The Skeptical Entrepreneur seems to have touched a nerve along the southern Pacific Rim. FORTY-NINE visitors to the blog from Indonesia today!
To all of my new Indonesian friends, I say, "Selamat Datang! Terima kasih telah mengunjungi. Saya berharap bahwa Anda akan menikmati tulisan saya. Pengusaha Skeptis Anda menyambut Anda!"
To all of my established friends around the globe, I say, "Thanks for reading! You guys are the best!"
Tuesday, September 24, 2013
On McDonald's and the $15/Hour Starting Wage
[Note: The Skeptical Entrepreneur should know better than to try to do math in his head. The initial version of this column incorrectly expressed the figures for increased consumer spending capacity in billions; it should have been millions. The corrected version is below. Sorry for the mix-up. - The Skeptical Entrepreneur]
The Motley Fool's Daily Finance column recently had an article on 3 Reasons why McDonald's would be Smart to Pay $15 an Hour as a starting wage. The arguments are good, especially the one that posits that McDonald's would be able to take its pick of the cream of foodservice workers if it became the first to offer a super-premium starting minimum wage.
What the article misses is the fact that bumping McDonald's 60,000-plus U.S.-based employees* to $15 an hour would provide a significant stimulus to the consumer economy. Assuming 60,000 employees, working an average 20 hours per week at an average $8 per hour, increasing the rate by $7 per hour leads to increased wages of $8.4 million per week, or $436.8 million per year. Given that American workers have the lowest marginal savings rate in the industrialized world, that translates to, at a conservative guess, something north of $400 million a year in increased consumer spending.
The benefit to other enterprises is two-fold. The Skeptical Entrepreneur has recently meditated on marginal consumer product demand, and the limitation thereof, as a hurdle to economic regrowth, despite the recovery of financial markets. The key to clearing that hurdle is to facilitate the expansion of consumer demand, thus increasing aggregate consumer product demand. Consumers cannot consume, if they lack the financial resources to purchase consumer products. Barter is not a viable option, since a fundamental principle of accounting demands that transactions be recorded in terms of a stable, unified, quantifiable system of valuation - no money, no documentable and recordable transaction.
Putting an extra $400 million-plus in purchasing power into the hands of consumers, who are bound by the same principle of limited marginal consumer product demand as regards food, will necessarily funnel a significant portion of that purchasing power into non-food consumer goods. All sectors of the consumer-retail economy will benefit, including the foodservice industry up and down the quality/service/efficiency scale.
How much of that extra wage money will find its way back into the hands of McDonald's Corp. and its franchisees is difficult to determine. Certainly, the increased demand for other consumer retailers's products will lead to increased hiring; the example of McDonald's and its premium wage will put pressure on other employers to increase their wages, thus initiating a further, two-pronged increase in consumer purchasing power. Goods and services flow circularly, so an increase in McDonald's wages should lead to an increase in other retailers's business volume, as well as payroll-based contributions to aggregate consumer purchasing power, which should feed back to increased demand for McDonald's products, both directly from its own employees buying more burgers and fries, but also from employees of other retailers (and wholesalers, and manufacturers, distributors, transporters, infrastructural-support firms, etc.).
The Skeptical Entrepreneur is at a loss to understand how anyone can consider that an increase of over $400 million per year in consumer purchasing power is a bad idea. Of course, there will be short-sighted managers who can only think of ways to increase their share of those consumer dollars without increasing their costs. There will be die-hard Hooverites who lament the weakening of the dollar. So what? Show me a businessperson who has a moral stake in maintaining the purchasing power of the dollar, and I'll show you a damned fool. It's not the entrepreneur's job to fret over whether the dollar buys as much today as it did yesterday. The entrepreneur's job is to grow sales and profits. Period.
McDonald's and its franchisees should raise their starting minimum wage to $15 per hour, and use the increase in customer-service value to justify increasing menu prices to cover the wage hike.
*A conservative guesstimate; The Skeptical Entrepreneur has been unable to locate hard data on employment numbers
The Motley Fool's Daily Finance column recently had an article on 3 Reasons why McDonald's would be Smart to Pay $15 an Hour as a starting wage. The arguments are good, especially the one that posits that McDonald's would be able to take its pick of the cream of foodservice workers if it became the first to offer a super-premium starting minimum wage.
What the article misses is the fact that bumping McDonald's 60,000-plus U.S.-based employees* to $15 an hour would provide a significant stimulus to the consumer economy. Assuming 60,000 employees, working an average 20 hours per week at an average $8 per hour, increasing the rate by $7 per hour leads to increased wages of $8.4 million per week, or $436.8 million per year. Given that American workers have the lowest marginal savings rate in the industrialized world, that translates to, at a conservative guess, something north of $400 million a year in increased consumer spending.
