Without reading the article (paywall) I can tell that at least here the problem is that companies don't pay well and there is not much difference between having a low paid job and living on benefits, so people often choose the latter.
edit: I don't write this as a negative. Majority of people agree with such system and there is nothing wrong with that.
The article says it's a contributing factor, but not the complete explanation. Access to vaccines, fear of public safety, and the need to be home with kids who can't attend school are still huge factors. Also, there is a ton of hiring going on. Unrate is dropping and competition is high. A lot of motivated workers just can't apply fast enough or have the option of being choosy.
It seems like they tried to read it but hit a paywall. The same thing happened to me. But I still wanted to see the comments and participate in discussion.
I don't know why hacker news still allows articles with paywalls.
I don't know if companies don't "pay well," but the government certainly pays well enough for people not to need a job. Is that good? :) It is certainly a goal that some people strive for and we certainly have realized this goal now. Is society satisfied with this result?
> It is certainly a goal that some people strive for and we certainly have realized this goal now
I'm not so sure we can compare the impact of temporary changes to the goals that proponents of UBI have set out.
I suspect there's going to be significant pressure to wind back expansions and allow temporary programs to sunset. And it'll be hard to argue to keep them once vaccine access is high, schools are open, and things can "return to normal."
Not working at a time when you have access to significantly increased unemployment funds and in the middle of a pandemic is an extremely rational decision, but I suspect it is not how the long-term would look.
If a company can't hire anyone at a specified pay rate, either they aren't advertising the position well enough or it doesn't pay well enough. If you've already tried more advertising, it leaves one thing..
It is a great thing when government forces businesses to pay living wages. We can hope and wish for them to do it themselves, but it just doesn't happen otherwise.
Sure, but is it good for the person to not work? I get that you don't care what happens to the business, but the question isn't about the business - it's about the person. We get that this is the best economic decision for them, but are they happier? Do they feel fulfillment? Is society better-off?
Some people are just like that. They consume and then they die. Not everyone has to achieve something and for me and you this may be unthinkable, but some people just don't feel the need. They are perfectly happy with spending their life watching TV or similar.
I think its good. The alternative for a lot of people on unemployment is losing that stream of income and becoming homeless. Some of those people will resort to crime, and some of those people will end up costing society more than paying for housing and food many times over.
The thing is - what would be achieved if we didn't have such safety net? People would essentially be forced to work - I would think that forced labour should be a thing of the past, because as a civilisation we can do better. Then other people inevitably would be forced into crime.
With this system you can safely go home with your groceries without fear of getting killed for a baguette, because people don't get reduced to animals.
There is also a ton of savings when it comes to policing. People have full bellies, so they are less likely to commit violent crime.
Nobody wants to do hard labor for $15 an hour in a costly place to live when they could be paid to stay at home while doing nothing, with an optional side hustle as well.
Didn’t read the article, but why would you go work at a lower end job when you can make 80-90% of what you would make by just collecting unemployment benefits?
I personally know at least 2 people that admitted this and said they would wait until unemployment benefits expire to seek work.
Unemployment isn't UBI. If you work you lose the unemployment money you would have got for free, hence the disincentive. UBI (most proposals) would supplement work not replace it.
With UBI, if you take an additional job, you would lose a large share of your income to taxes used to pay for the UBI.
Yes, you can restructure income tax levels so that people get to keep most of their additional income, and then you'd have to tax the remaining people more heavily to compensate. But if that's the solution, why don't we do that today?
This argument shows that UBI doesn't solve the incentive problem. It can only be solved by keeping welfare benefits significantly lower than minimum wages, which means lowering one or raising the other. This isn't logically impossible, but it's matter of political feasibility. That's true of UBI also.
I don't necessarily disagree. I think UBI is an important thing to study and consider as we increasingly displace workers with the ever-moving capability of tech, but it will undoubtedly have some unintended consequences.
I do think it's important to point out though that you lose unemployment if you work, so there's direct incentive there.
Just look at the Nordic countries, very good unemployment benefits but we do not have any issues with people staying on benefits even if they could get a good paying job.
A UBI that works as e.g. a negative income tax would definitely work.
The point from most of the comments seems to be, if unemployment is enough to live on and the alternative is a job you don't particularly want to do, then there's no incentive to do the job you don't want to do?
If UBI just replaces unemployment, how does that calculation change? You still have enough money to live on you still don't want to do the job being offered?
Unless UBI is sufficiently low that you need a job to survive, in which case... is it UBI?
Nothing says people aren't willing to work if they pay is good enough. Unemployment is effectively a 90% tax rate in the bottom bracket, making work pointless.
The U means that you still get your monthly basic income even if you work. With unemployment working earns you 10-20% more. With UBI working earns you 105-115% more.
Why don't companies pay more then? In Switzerland service employees make 20-35 dollars an hour. Is there some intrinsic reason why employers feel compelled to pay so little?
It does scale, because the assumption is that you’ve built your life around that previous level of income. Going from a few hundred K/year down to 60k/yr would probably be devastating for most.
The thing that people seem to forget is how higher AGI = higher taxes. People are just getting back some of what they’ve paid into the system already. Would you expect to get full coverage insurance on a new Ferrari, with premiums based on the value of that, then get compensated by the insurance for the value of the cheapest car on the market in the event that it was stolen?
I'm not arguing against the fact that unemployment scales, I am merely stating a fact.
OP's question was "why don't you pay more? That will make people want to leave unemployment". My response was "higher wages will not incentive people to leave unemployment because they would be receiving unemployment that scaled with those higher wages".
And the natural outcome of the business’s landlord running off loans/mortgage. Credit makes everything harder to change, and the more coupled the system, the worse it is.
