping model of restaurants is likely not going away but I was intrigued when I heard some countries don't have this type of restaurant model.

        We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

        by theotherside on Mon Mar 18, 2013 at 02:05:17 PM PDT

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