Posted on by Californiacontrarian

Which Door to Choose?

In my neighborhood there is a store called The Dollar Store, but soon it may need to be called “The Dollar Nine & One-Half Cent Store”. “Why?”, you ask.

Basic economics – related to the recent rise of 9.5% in the minimum wage, which went from $10.50 to $11.50 per hour in San Diego on January first of this year. The profit margin at this Dollar Store is small, and as almost all of their employees are minimum wage employees, the only way to maintain this small profit margin is (Door #1) to layoff some employees, or (Door #2) to raise prices . . . and thus the potential name change. Which do you think will happen?

In a similar vein this week two ladies told me that they had stopped going to a particular movie theater because it had raised the senior rate from $8.50 to $11.50. This increase in the senior rate was 35%! They could no longer afford to go to that theater any longer.  “Our Social Security COLA this year was only 0.3% and so we can no longer afford to go to that theater.”

Coincidentally, another movie theater that my wife and I usually go to raised its rate a similar 35%. When I asked, “Why the substantial increase?”, the answer revolved around the increased minimum wage. At this theater there are always four to five very young employees doing menial tasks, such as asking to which movie you are going and issuing a ticket, serving popcorn, drinks, and candy, and collecting the tickets. None of them are old enough to be a bread-winner for a family. None of them are minorities. All are teenagers; some out of high school, some not. We will not be going back to this movie theater. At this point both of these movie theaters have apparently opted to substantially raise their prices (Door #2) rather than lay anybody off (Door #1).

Why this minimum wage frenzy? Well the party line is that this increase will allow individuals to better raise a family . . . except that the minimum wage employees that I have run into are not raising families. I am sure that there are some, but these menial jobs were never meant to support a family. For the politicians it certainly is a “look at how wonderful I am; look what I am doing to help the less fortunate; and of course by raising our local minimum wage more than is mandated by the state of California, I am even more saintly.” Whether it will actually do more harm or more good is irrelevant for them because rather than thinking about the consequences of their actions, they are all about emotion, and besides ” I will be out of office when the sh** hits the fan.”

Whether the business establishments choose Door #1 or Door #2, only bad things will happen – either for the employees (some will get laid off), the consumers (who will be forced to pay higher prices), or the businesses (decreased profits as some customers will go elsewhere). Unfortunately at this point, there is no Door #3.

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