Usury to me implies that it's a predatory rate. Even with reasonable rates, being on the hook for a reasonable amount still means I'm now incentivized to keep my little corner of the world static, as well as simply slowing change down, which also forces change in the wrong places while the "right" change plays catch-up.
If you have a chain of A owing B $2k/mo and B owing C $2k/mo and so on from A to Z, then if A through Y's sectors all change, Y still needs to pay Z, meaning X needs to pay Y, mean W still needs to pay X, and so forth. Meaning that even though nobody's paying usury rates, nearly everyone is still heavily constrained in terms of how they can adapt to change. And so they're incentivized to push the world towards whatever scenario they planned for, not because they like that scenario a priori, but because that's what they planned for.
tl;dr Credit lets you play time arbitrage, which sets up bad incentives when things don't go according to plan.
It's proven that any interest rate above zero is destructive and predatory. Thus, there is no difference between usury and interest in terms of immorality. There's a reason that usury is prohibited in all three major religions (Islam, Judaism, and Christianity).
We shouldn't have chains of people owing money to each other, we've seen what happened in 2008. Prohibiting lending money with interest will not allow such chains to form.
In Switzerland the cost of living is also >50% higher than other western European countries. Housing is even 100% higher. Service employees in Switzerland come mainly from Germany, France, Portugal, Brazil etc.
Switzerland is also one of the most expensive places in the world. As is NYC, where I live and the minimum wage is $15/hour and service jobs paying between $20-$35 is not unusual.
In the US, there are also places where the minimum wage is $7.50 (the federal minimum wage) and things also cost far less. The US in general is a much more diverse place than a place like Switzerland, and yet it’s all governed by the same federal law, which paid expanded unemployment benefits the same regardless of where the person is located.
>Is there some intrinsic reason why employers feel compelled to pay so little?
The average US small-business owner makes around $70k/year, less than most devs: https://www.cnbc.com/2020/02/28/this-is-how-much-to-pay-your... . It's not like small business are rolling in cash. The only way for them to pay more is either to raise prices (meaning everything costs more) or hire fewer people. Would you be willing to patronise a shop that charges 50% more for coffee than the shop next to it because it pays its workers more? I'd bet not.
Switzerland is a very rich country, so all wages are higher; shops can afford to pay more.
>Would you be willing to patronise a shop that charges 50% more for coffee than the shop next to it because it pays its workers more? I'd bet not.
I'm not a business owner, but from a customer's point of view, I regularly settle on my favorite stores for reasons other than price. As long as it's not exorbitantly priced (e.g., $8 coffees in a small city), I prefer places that have good atmosphere, offer quality products and service, and become part of the community. A coffee shop that displays and sells works from local artists is better than a Dunkin Donuts.
My wife chooses where to shop and eat by price, and I hate it. We end up saving some money but often not enjoying it (cheap batteries that need frequent replacement, foul-tasting marinara, etc.). No matter how thrifty we were, I just see it as paying to be less happy.
Yes. Absolutely yes. If your workers make more money, they are happier and provide better service. The coffee shop next store will likely have terrible service, with high turnover because everyone there is just waiting for their chance to get out and move onto a better paying job.
Why do you think people shop at stores like Publix or Whole Foods when Walmart has lower prices? Because those stores (even though they still treat their employees--sorry, "associates" poorly) have better service, due to better pay.
>Would you be willing to patronise a shop that charges 50% more for coffee than the shop next to it because it pays its workers more? I'd bet not.
I would, assuming that it’s not just the exact same product. I really enjoy going to different coffee shops and checking out what they’ve got and what they do differently. I don’t actually care about price; I would pay $20 for a cup of something really interesting. I’m not talking about drip from an air pot, think more WBC. I wouldn’t expect someone at that level in their craft to work at a place paying minimum wage, and I wouldn’t expect the coffee shop paying people min wage to have excellent coffee, which I’m happy to pay more for.
There is a market for McDonald’s coffee as there is a market for $20/cup coffee.
Presumably, a business struggling to hire has too much demand to fill with their current workforce. The econ 101 solution to this is to raise prices or hire more capacity. If hiring additional capacity is impractical raising prices would be the next step.
If we're living in a world where prices are inelastic, then labor supply will also become inelastic. Presuming that successful businesses aren't trying to hire for the sake of hiring, then it's almost certain that they are raising prices to meet demand.
Same in Germany and Austria. Local farmers complain about a shortage of fruit pickers in the season even though there are plenty of able bodied unemployed locals with no skills or degrees but since they have the option of staying on unemployment, why would they do back-breaking work for 10-20% more money then what they get paid for sleeping in at home?
So they just import and abuse poor workers from Eastern Europe[1] living and working in illegal conditions, who have no better options back home than to do back-breaking work for what would be peanuts in Germany but somewhat-half-decent money back home.
The local authorities know about these illegalities regarding foreign worker exploitation but turn a blind eye as this keeps the meat and vegetables cheap in the supermarkets for the very price sensitive local consumers, since the farmers are all under the pressure of the big supermarket chains to deliver produce on time and on razor thin margins so they have no other way but to find cheap exploitable workforce to stay competitive or lose their contracts.
I wonder if the solution to this is to offer workers a non financial benefit, so it doesn't cost the farmer and more to employ a local person, but that local person gains something that they wouldn't get just by sitting at home collecting benefits...
>Didn’t read the article, but why would you go work at a lower end job when you can make 80-90% of what you would make by just collecting unemployment benefits?
I think you wouldn't. A family member runs a small shop and unemployment plus additional COVID benefits ended up being very close to wages of some employees, who did the math and decided that 90% of the pay for 5% (not zero due to expectations for unemployment) of the work.
You’re getting downvoted to hell, but it really is a let-me-google-that-for-you kind of question, given what the article presents. It’s frustrating to see so much discussion going that way.
> Didn’t read the article, but why would you go work at a lower end job when you can make 80-90% of what you would make by just collecting unemployment benefits?
