The Cost Of Paying A Higher Minimum Wage

Yesterday Twitchy reported that Wendy’s will be introducing self-service kiosks in their 6000 stores nationwide this year.

Investor’s Business Daily reported yesterday:

Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”

It’s not surprising that some franchisees might face more of a labor-cost squeeze than company restaurants. All 258 Wendy’s restaurants in California, where the minimum wage rose to $10 an hour this year and will gradually rise to $15, are franchise-operated. Likewise, about 75% of 200-plus restaurants in New York are run by franchisees. New York’s fast-food industry wage rose to $10.50 in New York City and $9.75 in the rest of the state at the start of 2016, also on the way to $15.

Wendy’s plans to cut company-owned stores to just 5% of the total.

There are some things those asking for significant increases to the minimum wage should keep in mind. Very few people are actually attempting to support families on minimum wage jobs–generally those holding those jobs are people attempting to enter the work force for the first time. These jobs allow them to develop basic workplace skills–showing up on time, being polite to customers, and showing up for work every day. Companies are in business to make a profit. If they do not make a profit, there is no reason for them to stay in business. No government has the right to determine what profit is acceptable–left alone, the free market will do that. Part of our current problem is that the government has interfered so much with the free market, that that normal checks and balances within the free market are not working as they should. The solution would be to get the government out of the marketplace–let businesses complete for workers and pay them what is necessary. It is also telling that because economic growth in America is currently slow, workers who would not normally be working in minimum wage jobs are working there.

When Government Gets Involved…

On a recent trip to a local restaurant where you order at the counter, my husband noticed the addition of about five or six order kiosks. They were sort of cute, and looked as if they might be fun to operate. I didn’t really think anything about it under I read an editorial in today’s Wall Street Journal.

The editorial is entitled, “Another Minimum Wage Backfire.” President Obama has supported raising the minimum wage, and a number of states have raised it on their own. Now we are beginning to see the impact of raising the minimum wage.

The editorial reports:

Last week the Wendy’s Company did a public service on its second-quarter earnings call by explaining how mandated wage hikes will lead to fewer jobs for the low-skill workers that progressives claim to be helping.

First, CFO Todd Penegor talked about the pressure to pay higher wages and said that “we continue to look at initiatives and how we work to offset any impacts of future wage inflation through technology initiatives, whether that’s customer self-order kiosks, whether that’s automating more in the back of the house in the restaurant. And you’ll see a lot more coming on that front later this year from us.”

Translated loosely, that says that Wendy’s is a business who does business to make a profit. The company will do whatever it has to do to keep making a profit and keep its stockholders happy. If people lose their jobs because of federal regulations, that is unfortunate, but the blame should be on the federal regulators–not the company.

I would like to note here that the reason the unions like higher wages is that they feel that if the minimum wage is higher, unions can ask for higher wages when they bargain. However, an increased minimum wage will have a strong impact on the food industry because that is the industry where many teenagers get their first jobs as busboys, kitchen workers, etc. More of these jobs will be replaced by machines, and less teenagers will have the experience of having a first job. An increased minimum wage will also cause an increase in prices in many of the restaurants that are still inexpensive enough to bring the whole family.

Raising the minimum wage is another idea that although it it well meaning, does not consider the law of unintended consequences. Very few people are supporting families on minimum wage jobs, generally these jobs are entry level jobs for people just entering the job market. Raising the minimum wage does not accomplish anything–it simply takes away the opportunity for teenagers to begin a working career.