Tuesday, August 11, 2015

CEO of Wendy's weighs in on Nashville mayoral race...

...albeit indirectly. On last week’s call with securities analysts, Wendy’s CEO Emil Brolick was asked how he will respond to minimum wage hikes, like that proposed by Megan Barry, one of the two Nashville Mayoral Candidates in a runoff:
“our franchisees will likely look at the opportunity to reduce overall staff, look at the opportunity to certainly reduce hours and any other cost reduction opportunities, not just price. You know there are some people out there who naively say that these wages can simply be passed along in terms of price increases. I don’t think that the average franchisee believes that.”

Mr. Brolick elaborated that “we believe that some of these increases will clearly end up hurting the people that they are intended to help."

BLOGGING DISCLOSURE:  I am supporting the other candidate, David Fox, and his wife is a former student.

9 comments:

  1. Before Emancipation labor was free and the South was like an extraordinarily rich nation, one of the richest in the world according to Piketty's book, Capital. Slavery now exists in a different form. Low-wage, dead-end jobs that hire public school "graduates" who lack fifth-grade math and reading skills is the 21st century version of slavery. This endless pool of cheap, marginally-educated labor guarantee that the fast food and retail corporations will make millions. In the case of Wendy's, the top five executives are raking in over $13million. Slavery is alive and well in America. It's perfectly legal. It's never going away. The labor may not be free but at $7.50 an hour, 20 hours a week with no benefits, that's pretty darn close. -SC

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    1. Interesting point of view. Shouldn't it be the responsibility of the government to educate its citizens past a 5th grade level so they can move from the minimum wage job to a higher paying job? Do you think approaching it from raising minimum wage would solve the problem that you are presenting?

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    2. Taxes destroy wealth!! I do agree that simply raising the minimum wage is not the only resolution. I do not agree that it is the government’s responsibility to educate its citizens past the fifth grade, the financial burden will fall on all of us; again taxes destroy wealth. I do believe that the government needs to figure out how to keep college costs down though. Education is important and it is completely out of reach; we are losing talent. Many companies and civil service jobs now require college credits for entry level employment. I am ok with this, education is important, but I also think we are losing talented people because they cannot afford college. I can’t help but to think how much talent is working the register at a fast food place, without the hope of progressing to the next level of employment.
      I graduated college in 1992 from a good local school. My tuition at the time was roughly $7,000 per year, that same school is now $40,000 per year. So $28,000 for a degree is now $160,000; that’s insane. I received maybe $1,500 a year in financial assistance, worked 2 minimum wage jobs and took a loan out for the rest. It took about 5 years to pay it all off. I used to joke that I could have skipped college, joined the work force and bought myself a Corvette for what I paid for my degree. You know what, I could have! I could have easily taken an entry level job and started a life time of contributing to the economy. I could have bought a car, taken trips, buy a house and raise a family. Kids can’t joke like that now, they need the degree to get entry level jobs and the cost of that same degree far exceeds the cost of 3 Corvettes. I paid for my degree on my own with absolutely no help. I thought it was tough but that is what people did. I really thought that kids in 2015 would feel the same way that I did in 1992, that it will all be relevant; but it is not. The whole thing is completely out of control! How do we expect people to progress? If they can even get through college how can we possibly expect them to pay it all off, buy a house or generally contribute to the economy in a single lifetime?
      JG

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  2. This issue is deeper than lack of education. Way too many minimum wage employees are educated and overqualified for these jobs. Technology has made it possible for one person to do the job of what used to take 2 or 3 adult employees. Now those same adult employees are taking the same jobs usually reserved for teenagers or others not qualified for better paying jobs.
    Technology is now eliminating those same minimum wage jobs. I can’t remember the last time that I actually went into a retail store to make a purchase, I just order it all on line. I don’t even call or walk into a takeout restaurant anymore, all the local places take their orders on line.
    I want to take the stance that the minimum wage needs to be a living wage but it seems that technology is actually replacing these jobs almost to the point of extinction. Company’s like Wendy’s will absolutely be able to eliminate some of these jobs if the minimum wage is increased.
    JG

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  3. As I was reading Chapter 7, I appreciated the learning curve concept. Employees will provide more value as they gain more experience. I've always believed in paying your best people top dollar as much as you can. They will end up providing more value and you will have less employee turnover.

