On Raising Wages And Departing Employees

 In what is going to be a real life test of an Ayn Randian principle, California has recently decided to up the minimum wage of fast food workers.

For the purposes of this exercise, I am setting aside the arguments about what a minimum wage is and why it is and who gets it.  That is not the crux of the issue - but there is an underlying issue I think bears careful watching.

The issue is simply the breaking point of the average consumer.

One of the things that remains relevant even in my own industry is the idea of COGS, or Cost of Goods Sold - that is, the sum total that one sells a good for.  In theory, COGS is supposed to include all the things which go into the manufacture of that good, including materials and labor (but excluding things like overhead, which falls into administrative expenses).  Nor does this include some level of profit for the company manufacturing the product (Useful description here.)

When labor goes up - just like materials go up - the COGS goes up.  But COGS is not necessarily the same as "price sold at".  This becomes a balancing act of all of the things - COGS, Administrative expense, profit.

When California raised the minimum wage to $20 an hour, it increased the COGS.  Unfortunately for fast food (and all of us), the cost of goods in general (in this case, food) has also gone up.  Which leaves the business owner three choices:  lower profits, raise prices, or cut costs.

From the view of the government, I am reasonably sure that the most desirable outcome is "lower profits".  Profits are, after all, generally evil except above some small socially acceptable norm which is never quite defined but everyone knows what it is (ignoring, of course, the fact that lowered profits equal lower tax receipts.  But more on that shortly.).

From the business owner's point of view, the most desired outcome is "cut costs".  Cutting costs reduced (or at least mediates) COGS.  And, sadly for everyone else, labor is usually the greatest cost any business has.

The option that is overall least desirable is "Raise prices".  From the government's point of view, although likely it generates more sales tax it also hikes overall prices.  From the business owner's point of view, the more prices rise the more likely it is that you will begin to price out certain portions of your market and thus lower overall revenue.

And so - even before this started - business owners started cutting staff.

In at least one example, it started with pizza delivery drivers.  There is a certain cold logic to it - in an age of apps that handle delivery of food, why would one keep a staff to deliver food?  Yes, it means that you do not have direct control over that part of the supply chain, but you are also not paying people who may or may not have deliveries.  And now that overhead and administrative expense falls on someone else, not you, reducing your cost. 

From the government's point of view, this is a bit of a catastrophe.  Less payroll taxes, less income taxes, likely more drain on the social welfare systems as these people look for work.  By "increasing" income, they have decreased their own revenues and increased their own spending.

The other element, of course, is simply the price hike.

As prices increase due to inflation and material costs, people start making choices.  People start realizing what is important and what is not.  And in times of tightened budgets, fast food and restaurants in general are likely some of the first things to go.  

The problem for Our Political And Social Betters (OPASB) is that although they can control owners indirectly, they cannot control consumers.  And consumers will respond to the market in a realistic fashion based on their experience, not on what good intentions would mandate.

By (in theory) trying to do the "right" thing in increasing people's salaries, they have likely ensured that more people will not have jobs.  Which seems like a bit of a reverse outcome. 

Contrast this mandate with at least one restaurant here in New Home 2.0, where they notify you up front (literally up front as you enter the restaurant) that they charge a 3% "living wage" fee as part of the check.  If you do not care to pay it, you can have it removed.  This, to me, makes more sense:  I am informed, I have the ability to opt out, and the company is able to do something to mitigate costs (likely most people do not refuse the additional amount).

My prediction?  Layoffs will skyrocket. Businesses will fold.  Where businesses do not fold, automation will not just become an interesting idea or unique selling point, but critical to the businesses ability to survive.   It will not impact OPASB of course; they eat at locations where none of these things will be an issue.  But almost everyone else will see some kind of effect.

Atlas may not be shrugging, but he may be limbering up his shoulders.

The Collapse CXXXXIII: On The Road I

16 July 20XX +1

My Dear Lucilius:

I write this to you at the end of two days of walking

The trip to Little City was unremarkable enough to give you but the high details; this area remains relatively reliable safe, at least so far as we know – although a certain wariness is always advised in any circumstance. The road remains solid and in relatively good condition, the trip between ourselves and the first stop – Kentucky City – nothing but the quiet walking of myself and Young Xerxes, he lost in thoughts he did not share and I lost in thoughts of leaving this morning and learning to fish in the man-made lakes along the side of road with my grandfather a very long time ago.

