My eldest daughter is a server for a growing chain restaurant. I think it’s a good gig for her, and she is probably an excellent server, and I like the fact that she seems to enjoy her work. Here’s the thing. She told me that in California, the minimum wage is something like 7.50 an hour. Apparently, there is no exemption for tipped employees. So, she earns tips in addition to her hourly wage. Great. Now, California must be only second to New York with respect to the “costs of doing business”, yet, companies find ways to keep profitable there. We visited the Nashville location of this restaurant, and she said that the prices were only slightly different, nothing truly noteworthy. So, Ezra, tell me why that company can pay it’s help 7.50 an hour in California, where they have sky-high real estate prices, (thereby driving up costs) and a much higher tax rate, yet continues to not only operate, but experience record growth? It can’t be volume, I mean, you can only serve so many people a day. Whenever I hear from Conservatives over the minimum wage debate, all I ever get is the argument that a government mandated wage floor would kill a company’s incentive to hire, and therefor, grow.
I was already thinking about this when I read that CostCo’s average wage was something like 18 dollars an hour. What is Walmart’s? 6? 10? Their prices are comparable, so how does CostCo do this?
(I’m asking Ezra because I am a fan of his, and he usually takes complex financial issues and writes about them in a way that a moron like me can understand. But please, feel free to chime in if you have thoughts)