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View Diary: Warren politely SCHOOLS businessman at Senate hearing who tries to explain wage economics to her (219 comments)

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  •  You misunderstood Rutigliano's point (7+ / 0-)

    He is a competitor of McDonald's in the sense that he serves food and they serve food.  But his business model is not built on a very fast service and high volume of business that Mickey D's is.  

    So, yes, Warren was wrong in her math because she is trying to apply a calculation derived on a price per meal increase of a high volume place with a price per meal increase on a low volume restaurant.  

    I would love for Warren to follow up with Rutigliano and see his meal count and the amount of hours worked by minimum wage employees to see what his price increase per meal would actually be.

    We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

    by theotherside on Mon Mar 18, 2013 at 10:31:34 AM PDT

    [ Parent ]

    •  Here is something on McDonalds beyond wages (11+ / 0-)

      McDonalds, Other Fast Food Chains Earn Failing Grades For Employee Treatment

      The Restaurant Opportunities Center released its annual diner’s guide, and in it called out several chain and fast food restaurants for unethical and sometimes illegal practices with regard to employees, Yahoo News reported.

      While some smaller and regional restaurants and chains did earn good grades in the report, some of the most well-known eateries were chided for low wages, few or no benefits offered and underhanded wage practices. There were dozens that failed to meet the survey’s minimum requirements for employees, including Applebee’s, Burger King, Chuck E. Cheese, McDonald’s, Pizza Hut, Subway and Taco Bell.

      Of the more than 4,300 restaurant workers surveyed for the report, 90 percent said they did not receive paid sick leave, Yahoo News reported. Two-thirds of respondents said employees routinely come to work sick—handling, preparing and serving food all the while.

      And there is more in the article.

      Daily Kos an oasis of truth. Truth that leads to action.

      by Shockwave on Mon Mar 18, 2013 at 10:43:32 AM PDT

      [ Parent ]

    •  He doesn't compete w/ McDonalds (13+ / 0-)

      He owns a chain of 4 or 5 restaurants called the Southport Brewing Company.  They brew their own beer and sell it at their restaurants as well as in stores.

      Small, local brew-pub chains don't compete in the same market as McDonald's and their prices, menu and food quality reflect that.  They're more upscale, catering to customers who want to enjoy craft brews and a gourmet-quality menu.  

      So if he raises his price for a burger by 8 cents, customers aren't going to go to McDonald's instead.  Too many of these smaller business owners have been brainwashed into thinking that paying their workers a decent wage will put them out of business.  That's not true.  While the restaurant business is very competitive, its not likely that an 8 cent increase is going to force you into bankruptcy.

      It is an old strategy of tyrants to delude their victims into fighting their battles for them. FDR

      by Betty Pinson on Mon Mar 18, 2013 at 11:15:01 AM PDT

      [ Parent ]

      •  What's more, every competitor will face the (6+ / 0-)

        same wage hike.

        income gains to the top 1% from 2009 to 2011 were 121% of all income increases. How did that happen? Incomes to the bottom 99% fell by 0.4%

        by JesseCW on Mon Mar 18, 2013 at 11:43:15 AM PDT

        [ Parent ]

        •  I'm down with raising the minimum wage (1+ / 0-)
          Recommended by:
          Sparhawk

          but I think it's misleading to state that fast food restaurants don't compete with mid-level chains or pubs.  And mid-level chains and pubs may be impacted differently.  How differently I just don't know because I haven't seen the data but I "know" Warren's math methodology is incorrect.

          So what if Mickey D's is impacted by $.04 per meal and Applebee's is impacted by $.50 or $1.00 per meal?  You can begin to see what the concern would be, right?  Now, I'm guessing that the impact on an Applebee's wouldn't be anywhere close to $.50 let alone a $1 per meal.  But I do believe that this data point is an important one to have when making an informed decision of how much to raise the minimum wage.

          We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

          by theotherside on Mon Mar 18, 2013 at 12:06:24 PM PDT

          [ Parent ]

          •  They only compete indirectly. (3+ / 0-)
            Recommended by:
            tardis10, jalapenopopper, Laconic Lib
            Now, I'm guessing that the impact on an Applebee's wouldn't be anywhere close to $.50 let alone a $1 per meal.  But I do believe that this data point is an important one to have when making an informed decision of how much to raise the minimum wage.
            Why do you think this is important?  Do you think Government should keep wages down for poor people to make Applebee's more competitive against McDonalds?

            income gains to the top 1% from 2009 to 2011 were 121% of all income increases. How did that happen? Incomes to the bottom 99% fell by 0.4%

            by JesseCW on Mon Mar 18, 2013 at 12:42:28 PM PDT

            [ Parent ]

            •  If a change in government policy would (0+ / 0-)

              change the restaurant marketplace in such a way that it damages somewhat healthier restaurants and favors fast, unhealthy food, I would enter that into consideration if I were a lawmaker.  There are unintended consequences of almost every piece of legislation but there are also logical consequences of legislation and, at the very least, you need to consider the logical consequences.