There’s a good article somewhere that looks into that specific question and provides some data and weighs alternative explanations. I wish I could find the link.
Alternatively we could all just debate it without any of the data from the article. I’m pretty sure I know which option is most popular.
I think their ideas make sense. There's not A REASON, there's probably a bunch. They list:
For some, unemployment benefits too generous.
For some, they are worried about getting sick.
For some, they're still needed at home
For some, the pay too low to want to work.
And for some, they're just reconsidering career decisions.
Add up all the "For Some" people, and that's probably a pretty big number.
Beer Garden Anecdotes (Few Hiring Candidates, Increased Competition for Wages due to PPP2)
- We have seen approximately 1/10th the amount of applicants as compared to our hiring prior to Covid.
- We have reached out to 50+ people via the hiring platforms i.e. Indeed recommended candidates, with a very limited response rate.
- Of the 6 people who a) applied for our job AND b) responded to our requests for interviews, only one has shown up for their scheduled interview. He was immediately hired.
- The single hire we made, for $14/hr as a dishwasher, did not return on day 4 as he was offered a position at a larger restaurant for $18/hr. That is not a sustainable market rate we can offer. I assume they are increasing their hourly rate due to 1) lack of talent seeking jobs or 2) large influx of cash from PPP2.
- I had three scheduled interviews, and all three were no shows, sending messages of cancellation either 10 minutes before, or not at all.
- I reached out to all three of those after their missed interview times, and two have rescheduled their interviews for. Typically, we would not entertain a no-show like that, as dependability is critical on a small team, but we are not in a position to be picky. (I'm curious if it is possible to use these scheduled interviews in fraudulent claims of seeking but not finding work. We literally hired the one person who came in.)
- We have had job postings on Indeed.com, Craigslist.org, and Facebook for the past 3 weeks - as well as leveraging our website and social media posts.
- Our current team of 6 other people are all hires from before Covid.
If you can't get a worker for the "market rate", perhaps the hard answer is that $14 is no longer the actual market rate, and you need to offer more money to get employees.
I live in a 50k poulation town, and $14 is not a living wage.
What do you think 'market rate' means? If you aren't able to hire for $14 but someone else is for $18... then $14 is clearly not the market rate and $18 is. That's what a market rate is - the rate things are selling for in the market.
But what if the supply gets tighter ? The market rate must adapt (since it's a market). You may have to raise everyone or hire no one new, or vote for a communist 5-year plan.
Imagine if instead everyone wanted to work at your restaurant, EVERYONE, you'd fire your 6 guys and pay $2 their replacement, no ?
> I assume they are increasing their hourly rate due to
Doesn't that maybe suggest that $18/hr is probably the current market rate then? My understanding of market rate is "amount at which the two parties are willing to negotiate", not "amount that the employer wants to lock in at, all other factors be damned"
If one can't afford to pay competitive wages, that may suggests they're not actually financially healthy enough to stay in business.
What do you mean when you keep saying “market rate?” You describe your competitors poaching your employees by paying them more, and saying it’s not fair because you can’t pay them that. Tough shit buddy! Sounds like you’re paying below market.
That's an interesting idea - an "Uber" for general work. You're vetted for having certain skills. A business needs workers having that skill from say 7pm - 10pm this evening. You can bid in your price. The business owner can then choose the worker they want at the price they want.
What I'm wrestling with is whether this is utopian or dystopian? That's why I say it's an "interesting" idea. I can see it appealing to some people and not appealing at all to others. Maybe there's room for both kinds of people in the labor market? Your "base" workers who are always there and reliable and the "peakers" who are taking care of your excess load at peak times?
Most unemployment programs require you to make and report a minimum of "two contacts" per week. You probably got used as one of the two required contacts, though the person was likely not interested in the job.
In other words: the rent is too high. If it was lower you could actually pay wages at a level that people would show up for. A correction of real estate prices is long overdue, there is no need for landowners to skim off money that could be used more productively in others sectors of the economy.
Inflation benefits people with debts. People with assets are quite untouched, you'd even think that real estate is viewed as a safe investment (the "concrete gold" meme). Better unemployment benefits would help, but under Delaware Biden they are a political impossibility.
One assumes, though it's expected the child tax credit will be introduced in a permanent bill eventually, so I think there's a chance we'll see a more permanent UI benefit too. At least I hope.
Pfft. Biden rolled back immigration restrictions in a period of record unemployment, and you expect improvement in unemployment benefits? Labour must be squeezed, and the child tax credit does that, too. Can't have a reduction in births, that would mean less workers fighting for a job twenty years down the line.
Inflation is the result of rising wages. However, we're in a place now where wages haven't even matched inflation for decades. Suddenly things start catching up and everyone loses their mind, claiming it's the fault of unemployment insurance.
Does it require changes in rates? Interest rates determine absolute property prices, by way of per month payment prices, but it’s the latter that should have primacy, right? What people can afford to pay each month.
Right. Property values are highly correlated with incomes, because that determines what purchasers or renters can afford. Interest rates determine how much of a loan a purchaser can service. So, low rates allow purchasers to bid up the price of assets, which effectively transfers money from borrowers to current asset owners.
Since property prices are highly correlated with incomes, and income changes are correlated with inflation and productivity gains, the only lever that can be pulled to change real estate prices is the interest rate.
For property to become more affordable, the interest rate has to rise. Since that would cause property values to drop, many people who recently purchased property would find themselves owing more to a mortgage lender than their property is now worth, and it would likely remain that way for a decade. Many of those people were stretching to afford their purchase before, with 3% down programs and half their monthly income or more going to service a loan. We are already at a record high level of mortgages in forbearance.
