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Comment by michaelmrose | Hacker News Reader

Companies only hire enough labor to service their need to start with. They either will already cut labor or the can't and still profit.

If minimum wage labor is 20% of your costs and it increases in price by 50% prices you can make up the difference by increasing prices by 10%

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It's not just a matter of having less people, it's also a matter of having less full timers (which saves on various costs as well as lessens the likelihood of unintentional overtime). Great flexibility for the business, sucks for the employee.

I don't think you understood what OP said. He said franchisees do not have the luxury of raising their prices by 10% as their prices are usually out of their control.

> prices are usually out of their control

Is that the case? I wouldn't think large franchises would be viable if they don't already allow for local cost of living in their prices.

It's within a few percentage points. I recall as a teen that McD's corporate came down on my store for running some kind of insane loss leader promotion like selling burgers for 50c one day a week. Apparently they made the money back on volume and addon purchases, but they had to stop it anyways.

Corporate doesn't like you undercutting and essentially openly competing with the other franchisees in the same general area, but they adjust prices based on local cost of living.

The whole idea is if there are two McDonald's near eachother, and one is known locally as "the good McDonald's", the other is therefore "the bad McDonald's". They don't want any "bad Mcdonald's".

Except in my case, it was literally the only McDonald's for 30 miles.

If someone lives in the middle, that's 15 miles to each of them.

You can also make it up by decreasing your profit margin.

Which one happens will probably depend upon the competitiveness of the market in question.

> you can make up the difference by increasing prices by 10%

LOL. Beautiful. Just beautiful. With no insight what so ever into the profit margins for a business, you've managed to solve all the Corporate world's problems. LMAO!

Its obviously an oversimplification. In fact 20% of gross costs being minimum wage labor is arbitrary and high as is an increase in minimum wage by 50%.

The point was to demonstrate that even in the case of a massive sudden increase in the minimum wage in an industry where unskilled labor makes up a pretty damn big portion of costs that the price increase that would pay for 100% of that pay increase was comparatively quite modest.

For example McDonald's is almost the quintessential low skill job and a McDs franchise can easily pay 20% of its costs to labor. In fact the average mcdonalds employee is paid $10 an hour.

Raising rates is one option, accepting lower margins is another if your margins are such that you can keep the doors open. Slashing labor as you have suggested is an unreasonable suggestion because the relationship as stated above isn't linear. In order to make up for labor going up by 50% you would have to slash your labor hours by 33% which is unsustainable.

Basically the gist of the matter is that I don't possess nor claim specific insight into a particular business in this post.

I'm saying that elementary school math can show that slashing labor is an unreasonable reaction that nobody will do because they when faced with the same scenario will be fully capable of doing the math.

I'm not here to solve all the corporate worlds problems I'm here specifically to refute your post.

Please don't do this here.

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