Andy Puzder: Minimum Wage, Maximum Politics - WSJ - WSJ

Andy Puzder: Minimum Wage, Maximum Politics - WSJ - WSJ

Running the numbers....

The middle class and working poor are struggling. While the stock market soared to historic highs, the labor-participation rate dropped in September to 62.7%—the lowest since 1978—according to the Bureau of Labor Statistics. More than six million people, BLS reports, are “not in the labor force” but “want a job now.”
Will a 40% minimum-wage increase improve this picture? No. Let’s examine how it would affect a restaurant franchisee, a typical small business owner attempting to run a profitable enterprise. My company, CKE Restaurants, has more than 200 franchisees running about 2,000 restaurants nationwide.
Our typical franchised restaurant employs 25 people and earns about $100,000 a year in pretax profit—about 8% of the restaurant’s $1.2 million annual sales. Our general managers, often also the store owners, are responsible for the success or failure of the business. They manage the employees and are in charge of a million-dollar facility. General managers are responsible for at least 25% of store profits. The other 24 employees are responsible for the remaining 75%, which comes to about $3,125 an employee. That is a generous estimate, as entry-level employees likely contribute less than their more experienced colleagues.
If minimum-wage crew members working 25 hours a week received a 40% raise, they would earn an additional $3,705 a year. That is $580 more than what the employee contributes to the restaurant’s profits.
The point is simple: The feds can mandate a higher wage, but some jobs don’t produce enough economic value to bear the increase. If government could transform unskilled entry-level positions into middle-income jobs, the Soviet Union would be today’s dominant world economy. Spain and Greece would be thriving.
But here’s what middle-class business owners, who live in the real world, will do when faced with a 40% increase in labor costs. They will cut jobs and rely more on technology. Such changes are already happening in banks, gas stations, grocery stores, airports and, more recently, restaurants. Almost every restaurant chain in the country from Applebee’s to McDonald’s is testing or already implementing automated ordering with tablets or kiosks.
The only other option is to raise prices. Yet it would be near-impossible to increase prices enough to offset the wage hike, particularly given today’s economic conditions. More important, price increases burden consumers, particularly those with low incomes who are supposed to be helped by a minimum-wage increase.