The stop in Kentucky City was both a reunion and a planning session, the reunion with The Colonel and the planning for what would come after. After a hearty round of greetings, the Colonel laid out the route he proposed: four days out to the location where we were to make contact, one day to survey, and then four days back. Based on what we found, further plans could be made from there.

The hike the next day – from Kentucky City to Little City – was started at the crack of pre-dawn. It was at this point that a thing that I did not expect occurred: not only was The Colonel there, but so was the Leftenant and Ox. I was (pleasantly) surprised beyond belief and told them both so. The Leftenant said I made a good traveling companion and Ox said he simply had nothing more pressing to do.

This was a harder hike as we made our way up and over the hills that divided the Garnet Valley from the next valley over. This was a little more nerve wracking than the day before, simply because of the fact that the ambush possibilities here were far richer: higher cliff walls, a pass, and (on the descent) a high wall of rock on one side and a steep drop on the other.

Add to this as well the fact that the rate limiting factor is me.

It is not something I care to dwell on often, Lucilius, but both you and I are on the long downhill slope. Likely I am 15 years older than The Colonel, between 20 and 40 years for the rest of the party. One of the members ran point, then myself and two others, then someone bringing up the rearguard. I was in neither rotation; my job apparently was simply to make sure I could keep going.

We stopped at the top of the pass for a breather – I say “we”, it was most likely for me. The sun had come up by this point and it gave a long view down to Little City and across the river to the valley’s edge on the other side. Here and their one could see clusters, mostly vacation homes like the ones outside of McAdams for vacationers that would likely never return. A wealth of materials there, Lucilius, to be mined.

Likely we would need to. Another plan for filing away to explore later.

The descent down was far more pleasant and by a little after noon (so far as I could tell) we made contact with the pickets of Little City. The Colonel talked for a moment, then we started in, following something of the route we had taken only a month ago before we arrived at the high school gym again.

I gave The Colonel a quizzical stare as I looked around the empty gym; were there no other shelters offered? The Colonel, perhaps sensing my question, simply shook his head.

Even with the recent past here, the sense of “us” and “not us” seemed a palpable thing.

Someone had taken the time to leave some supplies; digging through them, it appeared that they were loot from the McAdams storehouse. Dry oatmeal, tins of meet and fruit, even a tin or two of the little sausages covered in their own fat. For the sense of “not us”, someone at least seemed grateful for the attempt.

You may laugh at me that at what is about 5 PM here, I am already for bed. I am tired, Lucilius, and there is a very long hike ahead of me.

Of all the things that I had thought about in imagining The End, being tired all the time was not one of them.

Your Obedient Servant, Seneca

Sure Of Losing

I usually find myself on the side of the underdog.

Even when I am reading history, even when I know the outcome, I am likely to be pulling for the side that historically lost.

Part of that, I suppose, is simply the fact that as a confirmed life-long loser of most things, my sympathies go out to the side being defeated.  Part of that as well is that some of the defeated sides actually have the better histories, the classic example of this always being everyone that is happy to claim the slightest bit of Celtic Heritage (myself included).

It easy enough to do in history or in fiction.  It is harder to do looking forward into life, when the outcome is not known and uncertain.

Writers I respect - Sarah J. Hoyt and Friend-Of-This-Blog (FOTB) John Wilder - are confident that the ultimately, reason and sensibility triumph (if perhaps not in our lifetimes) as the consequences of choices manifest themselves and economic realities demonstrate that no matter how much one can wish something to be so, it simply economically will not be so.  And on one hand - the fact that, as Ayn Rand said, you can choose your actions but not the consequences of actions - I believe this to firmly be so.  

On the other hand, there can be a long stretch between here and there.

This is where history is the rub:  it shows just as many times where the side which was perhaps more in the right or on the side of sensibility has been ground into the mud and lost.

Do things come back?  Not always; Republican Rome's continual civil unrest and short term dictators led to the Principate and The Roman Empire only to dissolve into fragments.  Within 100 years, the high point of Athenian culture and democracy had dissolved into being just another Greek city in larger alliances, never to be more than a historical point of interest.  Other societies may return, but in far different circumstances: it took Russia 70 years to become something other than the Soviet Union, after it had managed to consume so much of Russian culture and society.

But really, this uncertainly is precisely what Eliot's quote is getting at:  Give me the person who, believing there is no chance of victory, takes the right side anyway

Ultimately we live for eternity, not time.  Would that we were conscious of this always and in all our decisions, seeing them for the time bound item they are with eternal implications.

On A Lesser Salary

 One of the realizations that has come with the initiation of the new job is that I have entered a period of time of declining income, not a rising one.

