Wednesday, January 14, 2009

Econ 101: Wages

Article from the Telegram:
The Kentucky Fried Chicken (KFC) restaurant on 115 Duckworth St. in St. John's has closed its doors and franchise owner David Hefferman says it's mainly because it was so hard to find people to work for him.
"We were having a major problem getting employees. Even with the minimum wage going up, that hasn't helped," he said.
He charges that increasing the minimum wage to its current rate of $8.50 an hour is hurting people in the fast-food industry more than anyone else.

Truly, the recession is affecting Newfoundland terribly. Cough. But that's not the point. Mr. Hefferman is only having trouble finding employees because he is only willing to pay the minimum wage. One can get more than the minimum wage working in a call centre, without having to deal with deep fryers or customers. Presumably if the minimum wage was repealed and he attempted to pay less, he would have even more trouble finding employees.

It may well be that the KFC is not profitable paying workers $10 or $11 hour, but it's fallacious to argue that the minimum wage is hurting fast food restaurants, since the equilibrium wage is in excess of $8.50 for the conditions KFC offers. The only culprit to his bottom line is the plethora of other job opportunities available to residents of the capital city.

POSTSCRIPT: Interestingly enough, the quality of comments on the Telegram website is several times higher than the quality of comments on the Globe site. Go figure.

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