So, the interest rate cannot be allowed to rise. The only people that would benefit are people with a decent income, no debt, and substantial savings, who do not yet own an asset class. Almost no-one, and mostly young people. But low interest rates push money to seek higher returns, which causes investment to become speculative instead of seeking lower-risk capital improvements. This reduces future productivity gains, which lowers growth long-term.
In other words, the future is Japanification. Society will gladly sacrifice its children and future for a few more years of fun bucks. A decade long recession is, I believe, inevitable, and will happen after the next asset crash.
Everything you’re talking about only relates to the list price. I don’t know the right name for it. The value of the property. What you’d see on the for sale sign. You’re right about different levers on that.
The problem is that that’s not the price that matters in this particular setting. What matters are the monthly payments. If you change rates, the list price will change but monthly payments won’t.
You know, you're not wrong. Inflated asset prices can last a long time. Fundamentals win in the end, but the end can take longer than a person's career.
"The market can stay irrational longer than you can stay solvent".
"When the music plays, you have to dance."
I'm just suggesting not to speculate with borrowed money.
I don't think the prices are gonna correct as much as people think it would, considering my entire generation is waiting on the sidelines to buy, the demand will always be there until it's satisfied.
12% of US detached housing is vacant. Property is being held by speculators who are betting that interest rates will fall and increase the value of property. No amount of supply will meet the demand of an asset class that increases in value by 6% a month.
Interest rates are at historic lows. The Fed rate going negative has been discussed in months gone by. Lender money to borrow is a little tougher as with rates so low they may keep it in equities, or buy GME or Bitcoin where they have higher upside potential.
Buying GME to offset losses in real estate is the most 2021 thing I've heard. I don't know if I should laugh or cry.
The only thing I have to say is that I would expect the government to push more federally backed mortgage loans at their preferred interest rates if they sense a slowdown in private lending. Heaven forbid markets correct themselves.
I think you may've missed some subtext from the parent post. It sounded to me like people are not showing up to interviews not just because of higher wages offered elsewhere. It sounded like, at least partly, those interviewees currently do not need to show up to job interviews in order to make ends meet. This has the added effect of lowering the labor supply, which to me explains the struggle parent poster is facing.
It is. In the scope of "how do I hire people" it is as simple as "pay them what they want".
How you work that into your business plan is harder, but you need employees for the business plan to work as all, so it still boils down to "pay them more".
While 100% on its face this seems a bit reductivist, it sounds like the argument I make about “just deal with the 30% App Store take or don’t make a business” which I guess I should revisit.
Sure this small bar could literally pay more but if that means their business model doesn’t work then that probably means many small bars/restaurants business model won’t work in the area (unless they have old/low rent). So does that mean you’re ok with all small places being replaced with TGI Fridays?
It's a harsh truth that businesses are not guaranteed that their business model will work. It's part of the reason that in my hometown (50k population, $600k townhomes) some 90% of restaurants (and small batch brewers/distillers) fold within a year.
But the 10% that succeed, are succeeding in the same environment as everyone else. They do so by offering food and an atmosphere that people want, and that you don't find in another restaurant in the area, even though the price is higher (significantly higher than TGI Fridays). Sure, there's also a good bit of luck involved, but that's hardly unique to starting and maintaining a business.
And what else would you suggest? Forcing people to work for $14? Prevent them from being sniped by other businesses for more money? They're already getting loans from the government to hire more people...
While traveling around to a few big and medium cities I get the sense that the market is already rationally killing off mom and pop shops in favor of Chain Burger, and I also get the sense that whether you’re in a small or big town, metaphorical Habit Burger is actually favored and more trusted to deliver a good burger.
It’s even more true with little apps on the App Store. Most tiny little apps actually hurt the Apple experience because they are unworthy and don’t have the reputation but still want your data.
Small shops don’t economically make sense except for very local concerns.
Or someone more adaptive and innovative fills your economic niche in a way that you couldn't by dealing with the market realities and investing in their employees. Capitalism is amazingly resilient to rising wages.
I think that works well in Tech, but I don't see how the OP's Beer Garden could possibly innovate and adapt their way into having the money to pay superior wages.
Well that's capitalism. Adapt and grow, or die. OP's business going under is not going to make the demand for beer gardens go away. Someone more efficient will fill it.
Labor has been forced to operate under the same rules for decades now. Don't like the minimum wage? Then starve. Or figure out a way to provide more value. A dozen other people will be desperate enough to take it. I've zero sympathy for business owners being held to the same forces.
You're not wrong but higher unemployment helps push prices down. The economy is a huge collection of competing forces so answers are rarely so straight forward.
> a dishwasher, did not return on day 4 as he was offered a position at a larger restaurant for $18/hr. That is not a sustainable market rate we can offer
I don't think these guys understand what "market rate" means.
Anything will “sell” if it is at the right “price”. If it isn’t selling, it isn’t at the right price!
Simply put, the market is what determines the wage employees will stick around for. The free market doesn’t give two shits about what any employer thinks is an “appropriate wage”. If you are offering $14/hr and employees are jumping ship after their fourth day for $18/hr, no amount of complaining and bellyaching about that not being “sustainable” will change things.
Tighten that belt and make cuts elsewhere - like your own take-home, which if it’s an industry standard, is likely several multiples of that employee’s wage in order to finance a McMansion on the hilltop and a Mercedes in the garage.
Remember - if you cannot afford to pay a living wage, you cannot afford to be in business. Asking people to work below poverty wages so you can own a business is entitlement at it’s finest: you are asking human beings to use their lives to subsidize your desire to own a business. If a job is worth being done, it’s worth being paid enough to live.
Many businesses exist that can't pay "living wages". That doesn't make them bad, or unworthy of existing. My wife owns a business. There were many years when she wrote herself paychecks but never cashed them. She pays better than most of her local competitors, especially for her more experienced workers. But its mostly unskilled labor that she hires. COVID cut her business demand by 90%. She has managed to hold onto 50% of her workforce.
