Payroll 2016: Would you like to Super Size that?

french-friesThe Law of Supply and Demand is a very strong economic model.  When it is manipulated, strange and scary things happen.  When Adam Smith wrote his notable ‘The Wealth of Nations’ nearly 240 years ago, he wasn’t amiss in his theory that a free market economy benefits all members of a society.

To quote Smith directly, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.  We address ourselves, not to their humanity but to their self-love, and never talk of them of our own necessities but of their advantages.”

In short, retailers (et al) don’t play the retail game for their health.

There is a growing albeit disorganized push in Nevada for an increase in the minimum wage.  As this movement potentially gains steam, it seems that a few facts are being overlooked.  First and foremost, who picked $15.00 as the ‘sweet spot’ for the minimum wage?

To move the minimum wage from $8.25 (for those without workplace healthcare policies) to $15.00 is a hefty increase.  Get out your calculator and you will find that the increase is just under 82%.

Increase the wages for those working entry-level or ‘McJobs’ and you will see retail prices rise commensurate with the increase in wages.  If the price of a Happy Meal (currently about $3.65 locally for the 4pc Nugget meal) is increased by 82%, the price jump would be $2.99 landing the four nuggets, small fries and small beverage coveted by nearly every elementary-schooler in this country to be priced at $6.64.

Math is such a fun tool.  More people should use it.

These whopping payroll increases will be passed on to the consumer faster than you can get a pizza delivered (which at an 82% increase goes from $11.99 at Domino’s to $21.82).  Domino’s will almost instantaneously sell fewer pies and well, you realize how dangerous this snowball becomes as it gains speed and size rolling down the slope.

Nevada is growing.  The Silver State has attracted new businesses by offering a very favorable business environment.  Is it not bait and switch if the companies who have decided to move to Reno specifically for the favorable business environment are now forced to pay more for labor?  Let Supply and Demand dictate wages. No need to tarnish the Silver State.

Susan Moreno

Susan Moreno
CVirtual CEO

“Reno Sees Future, and It Isn’t Casinos” misses mark on one key point…

While I don’t believe it can be definitively attributed to a specific individual, I certainly agree with the statement that, ‘any publicity is good publicity’. To this end, I appreciate Mr. Carlton’s WSJ piece (Available Here) on growth in Reno. I bristle however at the comment that Economic Development Authority of Western Nevada’s (#EDAWN) CEO Mike Kazmierski has ‘cajoled’ businesses to relocate their operations to the Reno/Sparks area. For example, I have a hard time believing that CEO Elon Musk (#TESLA) or CEO Rob Roy, (#Switch) are ‘cajoled’ into any business decisions. To suggest that Kazmierski exerts any control over these or other savvy business people is folly.

Northern Nevada is the ‘real deal’. The business leaders who have decided, or who are deciding to relocate their operations to the Reno area are doing so because they understand the dynamic here and the valuable business climate that Reno, its environs and the State of Nevada as a whole have to offer. Has Nevada attracted enterprise through tax abatements, incentives and by offering ‘cherry’ business conditions? You bet. Other states use similar strategies.

Mr. Carlton’s article correctly points out that in 2009, Reno’s unemployment rate was a whopping 14%. Residents who lived in the area during those hard times remember it all too clearly. Those tough times prompted a very concerted effort by local and state officials, EDAWN (et al) and the existing business community to combine creativity and resources to fix a severely damaged local economy. Becoming a healthy, diversified economy takes more than Mr. Kazmierski and one “cowboy-hat-clad brothel owner turned civic booster” rolling the dice. Mr. Kazmierski, Mr. Gilman and many others have worked tirelessly to pull Reno out of a decades-long slump. Let’s not cheapen their efforts and achievements or those of others by implying snake-oil sales or the use of chintzy monikers. The growth and revitalization currently underway in Northern Nevada is a breath of fresh of air.

Susan Moreno

 

Susan Moreno
CVirtual CEO