That probably seems like a very First World problem - after all (I hear you say), you spent last year looking for jobs not once not twice.  And you yourself admitted that you were likely overpaid at your last position for longer than you should have been.

Fair points and well taken.  I am simply looking at it from the trajectory of the typical career and my experience of the last 25 years.

It is fair to say over my time in the biopharmaceutical/medical device industry, I have done well.  I have done very well, the sort of well that could not have been replicated except in the nascent IT industry of its day (which I was more or less contemporaneous with).  From my entry into the industry, hard work and application allowed me to see my salary rise over time.  Sometimes it a cost of living increase, sometimes it was a promotion, but it was always ever up.  Even when I fell out from The Firm (which was a financial setback of epic proportions; in retrospect I wonder what would have happened if I had simply stayed put) or Hammerfall, I was able to effectively re-enter the industry at my previous salary (or close enough).

That changed with Hammerfall 2.0 and Hammerfall 3.0.  

Hammerfall 2.0 and the resulting salary drop was a not a surprise - I was overpaid for reasons that I will never understand (but, to be fair, never questioned).  Hammerfall 3.0 and New Home 2.0 continued that trend. 

Does money matter?  Not in terms of my ego (just as title does not matter at this point), but in terms of practical living absolutely.  All here know the relentless grind of inflation; a drop in salary helps nothing there.

For fun (because when is future planning not fun?), I ran a simple analysis of my current salary and added in the potential of a cost of living increase (3%, if you are curious).  It takes me four years to get to what I made prior to Hammerfall 2.0.  If I extend it to 10 years from now, it is still okay (but probably effectively the same as today given inflation). 

But I never touch what I made prior to 2020.

One of the assumptions that many young people have is that their salary and their careers will only ever go up.  We older ones know; careers are just often lateral moves and sometimes reverses not just of position, but of finance.  For those that know this, they can adjust and move on.

For those that do not and find their sum total in what they are called and what they earn, it can be a difficult adjustment indeed.

On Historians And Impotence

The great curse of the historian is they often function as the closest thing to an accurate fortune teller that we have, at least without supernatural intervention.

The historian can look back to similar sorts of things in the past (and trust me, there are always similar sorts of things) and while perhaps not being able to complete predict what will occur, can render an opinion on likely outcomes.

Those who just look at current and future trends suffer from the opposite sort of thing:  by basing things on what they think likely to happen, they spin all sorts of ideas about what they think will happen or - worse - what they "feel" will happen.

Humanity, though, is much like any other organism:  when under stress or challenge, we tend to revert to form.  And history, if nothing else, is filled with all sorts of form.  To be fair, it is not quite the "cause - effect" of scientific laws, but at worst one could say that there are a very narrow sort of potential options.  

The temptation here, of course, would be to insert some sort of commentary about a current situation and then point out how it will "not go as planned". But I am not nearly so good a historian as to be able to do so and like with any soothsayer, to predict wrongly is to undercut your message.

But given that the historian is more likely than the current/future trend follower to understand the outcome, they find themselves in the awkward position of not being able to actual use that knowledge to impact the course of events.

Oh certainly, they can raise the alarm, be the Cassandra in their Troy crying warnings that no-one will hear.  But warnings from individuals are simply words without any power to enforce them; they are often to their societies either amusing (at first) or tiring (later on) commentary on the state of the world.  Things inevitably are going well and looking better; why muddy the waters with constant reminders of Ozymandias in the desert?  One thing about the past, society says, is that it is gone:  we as humans can set any course we want.

We can set any course we want, I suppose.  Yet history points out that overwhelmingly when the storm hits the ship, the crew will most likely react as they always have.  And the historian will be there, pulling with the rest, sadly confident in the fact that this, too, was likely to occur.

Christianity Had Died Many Times

 

Be One

 "Now your remaining years are few.  Live them, then, as though on a mountain-top.  Whether a man's lot be cast in this place or that matters nothing, provided that in all places he views the world as a city and himself its citizen.  Give men the chance to see and know a true man, living by Nature's law.  If they cannot brook the sight, let them do away with him.  Better so, than to live as they live.

Waste no more time on arguing what a good man should be.  Be one."

- Marcus Aurelius,  Meditations, Book 10,  Sections 15 and 16

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I cannot ultimately control the world or the things that occur to me from outside of me.  What I can control is how I live and how I act and the example that I present.  This, anyone can do for free and without training.  It merely takes the moment by moment decision to live (or Live in Truth, as Solzhenitsyn would say).