The benefit to other enterprises is two-fold. The Skeptical Entrepreneur has recently meditated on marginal consumer product demand, and the limitation thereof, as a hurdle to economic regrowth, despite the recovery of financial markets. The key to clearing that hurdle is to facilitate the expansion of consumer demand, thus increasing aggregate consumer product demand. Consumers cannot consume, if they lack the financial resources to purchase consumer products. Barter is not a viable option, since a fundamental principle of accounting demands that transactions be recorded in terms of a stable, unified, quantifiable system of valuation - no money, no documentable and recordable transaction.
Putting an extra $400 million-plus in purchasing power into the hands of consumers, who are bound by the same principle of limited marginal consumer product demand as regards food, will necessarily funnel a significant portion of that purchasing power into non-food consumer goods. All sectors of the consumer-retail economy will benefit, including the foodservice industry up and down the quality/service/efficiency scale.
How much of that extra wage money will find its way back into the hands of McDonald's Corp. and its franchisees is difficult to determine. Certainly, the increased demand for other consumer retailers's products will lead to increased hiring; the example of McDonald's and its premium wage will put pressure on other employers to increase their wages, thus initiating a further, two-pronged increase in consumer purchasing power. Goods and services flow circularly, so an increase in McDonald's wages should lead to an increase in other retailers's business volume, as well as payroll-based contributions to aggregate consumer purchasing power, which should feed back to increased demand for McDonald's products, both directly from its own employees buying more burgers and fries, but also from employees of other retailers (and wholesalers, and manufacturers, distributors, transporters, infrastructural-support firms, etc.).
The Skeptical Entrepreneur is at a loss to understand how anyone can consider that an increase of over $400 million per year in consumer purchasing power is a bad idea. Of course, there will be short-sighted managers who can only think of ways to increase their share of those consumer dollars without increasing their costs. There will be die-hard Hooverites who lament the weakening of the dollar. So what? Show me a businessperson who has a moral stake in maintaining the purchasing power of the dollar, and I'll show you a damned fool. It's not the entrepreneur's job to fret over whether the dollar buys as much today as it did yesterday. The entrepreneur's job is to grow sales and profits. Period.
McDonald's and its franchisees should raise their starting minimum wage to $15 per hour, and use the increase in customer-service value to justify increasing menu prices to cover the wage hike.
*A conservative guesstimate; The Skeptical Entrepreneur has been unable to locate hard data on employment numbers
Friday, September 20, 2013
Four Words
Marginal Consumer Product Demand.
Four words that constitute the brick wall against which the U.S. has run. Four words that explain why, even if the Dow Jones Industrial Average rises high enough to provide real, break-even returns on equity portfolios from, say, October 2008 to whenever the DJIA reaches that goal (talk about moving goal-posts!), then provides minimal, real growth over that break-even point, then provides compound profits for the same indefinable period, there will still be no need for the owning class to loosen the purse strings.
Even if the "miracle of equity financial markets" contrives to make this now-five-year-old economic nightmare disappear, there will never again be a sufficient flow of cash into the retail-consumption market to lift the former middle class's boats off the bottom, much less make them float. And the poor - well, they're hosed, but what else is new?
Four words: marginal consumer product demand. Even if the value of the 1%'s stock portfolios rebounds to real, compound growth, there are only so many consumer goods that the 1% can consume. The Skeptical Entrepreneur has been flogging what he calls the "Reeboks-Domino's-Blockbuster" test since . . . well, since Reebok and Blockbuster were players.
There are only so many pairs of Reebok sneakers that someone with disposable income can buy. There are only so many Domino's pizzas one can eat, and only so many videos from Blockbuster that one can rent. The 1% can only consume so much.
This is equally true of "luxury" goods, the sorts of things that only the (super-)rich can afford. After all, back in the day - when the middle class, attenuated as it was, still existed - even the hoi polloi could buy Reeboks, Domino's, and Blockbuster. Not everybody can buy multimillion-dollar jet aircraft, or yachts that sleep eight, or more.
But even the ones who can afford those expensive transportation toys can only buy so many of them. Shoot your wad on a late-model Gulfstream G-IV, or the latest offering from Cris-Craft, and you're done. There's no repeat business, except in a few extraordinary cases, until the previous model is disposed of. Note that the population of the super-duper-wealthy, who can afford multiple jets, boats, &c., is even smaller, thus reducing the aggregate marginal consumer product demand.