I see all the negative comments but I'm asking this with genuine curiosity. Do high school students not really work any more? Maybe they legally can't at a Beer Garden, even if it's washing dishes?
When I was in high school I worked as a busser/dishwasher for a diner. I'm assuming you're in a high CoL state but what you are offering is above what I was paid after adjusting for inflation.
That was obvious to everyone from the start. In Hong Kong the gov tries horribly hard to stay away from cash incentive for the working population (usually only for retirees) and they try to offer more consumption-oriented staggered offers (during peak touristic period, in cashless cash coupons, for a limited time, for limited purposes).
Giving so much cash with no other consequence than the "rich" taxpayers footing the bill one day maybe, is not gonna motivate the restauration workers who usually worked by necessity, not passion.
The article lists a number of common sense explanations. Why would this one be special? Your first sentence applies very well to your own comment.
Personally, what rings most true is the quote in the article about the virus being the first order issue. It seems much more common sense that the hiring challenges at the (hopefully) end of the pandemic are related to the fact that it’s still a pandemic.
Even if you didn't lose such a job in the first place, you'd be thinking twice about taking one in this climate. Anything customer-facing that requires physical presence is gonna struggle to find victi^H^H^H^H^H candidates right now.
And that's as it should be, I concur. Nobody should be customer-facing right now, we should all be locked down, these people should not be considered unemployed.
I hear this all the time about other fields -- "there is a shortage welders" etc. But these jobs are 30-hours tops, or only for 8 months, or similarly limited, and often located in places like rural Missouri, where there is no overflow housing and nothing to do.
For 50/hr -- yeah maybe. I'll be bored as shit and living in a shed, but that's decent money. But for 25/hr? Screw that, I'll pick up a side job here or something.
Money doesn't grow on trees. If there were two shops offering you the exact same breakfast, but one was charging 50% because it paid its employees more, would you patronise it? Even if you would, the majority of people wouldn't, hence why anywhere that charged so much more would go out of business, because people are much more willing to moralise about other people's businesses than put their money where their mouth is and support companies that pay their workers more.
This back-and-forth has been getting very common regarding American businesses in recent years though. Without a doubt it's because the rest of the developing world are now having their middle class booms, and American purchasing power is being eroded.
And given the avarice of corporations and the negligence of our federal government, it won't be getting better.
Forgive my misunderstandings, but if the business can't make ends meet with their labor and income costs, then it sounds to me like that is not a sustainable business in the market they are in.
Granted, if enough of these shops then go under, the supply of jobs will decrease, and then the wages will drop (and many other market effects). Capitalism isn't even close to a perfect system for allocating these resources, but it does seem to be one of the best we have found thus far.
If you can’t sustain your employees, your business model is broken and and you should shut down and get a job or start over.
But to answer your question, yes I would. I voluntarily tip well above the amount you’re describing at every restaurant I eat at for this exact reason.
Money doesn’t grow on trees, but you’re pinning it on one arbitrary part of a very large system. Why doesn’t that mean the business’s rents are too high, or that property values are inflated, or that certain whole sectors have too low prices, or even that maybe we don’t need a coffee shop every twenty feet?
If a coffee shop can’t sustain livable wages, there are a ton of moving parts that could adapt. I imagine the problem is credit. It’s artificially hard to lower that shop’s rent because the landlord still has to deal with their mortgage price (and so on around the whole economy).
> If there were two shops offering you the exact same breakfast, but one was charging 50% because it paid its employees more, would you patronise it?
I do not believe that this situation truly exists, so this argument falls apart for me.
Also: many people are willing to pay more for “Made in USA”, even significantly more. Sewing and textile work is definitely more expensive here, and sometimes comparable quality can be found through overseas manufacturing (e.g. Arcteryx, Mystery Ranch). There’s room in the market for both, and the products are different enough for reasons other than some are MIUSA and others are not.
In other words, breakfast and coffee are not fungible commodities.
- Preference (at present) for remote work/gig jobs
- Malinvestment by USGOV/Fed in support of debt/equities/assets, instead of production of goods, infrastructure and critical services. This drives investment & job seekers to speculative industries, at the expense of core industries.
Theres one single solution here: higher wages. If you can't afford it, then your business probably shouldn't exist. Cry me a river for the people that can't find someone to slave away for $9/hr with no benefits.
The problem is unemployment programs have hard cutoffs of benefits. Why take a job that costs you 40 hours a week for only an increase of 10-20% of income that you would get from unemployment?
There may also be an element of risk in getting a job. I'm not sure what the situation is in the US, but in Canada it is very difficult to justify putting effort into finding work if you were barely earning enough to get by. Simply put, taking a full time job that earns 50% to 100% of your prior earnings will leave you worse off. That is because you cannot collect employment insurance if you work full time (regardless of your earnings) and the other emergency response program only kicks in if you lost 50% of your income.
Now put yourself into the position of someone who is only able to find work that doesn't pay well and is susceptible to emergency measures. Working full time may allow them to put a few dollars aside, but not much. When they find their hours cut back to 60%, there is nothing to protect them.
There are a couple of ways to respond to that. One is to put very little effort into applying for desperation jobs. Another is to continue looking for a more secure or better paying job while working. This was a problem in some sectors prior to the pandemic. It has only been made worse because of the pandemic. That being said, I suspect it is worse due to the heightened sense of insecurity rather than government benefits.
I'm in Canada. My neighbor is in this exact situation. She's an electrician turned electrical engineer -- and then went back to electrician cuz the work was steadier and she got harassed less on a job site, go figure -- but got hurt on a job site right before COVID.
It's easier for her to work towards Master Electrician via courses than it is to actually get any random job. Her unemployment + COVID boost + schooling stipend + insurance payout makes enough that she'd probably make less at a shit-tier service job.
