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Chipotle Increases Prices in San Francisco to Match Increase in the City’s Minimum Wage

in Liberator Online, News You Can Use by Jackson Jones Comments are off

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If you live or work in San Francisco, the delicious burritos you buy at your local Chipotle are going to be a little more expensive, and you can thank the city’s new minimum wage law, which took effect on May 1.

American Enterprise Institute economist Mark Perry made note of a report from William Blair, an investment banking firm, which noticed the price increase and surmised its cause.

chipotle burrito“San Francisco…saw across-the-board price increases averaging over 10%, including 10% increases on chicken, carnitas (pork), sofritas (tofu), and vegetarian entrees along with a 14% increase on steak and barbacoa,” the report said. “We believe the outsized San Francisco price hike was likely because of increased minimum wages.”

In November, voters in San Francisco overwhelmingly passed a referendum mandating a gradual increase in the city’s minimum wage from $10.74 an hour to $11.05 in January and $12.25 in May. By 2018, San Francisco’s minimum wage will be set at $15.

Employers, particularly smaller ones, in San Francisco will undoubtedly face huge headaches as they try to find ways to pay for the new big government mandate. Some will be simple price increases, while others may not be so lucky.

“[T]he minimum wage is not really a political problem, it’s a math problem,” Perry explains. “And the 10-14% price increases at Chipotles in San Francisco are just the new math problem now facing the restaurant chain’s customers, who’ll now be paying about $1 extra for each burrito bowl.”

San Francisco is following in the footsteps of Seattle, which, in May 2014, enacted a similar gradual minimum wage increase. On April 1, employers in Seattle had to pay $11 an hour. Additional increases will be phased in over time, though when will depend on the size of the employer.

Restaurants in Seattle are struggling to keep up with the wage increase. They’re reducing staff hours to cut payroll costs, opening later or closing earlier, and/or increasing menu prices to make up the forced added overhead cost. One pizzeria owner, however, was forced to close because of the additional costs the minimum wage increase brought her business.

“I’ve let one person go since April 1, I’ve cut hours since April 1, I’ve taken them myself because I don’t pay myself,” said Ritu Shah Burnham, owner of Z Pizza. “I’ve also raised my prices a little bit, there’s no other way to do it.”

Burnham is concerned about job prospects for her employees. “I have no idea where they’re going to find jobs,” she said, “because if I’m cutting hours, I imagine everyone is across the board.”

When he was less interested in scoring political points and more interested in the effects of economic policy, Paul Krugman, in 1998, chided two advocates of a higher minimum wage – – economists David Card and Alan Krueger, the latter of whom would go onto served as President Barack Obama’s Chairman of the Council of Economic Advisers.

“Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects,” Krugman wrote. “This will to believe is obvious in this book: The authors not only take the Card-Krueger results as gospel, but advance a number of other arguments that just do not hold up under examination.”

“For example, the authors argue at length that because only a fraction of the work force in the firms affected by living wage proposals will be affected, total costs will be increased by only 1 or 2 percent–and that as a result, not only will there be no significant reduction in employment, but the extra cost will be absorbed out of profits rather than passed on in higher prices,” he continued. “This latter claim is wishful thinking of the first order: Since when do we think that cost increases are not passed on to customers if they are small enough?”

Krugman seemingly laughed off the assertion that workers wouldn’t suffer, calling it “a non sequitur at best.” They will, according to more recent analysis of the effects of a minimum wage increases.

“Imagine that a new local law required supermarkets to sell milk at, say, 25 cents a gallon,” Krugman added. “The loss in revenue would be only a small fraction of each supermarket’s total sales – but do you really think that milk would be just as available as before?”

The full economic consequences of San Francisco’s minimum wage increase may not be fully understood for some time, and Chipotle’s price increase may be a blip on the radar. But when all is said in done, workers in the city may have a tough time finding employment because of a new hurdle in their way, and consumers will be shelling out a lot of money than they would otherwise be spending for more than just burritos.

The Piketty Challenge to Capitalism

in Economic Liberty, Economics, Liberator Online by James W. Harris Comments are off

(From the Intellectual Ammunition section in Volume 19, No. 8 of the Liberator Online. Subscribe here!)

Capital - Thomas PikettySeems like everybody is talking about French left-wing economist Thomas Piketty’s new book Capital in the Twenty-First Century.

It rocketed to the top of the New York Times bestseller list.

Lefty pundit Paul Krugman hails it as “the most important economics book of the year — and maybe the decade.”

An Esquire review was entitled “The Most Important Book of the Twenty-First Century.”

New York magazine described Piketty as a “Rock-Star Economist.”

The title of an article on Bill Moyers website crowed: “Piketty’s Bombshell Book Blows Up Libertarian Fantasies.”

Even the Pope tweeted a thumbs-up to the Piketty thesis: “Inequality is the source of social evil.”

No doubt about it: proponents of massive government intervention and coercive wealth distribution are praising Thomas Piketty’s new book to the skies.

Piketty’s tome is seen as a devastating criticism of the very fundamentals of capitalism. Basically, Piketty examines an enormous amount of historical economic data to conclude that capitalism inevitably, over time, promotes huge inequalities in wealth. This wealth becomes ever more concentrated in just a tiny percentage of the population, leaving the rest of us far poorer and far less powerful politically.