Four words. Has any harder wall ever been constructed from only four pieces?
Four words that constitute the brick wall against which the U.S. has run. Four words that explain why, even if the Dow Jones Industrial Average rises high enough to provide real, break-even returns on equity portfolios from, say, October 2008 to whenever the DJIA reaches that goal (talk about moving goal-posts!), then provides minimal, real growth over that break-even point, then provides compound profits for the same indefinable period, there will still be no need for the owning class to loosen the purse strings.
Even if the "miracle of equity financial markets" contrives to make this now-five-year-old economic nightmare disappear, there will never again be a sufficient flow of cash into the retail-consumption market to lift the former middle class's boats off the bottom, much less make them float. And the poor - well, they're hosed, but what else is new?
Four words: marginal consumer product demand. Even if the value of the 1%'s stock portfolios rebounds to real, compound growth, there are only so many consumer goods that the 1% can consume. The Skeptical Entrepreneur has been flogging what he calls the "Reeboks-Domino's-Blockbuster" test since . . . well, since Reebok and Blockbuster were players.
There are only so many pairs of Reebok sneakers that someone with disposable income can buy. There are only so many Domino's pizzas one can eat, and only so many videos from Blockbuster that one can rent. The 1% can only consume so much.
This is equally true of "luxury" goods, the sorts of things that only the (super-)rich can afford. After all, back in the day - when the middle class, attenuated as it was, still existed - even the hoi polloi could buy Reeboks, Domino's, and Blockbuster. Not everybody can buy multimillion-dollar jet aircraft, or yachts that sleep eight, or more.
But even the ones who can afford those expensive transportation toys can only buy so many of them. Shoot your wad on a late-model Gulfstream G-IV, or the latest offering from Cris-Craft, and you're done. There's no repeat business, except in a few extraordinary cases, until the previous model is disposed of. Note that the population of the super-duper-wealthy, who can afford multiple jets, boats, &c., is even smaller, thus reducing the aggregate marginal consumer product demand.
Four words. Has any harder wall ever been constructed from only four pieces?
Friday, September 13, 2013
Request for Assistance
The Skeptical Entrepreneur is an entrepreneur in need.
Due to having lost my job due to my big mouth, I am facing a serious fiscal crisis. Living expenses march on while I am between jobs; with no financial cushion available, I am looking at having serious difficulty with paying rent & utilities, and getting my cell phone turned back on.
I have posted a campaign on Indiegogo, soliciting contributions to help meet basic living expenses. The campaign goal is $2,200, which will leave me, if I meet the goal, with a net $2,046 after Indiegogo's fee. The campaign is here.
I made a video to support my campaign:
Thanks, and God Bless you!
Due to having lost my job due to my big mouth, I am facing a serious fiscal crisis. Living expenses march on while I am between jobs; with no financial cushion available, I am looking at having serious difficulty with paying rent & utilities, and getting my cell phone turned back on.
I have posted a campaign on Indiegogo, soliciting contributions to help meet basic living expenses. The campaign goal is $2,200, which will leave me, if I meet the goal, with a net $2,046 after Indiegogo's fee. The campaign is here.
I made a video to support my campaign:
Thanks, and God Bless you!
Tuesday, September 10, 2013
Car for Sale
No social commentary here. The Skeptical Entrepreneur is forced, reluctantly, to offer his late mother's 2007 Chrysler PT Cruiser for sale. The Blue Book value is ~$5,100; asking $4,500 OBO.
The sale notice can be found here.
Pictures of the vehicle:
Thanks for your interest!
The sale notice can be found here.
Pictures of the vehicle:
Thanks for your interest!
Friday, September 6, 2013
The Global South, Part II
The Skeptical Entrepreneur is pleased to report that coverage from the Global South continues to grow! We have had traffic from Australia, which reminds TSE of one of his favo(u)rite renditions of "Advance Australia Fair," the Australian National Anthem; viz.,
Advance Australia Fair
Enjoy! The Skeptical Entrepreneur is proud to be an American, but has to say that the Australian national anthem ROCKS!
Advance Australia Fair
Enjoy! The Skeptical Entrepreneur is proud to be an American, but has to say that the Australian national anthem ROCKS!
Thursday, September 5, 2013
Southern Exposure!
The Skeptical Entrepreneur is pleased to note, upon checking audience statistics, that there has been a visitor to the blog from Brazil (no idea if a boy, or a girl) during the past month. TSE welcomes any sort of southern exposure for the blog: the Global North must reach out to the Global South for their mutual survival.
Bemvindo ao nosso blog! O:)
Bemvindo ao nosso blog! O:)
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