Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: combjelly who wrote (859158)	5/21/2015 10:37:05 PM
From: TimF	1 Recommendation Recommended By PKRBKR Respond to of 1576418

Really? How does that work? Message 30077683 If you run a hamburger joint and the price of beef goes up, do you stop selling hamburgers? If it goes up enough yes. If it goes up less than that but still a lot you probably raise the price. At higher prices people consume less hamburgers. Hamburger oriented restaurants either expand their menu in to other areas, or shift their sales in to existing non-beef items already on the menu, or cut their hours to the busier ones where they can get enough business, or don't expand, or maybe go out of business. For small increases in the price of beef maybe they can pass it along (since competitors may be doing so as well), or maybe they have to and can afford to eat it in lost profits (despite the often thin margins in the industry), but relating this back to minimum wage remember were talking about the idea of more than doubling it. Labor is almost always going to be more expensive than one food input (sometimes more than all food inputs) but if beef prices suddenly more than doubled its not like the restaurants could just say "oh its the price of doing business" and act like nothing important happened. You and i-node assume that labor is elastic. If the price goes up, you reduce the amount you use. While there is some elasticity, there are limits. The limit is 100% of your labor being eliminated when you go out of business. Short of that the demand for labor will be relatively (but not totally) inelastic in the short run, but over time you get less expansion, more automation, more hiring and keeping only productive employees who are reliable and do more work (and our willing to work for $15 even if they wouldn't for 7 and change) etc. That's esp. true with such a massive price change. Small changes happen all the time but labor is probably going to be something like 25% to almost 40 percent of the cost of doing business. Few businesses can just shrug off an increase in cost of 12 to 20%.

To: combjelly who wrote (859158)	5/22/2015 1:36:13 AM
From: i-node	1 Recommendation Recommended By FJB Respond to of 1576418

>> If you run a hamburger joint and the price of beef goes up, do you stop selling hamburgers? >> You and i-node assume that labor is elastic. If the price goes up, you reduce the amount you use. While there is some elasticity, there are limits. You still need X amount to cover Y amount of work. I was going to write a post you would have no appreciation for anyway, so I'm going to skip that and just post the graphic you surely must have seen a year or so ago: Certainly, you would not argue against the idea that a vast number of jobs are subject to replacement by automated processes. I know you agree with that because you and I have discussed it here before. Surely, also, you would agree there is almost no function in the food service industry that can't be automated. If you want to argue that point it is a different post, but I can assure you that for the amounts of money at stake, automation will flow freely from the frying of french fries to the breading of onion rings and all points in between. This business is one I know backwards and forwards, and 90% automation isn't hard. The ONLY thing that prevents it is cost. It is cheaper to pay employees -- including for their mistakes -- than it is to purchase the necessary machinery and equipment. But I guarantee you that equipment is getting cheaper by the day. And frankly, just about everything you get at a chain restaurant is frozen and/or prepared today. The easy stuff, like order entry, is happening now. It isn't just food service and you know that; we've talked about it. Labor is going to continue to get cheaper and cheaper and demand for it scarcer and scarcer.