Why bust your ass for 10% more, when you can focus on skilling up and getting back into EE or waiting for a better job? Plus she works out like an hour a day, practices piano 3+ hours, and has time for schooling.
Outside of failing to meet someone else's implied capitalist strivings, I can't see the downside of this approach.
I’d recommend people read the article before jumping in off of the title alone (it’s a js paywall, so it shouldn’t be a real barrier to discussion). The article has actual data on things people are just speculating on all over the thread.
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[ 2.5 ms ] story [ 224 ms ] threadedit: I don't write this as a negative. Majority of people agree with such system and there is nothing wrong with that.
I don't know why hacker news still allows articles with paywalls.
I'm not so sure we can compare the impact of temporary changes to the goals that proponents of UBI have set out.
I suspect there's going to be significant pressure to wind back expansions and allow temporary programs to sunset. And it'll be hard to argue to keep them once vaccine access is high, schools are open, and things can "return to normal."
Not working at a time when you have access to significantly increased unemployment funds and in the middle of a pandemic is an extremely rational decision, but I suspect it is not how the long-term would look.
It is a great thing when government forces businesses to pay living wages. We can hope and wish for them to do it themselves, but it just doesn't happen otherwise.
1) Indoor work is still unsafe, which is messing with the labor markets and making it hard to start a new business
2) If you get a job or side income you lose your benefits
3) The benefits are temporary so you can’t plan around them.
But anecdotally my fiancé was able to start a small business during the pandemic. And unemployment benefits helped.
I personally know at least 2 people that admitted this and said they would wait until unemployment benefits expire to seek work.
Yes, you can restructure income tax levels so that people get to keep most of their additional income, and then you'd have to tax the remaining people more heavily to compensate. But if that's the solution, why don't we do that today?
This argument shows that UBI doesn't solve the incentive problem. It can only be solved by keeping welfare benefits significantly lower than minimum wages, which means lowering one or raising the other. This isn't logically impossible, but it's matter of political feasibility. That's true of UBI also.
I do think it's important to point out though that you lose unemployment if you work, so there's direct incentive there.
A UBI that works as e.g. a negative income tax would definitely work.
If UBI just replaces unemployment, how does that calculation change? You still have enough money to live on you still don't want to do the job being offered?
Unless UBI is sufficiently low that you need a job to survive, in which case... is it UBI?
You stop getting the benefit if you get a job, you wouldn't stop getting UBI, so there's no negative response to being employed.
The thing that people seem to forget is how higher AGI = higher taxes. People are just getting back some of what they’ve paid into the system already. Would you expect to get full coverage insurance on a new Ferrari, with premiums based on the value of that, then get compensated by the insurance for the value of the cheapest car on the market in the event that it was stolen?
Edit: minor typo
OP's question was "why don't you pay more? That will make people want to leave unemployment". My response was "higher wages will not incentive people to leave unemployment because they would be receiving unemployment that scaled with those higher wages".
If you have a chain of A owing B $2k/mo and B owing C $2k/mo and so on from A to Z, then if A through Y's sectors all change, Y still needs to pay Z, meaning X needs to pay Y, mean W still needs to pay X, and so forth. Meaning that even though nobody's paying usury rates, nearly everyone is still heavily constrained in terms of how they can adapt to change. And so they're incentivized to push the world towards whatever scenario they planned for, not because they like that scenario a priori, but because that's what they planned for.
tl;dr Credit lets you play time arbitrage, which sets up bad incentives when things don't go according to plan.
We shouldn't have chains of people owing money to each other, we've seen what happened in 2008. Prohibiting lending money with interest will not allow such chains to form.
In the US, there are also places where the minimum wage is $7.50 (the federal minimum wage) and things also cost far less. The US in general is a much more diverse place than a place like Switzerland, and yet it’s all governed by the same federal law, which paid expanded unemployment benefits the same regardless of where the person is located.
The average US small-business owner makes around $70k/year, less than most devs: https://www.cnbc.com/2020/02/28/this-is-how-much-to-pay-your... . It's not like small business are rolling in cash. The only way for them to pay more is either to raise prices (meaning everything costs more) or hire fewer people. Would you be willing to patronise a shop that charges 50% more for coffee than the shop next to it because it pays its workers more? I'd bet not.
Switzerland is a very rich country, so all wages are higher; shops can afford to pay more.
I'm not a business owner, but from a customer's point of view, I regularly settle on my favorite stores for reasons other than price. As long as it's not exorbitantly priced (e.g., $8 coffees in a small city), I prefer places that have good atmosphere, offer quality products and service, and become part of the community. A coffee shop that displays and sells works from local artists is better than a Dunkin Donuts.
My wife chooses where to shop and eat by price, and I hate it. We end up saving some money but often not enjoying it (cheap batteries that need frequent replacement, foul-tasting marinara, etc.). No matter how thrifty we were, I just see it as paying to be less happy.
Why do you think people shop at stores like Publix or Whole Foods when Walmart has lower prices? Because those stores (even though they still treat their employees--sorry, "associates" poorly) have better service, due to better pay.
There is a market for McDonald’s coffee as there is a market for $20/cup coffee.
If we're living in a world where prices are inelastic, then labor supply will also become inelastic. Presuming that successful businesses aren't trying to hire for the sake of hiring, then it's almost certain that they are raising prices to meet demand.
So they just import and abuse poor workers from Eastern Europe[1] living and working in illegal conditions, who have no better options back home than to do back-breaking work for what would be peanuts in Germany but somewhat-half-decent money back home.
The local authorities know about these illegalities regarding foreign worker exploitation but turn a blind eye as this keeps the meat and vegetables cheap in the supermarkets for the very price sensitive local consumers, since the farmers are all under the pressure of the big supermarket chains to deliver produce on time and on razor thin margins so they have no other way but to find cheap exploitable workforce to stay competitive or lose their contracts.
