miko33
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RE: More commentary regarding restaurant price jumps - inflation
(03-11-2024 06:17 PM)Kruciff Wrote: (03-11-2024 05:18 PM)miko33 Wrote: (03-11-2024 10:45 AM)Kruciff Wrote: (03-11-2024 10:30 AM)miko33 Wrote: (03-11-2024 09:57 AM)Kruciff Wrote: A couple of off the top of my head comments:
-The minimum wage should have been raised years ago, multiple times since the last federal increase to 7.25/hr all the way back 2009. This is still the federal minimum wage despite states acting individually to raise themselves, and businesses reliant on rock-bottom labor costs (restaurants and service) are struggling the same way banks relying on rock bottom interest rates have failed.
-You mention the root cause - rent and labor. Is it correct to blame minimum wage hikes, when these minimum wage workers are subject to their own rent increases? I think it's closer to a chicken / egg scenario, but out of control rent and property consolidations by big business are very visibly raising rent around the country, which forces workers to make more in order to live where they work (or even live at all). Independent of minimum wage increases, if the cost to rent or own housing is skyrocketing, it forces workers to make more income to cover the gap.
-Profit driven inflation, on top of all of the above.
Minimum wage was never meant to be a living wage. Also consider that the major reason minimum wage legislation gets pushed is not to make it a living wage - that's what the say for public consumption. The real reason is to allow unions to get wage increases thru their collective bargaining agreements where wages will go up when minimum wages go up.
That may well have been an additional reason for minimum wages, but here is a quote from FDR:
Quote:"It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country."
Source, 1933, Statement on National Industrial Recovery Act
In any case, do not forget that Labor is subject to supply and demand. Even without minimum wage increases, if there is a gap between living costs and pay, people will have to take their labor to a place it bests suits them. Unemployment is low right now, employees are enjoying more leverage than they've had since i've been alive. The place where I work finds their logistics operations staff in direct competition with places like Amazon and Target because those companies are offering 20-25/hr just to drive a forklift and move inventory around. Why would anyone work at a place that can't offer competitive pay, when they can make more elsewhere?
Rambling aside, I just think that Food Service is at the bottom of the employment totem pole, finding themselves with a very limited pool of employment. These fast food companies built a business model based on bottom dollar costs, and now have nowhere else to turn to but to raise prices in order to be able to afford to pay labor costs.
Maybe FDRs original intent was for minimum wage to be a living wage, but that concept was scuttled for many decades until Bernie started running for president. Sure labor being tight will increase wages, but what happened to labor prior to COVID? Wages and inflation was stable until “stimulus” checks started going out through 2020 and 2021. Objectively there are less jobs in fast food given the volume of kiosks in the dining rooms vs pre Covid yet wages are shooting up? Something doesn’t add up. I don’t believe fewer people are chasing the jobs.
It's interesting you bring up before COVID. What demographic was hit hardest by COVID? Older, mostly men, working, hit by sickness and more than a few deaths... and many more in that age range that decided to call it quits and retire during COVID, for various reasons.
Related, I saw an article on forbes recently, talking about the rate at which millenial wealth is growing in the past 10 years. Paywall, but link.
I argue that the workforce is being occupied and driven by Millenials / Early Gen X now, a generation of Americans with the highest attendance of higher education, and every one of those diploma holdin' youngins want a job that reflects their education. China is currently experiencing a labor shortage in part because the youth of their country refuse to do the jobs of their parents (working in factories and on assembly lines, producing cheap products etc etc) and demand higher wage jobs that merit the education their parents insisted they must have in order to be successful in life.
American millenials / gen x, are very much similar. Go to school, get good grades, get in a good college, get a job, and now are in the prime of their careers when suddenly a pandemic hits and upper positions from the boomers finally retiring start to open up. The non-boomers start buying houses, driving up demand, and begin building wealth as a result.
Long story very short, an outsized portion of the employment market retired or died during COVID, and a surge of positions were taken up by millenials either looking for entry into a "real" job or moved up or over to a better job. Everything down the "employment totem pole" moved up, leaving an employment shortage for the lowest rungs of employment: bad jobs, field jobs, service jobs. You narrow the employment market down to the people most desperate to work and are willing to take those jobs (i.e. not a lot), and supply/demand takes over and businesses either start raising prices to meet labor costs or hire undocumented workers.
I'm sure I can provide supporting links if you really want them but ya, that's what I believe pretty much happened
Boomers did hang on later than expected and while the GenX cohort is small the Millenials are a good sized generation and they along with GenX have been able to rise up the ranks. Concurrent to the boomer retirements, we've also seen jobs disappear too - ordering at kiosks in fast food restaurants being one development. Our society is self-correcting on that front. The labor participation rate has dropped to around 62.5% if we're comparing to years prior to 2014. It has rebounded since COVID - where it dropped to 60.8%.
https://www.bls.gov/charts/employment-si...n-rate.htm
https://www.bls.gov/emp/tables/civilian-...n-rate.htm
Looking at labor participation rate in the graph and the chart, there are some noticiable differences between 2002 and 2022. For one thing - a lot of kids 16-19 are particpating in much lower levels in 2022 vs 2002. Some of that is attending college. I know empirically that high school teens are also not working jobs like they used to at the same rates.
Is this structural or is it a byproduct of government policies? We'd need more data to determine that. We objectively know that the gov't in 2021 and into 2022 paid both workers and business to not work. This happened well beyond the time it should have ended given the COVID cycle. I think it's safe to say most agree that this was a royal FU by the gov't in 2021. Most of the boomers are out of the labor force, but a sizeable percentage still exists. The question becomes whether backfilling with GenZ is insuficient due to the size of GenZ relative to the Boomers? Based on the numbers we see today, all of GenZ prime working years people should be able to replace the remaining 26% of Boomers aged 65 to 74. Now the 55 to 64 bracket is participating at 65.2%. Over the next few years with zero immigration we will be in serious trouble in 5 years on the labor participation front.
I can understand why the government is allowing such massive levels of illegal immigration - to fill out the work force and fill those low skilled jobs. But surely there is a much, much better way to improve legal immigration so that instead of rolling the dice and hoping for them to obediently fill those low skilled labor slots - we should be importing highly skilled already trained people to make a better workforce.
Property rate jumps are being seriously hit by illegal immigration. It's not the whole story, but no doubt the sudden importation of millions of illegals is hurting property costs and rent in particular.
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More commentary regarding restaurant price jumps - inflation
