Quote of the Day
A room without books is like a body without a soul.Marcus Tullius Cicero
Crony Big Football vs. Taxpayers: NFL in Los Angeles?
Not So Super Bowl
With nearly a third of LA's budget needed to pay off public pensioners, isn't this a case of being really careful of what you wish for?
The Minimum Wage Debate--Not So Funny
I was reading a recent issue of Time which in a column discussed all sorts of things that could be purchased in vending machines--everything from a burger with all fixings to burritos, even live crabs. Vending machines never get tired and are endlessly patient; they operate at all hours of the day or night. Just like ATMs and credit-card taking gas pumps freed us from having to worry about idiosyncratic, Procrustean business schedules, businesses can make better use of their expensive labor resources dealing with less structured tasks.
I recently commented that I hadn't been to a fast food restaurant in so long I was shocked recently when I was charged over $7 for simple burger combos at McDonald's (and, more recently, Burger King). It seemed the last time I ate fast food (which I haven't done in the recent past because of dietary restrictions), a combo would run one under $5. It's not that I can't afford an occasional fast food lunch, but when I can buy a healthier Lean Cuisine or Atkins frozen meal at half the cost or a rotisserie chicken at $5 which can easily stretch to 3 or 4 meals, cost is a factor. Fast food is a very competitive niche; my folks used to live near a military base where the main street to the gates was fast food road. It seemed every time I came home, the lineup of franchises had changed.
Labor is a significant cost, particularly in a low-margin industry; restaurants operate on less than 3% margin, about a third of the average S&P 500 company, about a third less than they were making in 2009, early in the "Obama recovery". (Most McDonald's restaurants are locally owned and do not make the parent company's profits.) The issue of the minimum wage reflects the relatively low productivity gains of low-skill opportunities; furthermore only a small fraction of workers actually make minimum wage; few of those are heads of household. The typical "progressive" argument is that the government "subsidizes" low-end labor and that people who earn at the low end spend what they clear from employer mandates.
I am not going to recite all the arguments here, pro and con. I'll simply make the obvious observation: why don't fast food and other businesses using low-skill labor hire even more "inexpensive" workers than they do? Clearly the benefits of additional workers don't merit the cost. But the government can't make businesses hire more, expensive labor. It's difficult to explain what happens when government foolishly gets in the way of workers willing to work at lower wages at which an employer is willing to extend an offer; I think it borders on the morally reprehensive abuse of governmental authority: the government stands in the way of many young workers getting that all-important first job and experience. It plays winners and losers by imposing costs that don't hit the government's financial statements. Many of those potential workers are priced out of the market, i.e., unemployment. Employers have to weigh short-term and long-term responses. For example, they might shift dollars from benefits to wages, they have to weigh training costs and may reduce hours, they may focus on hiring more experienced applicants, and they may look to invest longer term in more feasible automation alternatives. Of course, in a competitive industry, business owners may have to absorb cost shocks in the short term, say, the price of sugar triples due to market conditions. But businesses must operate under budgets, and they face diminishing demand for goods and services at higher prices. While Stewart earns millions making free market proponents appear callous and out of touch, it's easy to be for higher wages when you're not the one paying the bill.
Political Humor
HT Don Boudreaux of Cafe Hayek:
Political Cartoon
 |
| Courtesy of Nate Beeler and Townhall |
Billy Joel, "She's Always a Woman To Me"