Welcome to 21st century European capitalism.
[1]https://youtu.be/OUiFYhVEUvU
I think you wouldn't. A family member runs a small shop and unemployment plus additional COVID benefits ended up being very close to wages of some employees, who did the math and decided that 90% of the pay for 5% (not zero due to expectations for unemployment) of the work.
Then why are you commenting? Your point was addressed in the article.
There’s a good article somewhere that looks into that specific question and provides some data and weighs alternative explanations. I wish I could find the link.
Alternatively we could all just debate it without any of the data from the article. I’m pretty sure I know which option is most popular.
For some, unemployment benefits too generous. For some, they are worried about getting sick. For some, they're still needed at home For some, the pay too low to want to work. And for some, they're just reconsidering career decisions.
Add up all the "For Some" people, and that's probably a pretty big number.
- We have seen approximately 1/10th the amount of applicants as compared to our hiring prior to Covid.
- We have reached out to 50+ people via the hiring platforms i.e. Indeed recommended candidates, with a very limited response rate.
- Of the 6 people who a) applied for our job AND b) responded to our requests for interviews, only one has shown up for their scheduled interview. He was immediately hired.
- The single hire we made, for $14/hr as a dishwasher, did not return on day 4 as he was offered a position at a larger restaurant for $18/hr. That is not a sustainable market rate we can offer. I assume they are increasing their hourly rate due to 1) lack of talent seeking jobs or 2) large influx of cash from PPP2.
- I had three scheduled interviews, and all three were no shows, sending messages of cancellation either 10 minutes before, or not at all.
- I reached out to all three of those after their missed interview times, and two have rescheduled their interviews for. Typically, we would not entertain a no-show like that, as dependability is critical on a small team, but we are not in a position to be picky. (I'm curious if it is possible to use these scheduled interviews in fraudulent claims of seeking but not finding work. We literally hired the one person who came in.)
- We have had job postings on Indeed.com, Craigslist.org, and Facebook for the past 3 weeks - as well as leveraging our website and social media posts.
- Our current team of 6 other people are all hires from before Covid.
Say you pay 25$ an hour, but it's only 8 hours a week during peak ?
I think with the gig economy young people are used to only working when they want.
I live in a 50k poulation town, and $14 is not a living wage.
What do you think 'market rate' means? If you aren't able to hire for $14 but someone else is for $18... then $14 is clearly not the market rate and $18 is. That's what a market rate is - the rate things are selling for in the market.
If someone can Doordash, etc, and make more( while arguably dealing with less stress) they'll rationally do that.
Or since this is HN, can you automate some of these tasks ?
Imagine if instead everyone wanted to work at your restaurant, EVERYONE, you'd fire your 6 guys and pay $2 their replacement, no ?
Doesn't that maybe suggest that $18/hr is probably the current market rate then? My understanding of market rate is "amount at which the two parties are willing to negotiate", not "amount that the employer wants to lock in at, all other factors be damned"
If one can't afford to pay competitive wages, that may suggests they're not actually financially healthy enough to stay in business.
What I'm wrestling with is whether this is utopian or dystopian? That's why I say it's an "interesting" idea. I can see it appealing to some people and not appealing at all to others. Maybe there's room for both kinds of people in the labor market? Your "base" workers who are always there and reliable and the "peakers" who are taking care of your excess load at peak times?
https://www.snagajob.com/ I imagine it depends on your situation.
If I was 19 I'd love it. I'd hate living like this with a family to support
By the time it reaches ground level nothing left but crumbs
There is no way out. Get out of debt and hoard as much as you can. Bad times are coming.
Since property prices are highly correlated with incomes, and income changes are correlated with inflation and productivity gains, the only lever that can be pulled to change real estate prices is the interest rate.
For property to become more affordable, the interest rate has to rise. Since that would cause property values to drop, many people who recently purchased property would find themselves owing more to a mortgage lender than their property is now worth, and it would likely remain that way for a decade. Many of those people were stretching to afford their purchase before, with 3% down programs and half their monthly income or more going to service a loan. We are already at a record high level of mortgages in forbearance.
So, the interest rate cannot be allowed to rise. The only people that would benefit are people with a decent income, no debt, and substantial savings, who do not yet own an asset class. Almost no-one, and mostly young people. But low interest rates push money to seek higher returns, which causes investment to become speculative instead of seeking lower-risk capital improvements. This reduces future productivity gains, which lowers growth long-term.
In other words, the future is Japanification. Society will gladly sacrifice its children and future for a few more years of fun bucks. A decade long recession is, I believe, inevitable, and will happen after the next asset crash.
The problem is that that’s not the price that matters in this particular setting. What matters are the monthly payments. If you change rates, the list price will change but monthly payments won’t.
Exactly
If the buyer can only afford $1,000 a month with a 30 yr mortgage - that sets the upper bound of the list price of the asset
If rates rise the monthly payment stays the same, but the buyer can only afford a lower priced house.
If rates go down those $1,000 can now pay for a higher list price
"The market can stay irrational longer than you can stay solvent".
"When the music plays, you have to dance."
I'm just suggesting not to speculate with borrowed money.
The only thing I have to say is that I would expect the government to push more federally backed mortgage loans at their preferred interest rates if they sense a slowdown in private lending. Heaven forbid markets correct themselves.
Vacant Housing Estimate - https://fred.stlouisfed.org/series/EVACANTUSQ176N
So, looks like closer to ~11% as of that data.
How you work that into your business plan is harder, but you need employees for the business plan to work as all, so it still boils down to "pay them more".
Sure this small bar could literally pay more but if that means their business model doesn’t work then that probably means many small bars/restaurants business model won’t work in the area (unless they have old/low rent). So does that mean you’re ok with all small places being replaced with TGI Fridays?