This inequality, Piketty believes, poses a serious threat to the people of the world (except the wealthy). The solution? Although he himself suggests it is probably unrealistic, at least for the moment, he urges a massive worldwide tax on wealth to radically reduce income inequality.

And what a tax it is! For the U.S. Piketty wants a steeply progressive income tax with a top rate of 80% on incomes starting at around $500,000 or $1 million, as well as a 50%-60% tax rate on incomes as low as $200,000, which he confidently asserts “would not reduce the growth of the US economy.” To make sure the beast of inequality remains slain, he suggests an annual wealth tax up to 10% on the largest fortunes, and grabbing up to 20% of lesser estates.

No, he’s not kidding. And the main purpose of this tax is not to flood governments with revenue — though it would, at least at first — but simply to reduce income inequality. Indeed, he has surprisingly little concern with how inefficiently or destructively government might use this money.

These proposals may sound downright insane to libertarians and other market advocates, but at the moment Piketty’s book is sweeping the country. So libertarians will want to learn about this latest challenge to liberty and why Piketty’s arguments against economic liberty are dangerous and wrong.

Here are some good short, very readable places to start:

Piketty Gets It Wrong by Michael D. Tanner (Cato Institute), National Review (Online), April 23, 2014.

Excerpt: “Piketty’s solutions would undoubtedly yield a more equal society, but also one that was remarkably poorer.”

Fighting Inequality: Rule of Law Vs. Legal Plunder by James A. Dorn (Cato Institute), Investor’s Business Daily, April 29, 2014.

Excerpt: “The likely result of this utopian scheme would be to drive creative people out of high-tax countries, slow economic growth, and make societies poorer in the long run.”

Will 80% Income Taxes and a New 10% Wealth Tax Fix Our Economy? by Hunter Lewis, AgainstCronyCapitalism.org, May 2, 2014.

Excerpt: “Perhaps the most astonishing claim in Piketty’s book is that government bureaucracies need to be reformed so that they can make most efficient use of all the new income and wealth taxes that are recommended. The assumption is that almost complete government control of the economy would be best, but that the machinery needs some fine tuning.”

Who Is Thomas Piketty And Why Has The Obama White House Rolled Out The Red Carpet For Him? by Hunter Lewis, AgainstCronyCapitalism.org, April 19, 2014.

Excerpt: “This is all complete nonsense. Economic growth is produced when a society saves money and invests the savings wisely. It is not quantity of investment that matters most, but quality. Government is capable neither of saving nor investing, much less investing wisely.”

The Inequality Trap Distracts from the Real Issue of Freedom by Richard Ebeling, May 5, 2014.

Excerpt: “The only important and relevant ethical and political issue in a free society should be: How has the individual earned and accumulated his material wealth? Has he done so through peaceful production and exchange or through government-assisted plunder and privilege?

“Rather than asking the source or origin of that accumulated wealth — production or plunder — the egalitarians like Thomas Piketty merely see that some have more wealth than others and condemn such an ‘unequal distribution,’ in itself.”

Thomas Piketty’s bestselling post-crisis manifesto is horrendously flawed by Allister Heath, UK Telegraph, April 29, 2014.

Excerpt: “Parts of the US intelligentsia now advocate the same ideas that are to be found on Europe’s Left-wing fringes… Envy is back, disguised as a concern about ‘inequality,’ and the bail-outs and QE were merely a convenient excuse to bash the rich. It is shocking how many intelligent people now support seizing most of the wealth created by entrepreneurs…”

Smith, Marx, and Piketty by George Reisman, Reisman’s Blog, April 21, 2014.

Excerpt: “Contrary to Mr. Piketty, the fact that the rate of return on capital is higher than the rate of economic progress does not at all imply that the fortunes of the rich will increase more rapidly than the overall size of the economic system. … Our problems today result largely from government policies that serve to hold down saving and the demand for capital goods. Among these policies are the corporate and progressive personal income taxes, the estate tax, chronic budget deficits, the social security system, and inflation of the money supply. To the extent that these policies can be reduced, the demand for and production and supply of capital goods will increase, thereby restoring economic progress, and the aggregate amount and average rate of profit will fall.”

On the Piketty Welcome Party by Bas van der Vossen, Bleeding Heart Libertarians, April 21, 2014.

Excerpt: “…inequality per se need not bother us as much as it does the Piketty-acolytes. …What matters is that living standards keep rising, and keep rising for all. That has been the crucial engine of humanity’s greatest achievements in poverty reduction, increases of life expectancy, literacy, culture high and low, and so on.”

Liberal Pundits of the World Unite Over Thomas Piketty’s New Book: Democratic pundits have enthusiastically and unconditionally embraced a book that evokes Karl Marx and talks about tweaking the Soviet experiment“ by David Harsanyi, Reason.com, April 25, 2014.

Excerpt: “…it is worth pointing out that liberal pundits and writers have enthusiastically and unconditionally embraced not only a book on economics but a hard-left manifesto. …But how does a book that evokes Karl Marx and talks about tweaking the Soviet experiment find so much love from people who consider themselves rational, evidence-driven moderates?”

Obama: Wrong About Income Inequality; The problem is joblessness, not rich people by Ronald Bailey, Reason magazine, April 2014.

Excerpt: “Are the rich getting richer? Yes. Are the poor getting poorer? No. In fact, over the past 35 years most Americans got richer. Has income inequality increased in the United States? Yes. Does it matter? …No. …if most Americans’ incomes are rising, does it matter if some are getting a larger share?”