The Minimum Wage: A Case Study in Laughable Liberal Logic
In the wake of comments on an earlier post, The Minimum Wage and Liberal Math, I thought to look at the results of raising the Minimum Wage at a real company.
I chose Dunkin’ Donuts, a company Liberals highlighted in a recent email campaign as only paying its workers the minimum wage of $7.25 an hour.
A web search for my Zip Code showed 6 stores, all open at least 16 hours daily. For the post I’m assuming 16 hour days per store and just 1 worker per 8 hour shift. The company website says there were 7015 US stores at the end of 2011.
The $2.85 hourly increase in question, $7.25 to $10.10, adds $45.60 to a store’s daily cost of business. Over 7015 stores, that’s $319,884 daily, $2.24M weekly and $116.76M a year.
Add 8.5%, or $9.92M, for employee costs to get a yearly increase of $126.68M.
2011′s net profit for the corporation was only $34.4M. This wage increase puts the company in a $92.28M hole at the start of 2012; well over 2.5 times 2011 profits. To compensate, the company needs $1.7 billion in sales with the same profit margin and no other increased costs. By way of comparison, total sales corporate wide, not just US sales, were only $628.2M for 2011 and that in a 53 week period.
Clearly, a $2.85 increase depends on drastic operational changes and unrealistic growth projections. Yet if Democrats win, that’s exactly what will be forced on American businesses.
What can they afford? 7015 stores generate 40,967,600 annual man hours. Applied to profits of $34.4M, that allows an $0.84 raise.
Except they don’t have $0.84 either. We haven’t talked about corporate staff raises yet. Or store management. That takes from our $0.84. So do natural increases in costs for everything from coffee to landscaping. There are all manner of expense increases. Obamacare, anyone?
It doesn’t allow for maintenance. But what do well paid workers care about broken equipment or unsafe workplaces. It doesn’t pay investors more either although I suppose only workers deserve raises.
Even if we successfully juggle all of this, $0.84 is only break even. What about future raises and expansion? Shouldn’t there be profits to ensure the company stays healthy and jobs are there next year?
Of course, they could raise prices; make customers pay more tomorrow than today. But Econ 101 teaches raising prices reduces sales leaving the company to meet higher costs with slumping or static revenues. Or they could cut hours. But that reduces revenue AND gives fewer better paid hours to employees.
Space and time prevent extrapolating all the possible scenarios.
All because Liberals decided 100% of workers deserve a “living” wage. And they’ll turn the entire economy upside down to force that outcome regardless of consequences.
And consequences there will be. Remember when Liberals decided 100% of Americans should own a home? We got the Housing bubble and its burst. They decided 100% of Americans should have a college education, too. We got graduates with crippling debt, worthless degrees and no jobs.
Finding the right balance between today and tomorrow, profit and loss, growth and stagnation – is an art best practiced in the Marketplace, not legislative chambers.
Sometimes that balance means raises. Sometimes not. Sometimes it means starting wages are higher. Sometimes not. It also means companies like Dunkin’ Donuts aren’t screwing anyone. They are treating everyone – customer, worker and investor alike – with respect and fairness. All in all, the reality is the Market does a pretty good job when we stop passing laws that force counterfeit and unpredictable pressures on it.
I don’t know exactly how much Dunkin’ Donuts can afford. Whatever that figure is, it won’t be the same as McDonalds or the YMCA. It’s not a “one size-fits all” proposition. I’m impressed that Dunkin’ Donuts finds a way to give raises at all. But it’s in their best interests to meet the needs of those customers, workers and investors. If there’s a way, I trust them to find a way to make it work.
The Liberal way to self improvement doesn’t work. Liberals have demanded and received their path to a “living wage” for years. They’re still demanding it because they haven’t accomplished the goal. They never will. Prosperity doesn’t work like that. Maybe they should stop fixing what isn’t broken; stop forcing others to implement a vision they cannot accomplish themselves.
At the same time, responsible and moral people have promoted hard work and sacrifice and brought more success and prosperity to more people than any Liberal could imagine.
This isn’t happening in a cave. It’s easily verifiable. Go see for yourself.
Resist Liberal lies. Refute Liberal logic. Live free …
Cross posted from Blue Collar Muse.