September 6, 2014 by JImbo
People often underestimate the value of Logistics and Finance on major projects. They can’t for example figure out why it takes DAYS for food to get to a disaster area. They can’t figure out how it takes so long to turn the lights on after a thunderstorm.
Or how much goes on behind the scenes to produce a meal at McDonald’s or stock a shelf at Wal Mart.
Me, I KNOW how much work goes into things. I’ve been there. Done that.
In a disaster, you need to clear the roads before the truck can drive.
You need to get the truck before you load it.
You need to get supplies (from somewhere else) before you can load them.
You need to decide where to distribute food before you can drive to those sites.
You need to find out how bad it is before you can determine where the food is needed.
You need to talk to the authorities and organize your troops before that.
And of course you need to get TO the National Guard Armory first to get to your gear and office and that means getting through those SAME roads that everyone else can’t get down!
So, it takes some time.
A lot of time.
The same is true of stocking shelves at Wal Mart. Do you know how many levels of work there are between you buying the product and the raw materials it’s made from? Let’s say a cheap plastic toy?
Wal Mart -> Truck -> Warehouse -> Truck -> Distributor -> Truck -> Port -> Ship -> Warehouse -> Truck -> Factory (China?) -> (a ton of steps in making the thing at the factory) -> Truck -> Port -> Ship -> Port -> Truck -> Oil Fields
At each stage work needs to be done, energy used, and people paid.
Things cost money.
The two biggest costs are PEOPLE and ENERGY (and people using energy really)
So, let’s go back to this “strike” for $15 minimum wage for fast food workers. The average McDonald’s only makes 10% profit. Then a franchise needs to pay 4% “rent” to the Corporation. So, only about 6% of the money made by the restaurant goes to the boss. And then he has to reinvest at least 1% in replacement costs.
So, about 5% net profit. That’s what the owner lives on. Given an “average” of about $2-2.5 million a year and that’s about $100,000 a year. Not bad but not a “millionaire” by any stretch of the imagination.
Now, that 5% is all they can use without raising prices. There simply isn’t any big pot of money to pay these people more.
About 40% of their expenses or more are LABOR. So, it’s impossible to double that without raising prices.
Or… reducing costs. Another way of doing it is to cut half of your staff to pay the other half double.
They’ve already premiered automated ordering at some McDonald’s and Wal Mart and TOPS have had automated registers for awhile. People don’t tend to like them, but they work to reduce the load when only ONE cashier is on. That’s pretty much all the time now.
Why? Because people want it. But, how much do they want it? Enough to pay extra for it? I’m gonna bet that within a few years you’ll have “automated with a discount” or “full price with a live cashier.” We’ll see how long those jobs last.
But this isn’t just about McDonald’s. It’s about EVERY business not paying $15 an hour. So… basically… EVERY COMPANY IN THE UNITED STATES. Right now $15 is considered “good money” in most parts of the country. I have friends working in factories who brag about making $12 or $14 an hour. So now “good” money is “minimum wage?”
Does that make any sense?
Then there’s people who are living in a dream world and think that nothing will ever change.
For an economics magazine, I expected more out of Forbes. No effect on prices? Really? Well who is McDonald’s competition?
Taco Bell? Wendy’s? Burger King?
Don’t they use the same business model? Low-skilled labor with low wages?
So if their competition is paying more and raising prices, then THEY will too.
Or, they’ll automate more. What if there’s just ONE person there and a huge Dr. Seussian Rube-Goldberg machine that makes Happy Meals? Then the one person there will sit there like the Maytag Repair Man in case it breaks down.
Until he’s replaced by a robot too.
Or a nice Indian family. They seem to run all the Dunkin Donuts in Syracuse. They simply don’t hire outside workers. They have the huge family all pitch in.
Same with the Chinese restaurants. Strictly a “Mom and Pop” operation. That way you avoid labor costs.
It’s all about what the customer wants in the end. People vote every day with their money. They buy what they want. If they don’t like it you lose their business.
The Free Market is a great thing. It’s like the power of Nature. It does its thing without most folks even knowing it’s working.
However, much like Nature, the Government can’t replicate it. It can only STOP it from working or pervert it and mutate it.
Those politicians pushing for the “Living Wage” are like those people who breed tiny dogs that don’t DO anything. They take a good, healthy template of a dog (or economics in this case) and twist and pervert it into something that is essentially useless and unable to exist without constant watching.
Capitalism is said to be a “Dog Eat Dog” system, or a “System run by Wolves.” is that a bad thing?
How long do Terriers, Poodles and Chihuahuas live in the wild? Other countries are NOT raising cute little mutants. They are breeding survivors. Their businesses are truly competitive.
Or maybe we’re more like the “seedless watermelons” of the world. We keep destroying the one thing that makes Capitalism work… Capital. Our innovation, risk taking and education follow.
We have virtually no manufacturing in this country. How long can you be a watermelon farmer with watermelons that have no SEEDS to plant the next year? If you ONLY sell the watermelons, then you’re dependent on other farmers to grow them. You lose some control. You give them the jobs and they don’t come back.
So is a %15 minimum wage good? No, it’s one of the worst ideas politicians have ever had. At BEST it’ll do nothing. If instituted slow enough, prices will just rise as fast as inflation because of higher wages. So, in 10 years you’ll be making twice as much and paying twice as much.
So, you’ll be no farther ahead. You will have accomplished exactly nothing.
And that’s the BEST case scenario.