Economics 101 is missing from $15/hr movement

I encountered a group of protesters today outside a Kroger store. I wanted so to engage them in a conversation, but I suppose it would be unfair to have a battle of wits with and unarmed person. Any way, I was working, and did not have time to get into it anyway. The group appeared to be mostly union members who had recruited a few college kids to come and demonstrate in favor of $15/hour wages for fast food and grocery store workers.

I couldn’t help but wonder though how they would have answered the question. “Where do you suppose the money to pay that wage comes from?” The obvious answer is from the sales of the businesses they chant “shut it down” about if they don’t get their way. Now I don’t claim to be the smartest guy in the world, but it seems to me that if you expect a business to raise the wages of its workers, damaging their sales is counter productive to your goal.

Additionally, any given business will do a finite amount of sales in a year. Most of their costs (inventory, facility, taxes) are pretty well fixed. That leaves only a certain amount to cover variable costs, the largest of which is personnel. If a business has only 20% (just for illustration, this may be off) of its profits to spend on labor, then an increase in the hourly rate can only have one result – fewer employees. This is exactly the dilemma faced now by Walmart after they committed to paying higher wages. They are forced to lay off workers.

So to all the industrious rabble rousing union goons who shouted “No justice, no peace” today in from of the Kroger store at 9000 Staples Mill Road in Richmond, VA, take comfort in the knowledge that if you get your way, some of your friends will lose their jobs.

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