But the 10% that succeed, are succeeding in the same environment as everyone else. They do so by offering food and an atmosphere that people want, and that you don't find in another restaurant in the area, even though the price is higher (significantly higher than TGI Fridays). Sure, there's also a good bit of luck involved, but that's hardly unique to starting and maintaining a business.
And what else would you suggest? Forcing people to work for $14? Prevent them from being sniped by other businesses for more money? They're already getting loans from the government to hire more people...
It’s even more true with little apps on the App Store. Most tiny little apps actually hurt the Apple experience because they are unworthy and don’t have the reputation but still want your data.
Small shops don’t economically make sense except for very local concerns.
Labor has been forced to operate under the same rules for decades now. Don't like the minimum wage? Then starve. Or figure out a way to provide more value. A dozen other people will be desperate enough to take it. I've zero sympathy for business owners being held to the same forces.
It's not sustainable? Pfft you think anyone else is magically getting cheaper? Raise your prices and cut your overhead, welcome to the game.
I don't think these guys understand what "market rate" means.
Whether that is “sustainable” for your own cash flow was never the point.
Simply put, the market is what determines the wage employees will stick around for. The free market doesn’t give two shits about what any employer thinks is an “appropriate wage”. If you are offering $14/hr and employees are jumping ship after their fourth day for $18/hr, no amount of complaining and bellyaching about that not being “sustainable” will change things.
Tighten that belt and make cuts elsewhere - like your own take-home, which if it’s an industry standard, is likely several multiples of that employee’s wage in order to finance a McMansion on the hilltop and a Mercedes in the garage.
Remember - if you cannot afford to pay a living wage, you cannot afford to be in business. Asking people to work below poverty wages so you can own a business is entitlement at it’s finest: you are asking human beings to use their lives to subsidize your desire to own a business. If a job is worth being done, it’s worth being paid enough to live.
Yes, it does. Someone is making easy money on the backs of people who can't afford to live.
When I was in high school I worked as a busser/dishwasher for a diner. I'm assuming you're in a high CoL state but what you are offering is above what I was paid after adjusting for inflation.
If you increase the amount of money provided to people who aren't working then you change the cost benefit analysis of working a wage job.
The end game is higher prices at service businesses to allow them to pay people a higher wage to attract them.
A positive side effect I've noticed is that high school kids are getting hired in droves at local restaurants here.
Giving so much cash with no other consequence than the "rich" taxpayers footing the bill one day maybe, is not gonna motivate the restauration workers who usually worked by necessity, not passion.
Personally, what rings most true is the quote in the article about the virus being the first order issue. It seems much more common sense that the hiring challenges at the (hopefully) end of the pandemic are related to the fact that it’s still a pandemic.
And that's as it should be, I concur. Nobody should be customer-facing right now, we should all be locked down, these people should not be considered unemployed.
$25 an hour is great for a lot of people, but if they only pay you for 10 hours a week that isn't great after all.
For 50/hr -- yeah maybe. I'll be bored as shit and living in a shed, but that's decent money. But for 25/hr? Screw that, I'll pick up a side job here or something.
Here's a radical concept: wages are too low. People aren't applying to your job because you're not offering enough money. Pay people more.
You claim to believe in a free market, then complain when nobody wants to work for you for starvation wages.
And given the avarice of corporations and the negligence of our federal government, it won't be getting better.
Granted, if enough of these shops then go under, the supply of jobs will decrease, and then the wages will drop (and many other market effects). Capitalism isn't even close to a perfect system for allocating these resources, but it does seem to be one of the best we have found thus far.
But to answer your question, yes I would. I voluntarily tip well above the amount you’re describing at every restaurant I eat at for this exact reason.
If a coffee shop can’t sustain livable wages, there are a ton of moving parts that could adapt. I imagine the problem is credit. It’s artificially hard to lower that shop’s rent because the landlord still has to deal with their mortgage price (and so on around the whole economy).
I do not believe that this situation truly exists, so this argument falls apart for me.
Also: many people are willing to pay more for “Made in USA”, even significantly more. Sewing and textile work is definitely more expensive here, and sometimes comparable quality can be found through overseas manufacturing (e.g. Arcteryx, Mystery Ranch). There’s room in the market for both, and the products are different enough for reasons other than some are MIUSA and others are not.
In other words, breakfast and coffee are not fungible commodities.
Surely the social safety net is to blame.
- Stimi checks
- Unemployment benefits
- Migration from high crime/tax/rent areas
- Preference (at present) for remote work/gig jobs
- Malinvestment by USGOV/Fed in support of debt/equities/assets, instead of production of goods, infrastructure and critical services. This drives investment & job seekers to speculative industries, at the expense of core industries.
Now put yourself into the position of someone who is only able to find work that doesn't pay well and is susceptible to emergency measures. Working full time may allow them to put a few dollars aside, but not much. When they find their hours cut back to 60%, there is nothing to protect them.
There are a couple of ways to respond to that. One is to put very little effort into applying for desperation jobs. Another is to continue looking for a more secure or better paying job while working. This was a problem in some sectors prior to the pandemic. It has only been made worse because of the pandemic. That being said, I suspect it is worse due to the heightened sense of insecurity rather than government benefits.
EDIT: clarification.
It's easier for her to work towards Master Electrician via courses than it is to actually get any random job. Her unemployment + COVID boost + schooling stipend + insurance payout makes enough that she'd probably make less at a shit-tier service job.
Why bust your ass for 10% more, when you can focus on skilling up and getting back into EE or waiting for a better job? Plus she works out like an hour a day, practices piano 3+ hours, and has time for schooling.
Outside of failing to meet someone else's implied capitalist strivings, I can't see the downside of this approach.