              Now, since there is no data that I'm aware of that would show this to be the case, we should proceed with raising the minimum wage in a deliberate but thorough fashion.  With that said, did you see where a commenter said that the impact on a pub style restaurant might be $2.30 per meal?

              At some dollar point the impact is potentially severe and should be taken into consideration, right?  I don't know if I buy "his" calculations but it would be interesting if true.

              We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

              by theotherside on Mon Mar 18, 2013 at 01:58:29 PM PDT

              [ Parent ]

              •  Chains like Appelbees and Denny's aren't even (1+ / 0-)
                Recommended by:
                Laconic Lib

                somewhat healthier.  They serve the same crap.  A cheestick is a cheestick.

                I really cannot fathom how a person starts thinking "It's ok to keep millions mired deeply in poverty, because it might narrow the gap in price point between several corporations selling profoundly unhealthy food".

                But, then, I've lived on minimum wage for several years of my life.

                income gains to the top 1% from 2009 to 2011 were 121% of all income increases. How did that happen? Incomes to the bottom 99% fell by 0.4%

                by JesseCW on Mon Mar 18, 2013 at 03:10:25 PM PDT

                [ Parent ]

                •  That's a fun game! (0+ / 0-)

                  I'll try one.

                  I really cannot fathom how a person starts thinking "It's ok to raise the minimum wage to $20 an hour and completely destroys our manufacturing base."

                  But, then, I help people with disabilities get jobs and understand, to some degree, the perilous nature of manufacturing in the US.

                  Hmmmm, completely distorting somebody else's position isn't nearly as satisfying as I would have imagined.  Perhaps you find it more satisfying than I do.

                  It's all good, Jesse.  Be well.

                  We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

                  by theotherside on Mon Mar 18, 2013 at 03:31:56 PM PDT

                  [ Parent ]

                  •  You think we still have a manufacturing base? (1+ / 0-)
                    Recommended by:
                    Laconic Lib

                    Seriously?

                    income gains to the top 1% from 2009 to 2011 were 121% of all income increases. How did that happen? Incomes to the bottom 99% fell by 0.4%

                    by JesseCW on Mon Mar 18, 2013 at 07:32:14 PM PDT

                    [ Parent ]

                    •  Of course I do (1+ / 0-)
                      Recommended by:
                      Sparhawk

                      Apparently you do not.

                      Here's what you can do.  Go to this website:

                      http://www.census.gov/...

                      Use the default settings, which were:

                      1. Manufacturer's Shipments, Inventories and Orders
                      2.  1992 to 2013
                      3.  Total Manufacturing
                      4. Value of Shipment
                      5. US Total

                      Do you see a clear trend?  Is it positive or negative?

                      Now, what is also true is that we have gotten really efficient at manufacturing and so our productivity is really high.  What that means is that manufacturing employment has really taken a hit and are at numbers not seen since the 1930's.

                      But to put your view point in context if there is no manufacturing base then completely eliminating it would be no big deal.  Of course, the reality is that there are about 12 million people employed in that sector of the economy.

                      We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

                      by theotherside on Tue Mar 19, 2013 at 04:25:05 AM PDT

                      [ Parent ]

    •  A lot of talking across each other. (3+ / 0-)
      Recommended by:
      theotherside, Sparhawk, Shockwave

      Rutigliano is a chef/restauranteur from Connecticut, which has one of the highest minimum wage standards for tipped employees in the country. He notes that his servers are making $25 an hour including tips, which is reasonable - his average bill is probably $20 a person so tip is at least $3 and wait staff only need to average about 7 patrons an hour on their shift to make $20. The Conn min wage for tipped workers is $5.69, so.... So why does he care about the min wage when his workers are making so much more? He is probably actually paying all his waitstaff and most of his line chefs and bussers minimum, so a couple dollar increase in min wage would increase his labor costs by more than 20%. Full service restaurants typically pay out about a third of their gross in labor costs, so his costs could actually increase by nearly 10% in response to an increase in the minimum wage to $10.25. If he passes the full cost on to customers the average meal price would increase from $20 ($23 with tip) to $22 (25.30 with tip).

      There is a pretty big difference between 8 cents and $2.30.

      On the other hand, this guy is completely unrepresentative of minimum wage employers. Even among full service restaurants, the usual minimum wage for tipped employees is $2.33 and the impact of an increase in the general min wage would be nominal for those employees. Few full service restaurants manage to staff their non tipped positions at minimum so he is sort of the worst case scenario, and really not relevant to the national min wage discussion at all. For McDonald's for example, the labor share of gross receipts is closer to 10% than 30. That is where the pennies per item calculations come from.

