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A Little Math and Economics – Doubling Fast Food Wages, and so on

Fast Food Labor Costs

Labor costs are generally 30% of gross income.

Average Income Percentage Spent on Food

Average family spends 11% of their income on food. 45% of that is on eating out. We’ll generalize that to fast food.

11% x 45% = 5%

Typical family seen inflation: 5% x 30% = 1.5%

So, according to the math going around, the average family would see 1.5% inflation do to a doubling of fast food workers’ wages.

But, that’s not how things work. (supply is ultimately related directly to labor), but he is somewhat right. Costs would probably go up, but not by 30%. First, sudden dramatic hikes in price can have a negative marketing affect, and restaurants would be hurt more by families compensating by eating out less, than seeing profit margins shrink. So, price increases and, perhaps, portion size reduction will gradually take place, but initially at the lowest rate owners can afford. The other gradual change will be expectations in higher productivity, ie, reduction in the work force. Which, will only take place at the rate that new equipment and greater workplace discipline can be implemented.

So, let’s say that restraunt X has a 20% profit margin, and requires 5% to make the owner feel happy enough (actual productivity increases will be financed). So…
(0.3+0.8)/0.95 – 1.0 = 16% increase in cost (perhaps offset by other measures as well.
Now that 1.5% becomes 0.8%. Which is likely too optimistic. Nevertheless, the point being, owners will temporarily compensate with lower margins (or even negative).

But, there are other affects. McDonalds just became more desirable employment than Starbucks. That, of course, doesn’t stand. Most jobs that payed more than fast food, and had higher labor standards, will necessarily raise their wages. The wages of the next guy up the chain will be similarly affected. And so on. With each iteration the change being smaller. Likewise causing inflation elsewhere, but small in comparison to wage increases for the average wage earner, non-owner.

The main point being, such an action would, in effect, be a massive downward redistribution of wealth. Those at the bottom would see their income increase dramatically. Not double, since they will class out of some income assistance programs, but dramatic still. The impact would be a net positive, not just in social justice terms, but in real economic terms in an economic climate drug down by lack in aggregate demand. By either doubling fast food wages, or better yet, doubling minimum wage, wealth distribution would shift in the direction of the economic classes that spend the entirety of their paychecks (and much of that on goods and services), and away from the class that has been creating bubble economies by massive shifts of excess capital (or, sitting on massive reserves). Which, in turn, would have a greater impact on increasing employment than higher wages will have on decreasing employment (household consumption makes up the lion’s share of the US economy).

Of course that all would be whittled away with time. Which is why minimum wage has never been tied to inflation (or better, productivity).

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She Got Drehered

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My sister died. Payday, bitches! Lolz!
-Rod “Muzhik” Dreher

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Donate

Kids dying of cancer, and so forth..

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Update

For those who haven’t noticed, I have now removed the “authors” portion of this blog. I think it is now certain that the idea of co-blogging will never come to fruition. My cousin had a fairly hilarious inaugural post concerning his accidental attendance of a Catholic Geocentrist conference, but due to some painful circumstances, the post will never see the light of day. Though I still like the idea of co-blogging, this time it was not meant to be. For now on, this blog is my personal blog, and (hopefully) I will soon get to creating an about page, and so on, to reflect these changes – which in effect, change nothing.

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Conley Becomes Christian, Miscellanea

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Little Conleth’s baptism this past Saturday evening.

The short sale process officially began on our old farm this week. I haven’t been back since I packed the last of our stuff, now the better part of a year since. This season makes it a little sad. The lambs would be new, frolicking in the grass. The chicks would be in the brooder, growing and feathering out. We would have our seed order in, out of the new heritage seed catalogue.

All of this, being the old season of new life, and a baptism to reinforce this, has been giving me the garden itch again. Unfortunately, I doubt I’ll have the energy to get the garden going in time for this summer, but I am setting up this weekend to prepare for chickens. With the number of raccoons and dogs in the neighborhood, their coop will have to be Fort Knox. I miss the birds mightily, and their eggs even more.

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