    Can the same be said for workers that see a decent increase in the minimum wage? They will then feel they are being paid more appropriately. As a result, they will provide more value and will be more likely to stay put longer. Wouldn't that be a net benefit for employers in the long term?

    Yes, call me an optimist. This is good for everyone - most of the dollars earned by minimum wage earners go back into the economy. Same thing can be said for the middle class -we need those groups to prosper for the overall economy to work and for the rich to get richer.

    Inclusive capitalism, anyone?

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  4. I agree, we need this group to prosper. The minimum wage should be a living wage, which it is not right now. When I was a minimum wage earning teenager I spent every dime in local businesses or at the mall. It was $3.35 an hour; I lived at home so it was all mine. I probably never grossed more than $70 or $80 on any given week, but I pumped almost all of it back into the local economy. I had my fill of diner burgers, movies, new records and even opened up a pass book account at the local bank. Looking back all the places that attracted teenagers back then must have done well, sadly many of these places are out of business now. The diner, movie theater and record store that thrived on my local main street are all shut down now. It should not come as a surprise since the same minimum wage jobs now belong to adults, who cannot afford to foolishly waste money like a teenager. Unfortunately the wage hikes will just force businesses to cut corners, either quality or actual staffing will suffer the most.
    JG

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  5. The debate over raising the minimum wage has been a lively topic of late. While President Obama and his supporters claim that this increase would greatly benefit the economy and result in no loss of jobs, the opposition claims that this would be detrimental to those earning minimum wage.

    Raising the minimum wage means minimum wage workers have more money to spend resulting in more money being distributed throughout the economy. If these minimum wage employees are spending more, then businesses are earning more and need to hire more employees. Also, many of the same employees who are currently earning minimum wage are the same people who must rely on additional support of government aid and programs to support themselves and their families.

    If an employer has a tight budget, and minimum wage is raised, it means they may no longer be able to compensate the same number of employees at the higher rate, and may need to execute layoffs to remain within budget. Employers might raise prices of their product in order to generate enough income to support their more highly paid minimum wage employees, which could ultimately create a ripple effect for other shops and services. And, if business must pay their minimum wage employees more, they may decide to not hire as many.

    It has been suggested that creating more jobs for people who need them rather than raising earnings for people who already have them might be a better solution for reducing the national poverty rate. Of course, this does not mean that raising the minimum wage wouldn’t be greatly beneficial to those earning it, but ultimately it does not help those who do not already have jobs to begin with.

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    1. It has been predicted by economists that the increase in minimum wage at fast food corporations will have a ripple effect to restaurants and low wage jobs, such as retailers. (McGeenhan, 2015) In the state of New York the wage increase would come at over 70%, quite a substantial jump. But cities throughout the U.S have already adopted higher minimum wage so it is a doable measure. However the concern of franchisors is understandable especially in lower income areas. Although if the good is normal, in the theory of income elasticity of demand would suggest as income increases so will demand. (Froeb, 2014) In addition higher wages could lead to better overall quality and could increase demand in that sense as well.

      New York Plans $15-an-Hour Minimum Wage for Fast Food Workers - The New York Times. (n.d.). Retrieved October 18, 2015, from http://www.nytimes.com/2015/07/23/nyregion/new-york-minimum-wage-fast-food-workers.html?_r=1
      Froeb, M. S. (2014). Managerial Economics A Problem Solving Approach. Boston: Cengage.

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  6. The raising of minimum wage is a very important topic especially as of late. The average person needs a higher wage due to cost of living increases. However, industries such as the fast food industry rely on keeping overhead low in order to stay competitive. Wendy’s is certainly not going to stay competitive by putting out a high quality product. That is not what they do. They provide a quick, cheap and adequate meal. If a person wanted a top quality meal they do not enter a drive thru. In such an industry, the raising of minimum wage will cause the organization to find other cost cutting means in order to remain competitive in the marketplace. The easiest place to find that cost cutting measure is under that very same expense- payroll/wages. If you have to pay one person more then why not pay less people? That is absolutely a reaction that would occur within many given industries. Wal-Mart is another good example. Wal-Mart is not in the business of supplying top of the line products. Wal-Mart is in the business of supply low cost products, therefore it must keep its costs low. Wages are a bid part of Wal-Mart’s costs.

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