      •  I don't know if your numbers are accurate (1+ / 0-)
        Recommended by:
        Shockwave

        but your general point is well taken, at least by me.  The largest takeaway is that you can't just extrapolate the $.04 price increase per meal for the $7.00 fast food meal to the $14 sit down restaurant meal and come up with a price increase of $.08 per meal.  It would be very interesting to find out how close your $2.30 figure is to being accurate.

        On top of that there IS an inflationary effect like Rutigliano may have been talking about.  Now he was apparently talking about the macroeconomic view but, for the sake of argument, let's limit it to the restaurant business.  There is a hiearchy of wage rates within a restaurant.  If you bring up the bottom earners there will be inflationary pressure to raise the rates of the other people that are just slightly above the new minimum wage.  So, if you are going to calculate the effect of raising the minimum wage you can't merely figure the cost of getting everyone up to the new minimum wage rate because there are other costs to consider.

        For those that are unclear on what I'm talking about, if a dishwasher was making a minimum wage of $7.25 an hour and a cashier was making $9.00 per hour and the minimum wage was raised to $9.00 an hour some people would be tempted to say that the cost to increase the minimum wage to $9.00 an hour was merely $1.75 for every dishwasher hour worked.  When, in actuality, the cashier's wage would also go up.  And then you would have to calculate the additional taxes on those new higher wage rates.

        We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

        by theotherside on Mon Mar 18, 2013 at 12:26:13 PM PDT

        [ Parent ]

        •  I think 10% is worst case (0+ / 0-)

          In response to a 25% increase in min wage. Basically assumes the highest percentage of costs go to labor found in the restaurant industry and that almost all wages are tied directly to minimum wage - but that might be true in his case.

          That said, the argument for inflation is much harder to make. Overall, very few workers wages are directly tied to minimum wage, and very few products costs are really impacted. The potential for higher restaurant prices eroding a substantial portion of the increase in wages for these workers is pretty much nil.

          The tipped wage thing is a big deal here. A lot of his costs are paying servers and barkeeps $6 an hour. If he has to pay $8 and hour that is a big deal to his labor bill, and he correctly states that they are already taking home several times that in tip income. Most states allow very low min wages for tipped employees, and lots of those folks are seeing much lower tip income. His type of full service moderate cost restaurant in a state with a high in wage for tipped employees is the absolute worst case for the min wage. Which is of course why he was testifying.  

          In most states, the tipped workers would get a tiny portion of the increase in the min wage. In fast food joints the labor bill is a much smaller share. In high end restaurants, the min wage is a tiny part of the overall bill.

          •  Thanks, what you write makes sense (0+ / 0-)

            If you are so inclined and have the time at some point, I would be interested in hearing your take on the debate that was started by that Applebee's/Pastor flap about the automatic gratuity.

            Do you know of any studies that have been done if we tried to eliminate the tip economy with just moving to a system where tips are discouraged and all people are paid a "decent" wage?  I heard this is somewhat common in some parts of Europe but I don't know if it produces a system where restaurant workers are better compensated or not and whether service improves or declines.

            Probably all academic because the tipping model of restaurants is likely not going away but I was intrigued when I heard some countries don't have this type of restaurant model.

            We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

            by theotherside on Mon Mar 18, 2013 at 02:05:17 PM PDT

            [ Parent ]

      •  So was he bullshitting (3+ / 0-)
        Recommended by:
        mrkvica, tardis10, Shockwave

        when he said "I have many jobs, many jobs that pay well above the minimum wage.  We have a retirement plan, we offer health insurance to our salaried employees ..."?

        It seems to me that if all that is true, his percentage increase in labor cost ought to be smaller than the fast-food joint that pays mostly minimum right now.

        “What’s the use of having developed a science well enough to make predictions if, in the end, all we’re willing to do is stand around and wait for them to come true?” - Sherwood Rowland

        by jrooth on Mon Mar 18, 2013 at 12:35:55 PM PDT

        [ Parent ]

        •  No, not bullshitting (1+ / 0-)
          Recommended by:
          Shockwave

          Almost all of his employees probably make well above the minimum wage, but many are directly or indirectly impacted by it. His servers are paid $5.69 an hour (min wage for tipped employees in Conn). Bussers and line cooks may start at minimum, but he has to give raises to keep experienced workers, so many will make more after a couple months, but if the min wage goes up he will have to maintain the difference, so nearly everyone's salary moves up.

          He is probably the worse case for the percentage impact of a minimum wage increase, even though most of his employees make more (in many cases considerably more) than minimum.

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