Start with Costco, whose CEO, Craig Jelinek, is an outspoken advocate of raising the minimum wage. "At Costco, we know that paying employees good wages makes good sense for business," Mr. Jelinek said in a statement in March of last year. Mr. Jelinek offers new employees $11.50 an hour, but his narrative omits a few key details. First, Costco charges its customers as much as $110 a year for the privilege of shopping at the store. That's a $2 billion-per-year luxury no grocer or restaurant enjoys.
As a result, the warehouse retailer rakes in what amounts to a more than $10,000 profit per employee, according to data from business research company Hoovers. A casual dining restaurant, on the other hand, earns a roughly $2,000 profit per employee, which explains why most businesses aren't following the president's "just be more like Costco" advice.
Like Mr. Jelinek, Zingerman's co-founder Paul Saginaw supports hiking the minimum wage. He posted a minimum-wage manifesto on a company website last September.
As Mr. Obama relished the perfect sandwich prepared by well-paid employees, he neglected to mention how much he paid for the happy experience: Zingerman's Reuben costs $14. That's about three times as much as a Subway foot-long. When I was an undergraduate student at Michigan, I rarely dined at Zingerman's because it was so expensive.
If every deli could charge $14 a sandwich, then perhaps an $11 or $12 minimum wage would be feasible. But your local sandwich shop cannot match the price points of a shop serving a parent-subsidized clientele in a college town. Expecting restaurants everywhere to do so is a recipe for business failure.
Labor Secretary Tom Perez's March visit to a Shake Shack in Washington, D.C.—again, to promote the company's above-minimum starting wage—was typical. While praising the restaurant's wage structure, Mr. Perez did not mention that the least-expensive double cheeseburger on the menu sells for $6.90, or more than 40% more than a Double Quarter Pounder at the McDonald'sMCD -0.58% nearby.
If McDonald's could raise burger prices by 40% without losing customers, it would have done so already without input from Messrs. Obama and Perez.
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