Thursday, February 21, 2013

Minimum Wage Math.

Suppose you own a Subway store.

A healthy store grosses about $7000 per week (about 1000 sales per week).

Per week, you pay two full time workers, and another three full-time equivalents of part-time employees. Four of them are minimum wage, $7.25 per hour (sans FICA, etc). If you keep your store open for ten hours, seven days a week, you are paying at least for 280 hours of minimum-wage work, or about $2030 a week.

You are now required to pay $9.00 an hour for the minimum wage. Your labor costs have increased by at least $490 per week. This comes right out of your profit, which is about $1000 a week. Your income, your capital savings to expand to another store, and your reserve for hidden costs, such as remodeling every five or six years, has just been halved.

What do you do? You let go of at least one part-time employee, of course, and you pick up the slack by working 20 more hours yourself.

And another kid is on the street without a job.