'I was stunned by the business': Fast food CEO says profits soared after minimum wage hike

[DonViejo]

Source: RawStory


DAVID EDWARDS
05 JAN 2017 AT 12:57 ET

The CEO of a popular fast food chain said this week that he was “stunned” to see profits soar each time California passed minimum wage increases.

In an interview with KQED on Tuesday, Wetzel’s Pretzels CEO Bill Phelps admitted that his investors were worried about how a 2014 wage hike would impact the business. “Like most business people I was concerned about it,” Phelps said.

For years, opponents of minimum wage increases have argued that wage hikes mean fewer jobs because businesses have to raise prices and cut hours to cover the additional expenses. But Phelps said that his sales skyrocketed after a California law forced businesses to raise wages in 2014.

“I was shocked,” Phelps recalled. “I was stunned by the business.”

The same thing happened earlier this year when California raised the minimum wage to $10.50 per hour, Phelps said.

Read more: http://www.rawstory.com/2017/01/i-was-stunned-by-the-business-fast-food-ceo-says-profits-soared-after-minimum-wage-hike/

[BeyondGeography]

1. A big piece of their market had more money to spend

Go figure.

[inanna]

5. Bingo!

[groundloop]

28. EXACTLY.... CEOs can only buy so many burgers

Put money in the hands of the bottom 90% and we'll spend it, creating more demand and more jobs.

[shenmue]

52. Dingdingding

[reflection]

65. You water a plant by the roots, not the leaves.

This is not complicated, though many would like to make it so. Give people who are struggling to get by more money, and they will spend it to ease the crushing burden they bear. They generally don't stash it away in interest-bearing accounts like people do who are more well off. So minimum wage hikes are a good thing every now and then.

There are so many ways to stimulate the economy, each with its own efficiency. I remember a Moody's report a few years ago that listed them and their effectiveness. Tax cuts were low on the list, wage hikes were high, the highest was actually food stamps. And of course that's the one Republicans complain about the most, because someone somewhere might sell theirs and buy a beer. But at some point that food stamp has to be redeemed, which puts it right back into the local economy.

(sorry to hijack the thread a little there)

[riversedge]

29. I was going to say the same.

[TCJ70]

31. Yeah, this isn't a hard concept...

...people who had less money that end up with more money typically spend it. It's why trickle-down economics is one of the biggest, most detrimental lies foisted on people in recent history.

[AgadorSparticus]

71. Exactly!

[LuvNewcastle]

53. When businesses pay their low wage employees more

They get it back in spades. It's a pretty simple concept. Pay people more and they spend more. A person has to be stubbornly and willfully ignorant to not see it. The only reason I can see why they wouldn't want to pay people more is that they want to keep people desperate. I would like to see a study on the toll society pays to keep people a paycheck away from disaster all the time. The mental anguish alone makes the cost incalculable.

[lostnfound]

54. Especially for buying something as inexpensive as a burger..

I can't imagine how much stress people are under. I feel so stressed all of the time due to work, kids, health, and politics to the point that I feel my health is deteriorating. Worrying about every penny must just suck people's lives away.

[Berlin Vet]

55. Basic Economics

Don't these CEO's have any understanding of basic economics? You are right, when you have the luxury of having more money you often spend it. What a concept. In a related vein I've often wondered why American corporations pay their CEOs so much money. Seems like they should outsource to India for their CEOs and spend a tenth of the money they now spend. More profit for shareholders!

[niyad]

66. "outsource the ceo jobs to india" excellent idea.

[MountainFool]

2. economics!

Yeah, sometimes economics is just a little more complex than the right-wing pundits would imply.

[William Seger]

15. They always cite Economics 101, which isn't much use if you flunked Logic 101 (nt)

[hibbing]

33. +1

[ProfessorGAC]

57. Besides...

...Econ 101 is almost all 2 dimensional concepts and the real economy operates in 20 dimensions when interactive variables get included.
But when Steve Moore is one of their big thinkers, 2 dimensions is pretty much the extent of their grasp!

[not fooled]

59. Or took "Propaganda 101"

which = Faux watchers, Rush listeners, and many other low-information/propagandized 'Muricans who have been exposed only to the BS from the Reganomicists.

[calimary]

46. Welome to DU, MountainFool!

I wasn't going to be as polite as BeyondGeography was in the first reply.

I read the story and thought: "IDIOT! Raise the minimum wage and people have MORE MONEY TO SPEND!!! NO DUH!!!!

Your forgiveness please - sometimes I just lose all patience and turn rude and crude. But Honest to Pete, sometimes...

[NoMoreRepugs]

3. FACTS do not matter to conservatards - their perception of what raising the minimum wage

will do is far more important than the reality of WHAT HAPPENS..

[louis-t]

10. Only ideology is important to conservatives.

They learned nothing from 8 years of bush. Worst economy in 80 years? "Stuff happens." Repeat all of the things that crashed the economy? "Sure, why not. Grover Norquist says we should."

[Thav]

36. They'll say that

sales increased IN SPITE of the raise, not because of.

However, if things were to turn down, they'd blame the high price of labor.

[Maynar]

61. This.

Give 'em an inch, they'll add it to the noose around your neck.

[NoMoreRepugs]

69. agree Thav - there is no way to have a rational discussion w/goobers

[calimary]

47. I like that - conservatards!

GOOD one!

Emphasis on the "CON" part, because all they ever offer is a CON JOB!

[phylny]

68. I do not.

Like "lib****s," it is linked to a word making fun of people with cognitive disabilities. I don't like any form of it.

[calimary]

72. Indeed. Point taken.

[Hekate]

4. KnR!

[inanna]

6. Recommended!

[killbotfactory]

7. Puting more money in the hands of consumers in a consumer driven economy.

Turns out it's a good idea.

Who could have predicted?

[Eliot Rosewater]

8. Basic economics...Common sense.

[harun]

9. They don't teach in business school that paying people enough to buy food will result in people

buying more food.

Unfortunate, glad this news is out though.

[cstanleytech]

11. Not shocking to me as more people with money (as opposed to only having some with the money)

tends to stimulate the economy causing more people to spend even more money as opposed to them being forced to survive on crackers and peanut butter when wages are low.

[LittleGirl]

12. well, duh! eom

[JI7]

13. very shocKing

That people with more money means they can spend more.

[Skittles]

14. what a novel concept

when people have more money, they spend more

[CrispyQ]

16. Hey you stingy jerks, everyone does better when everyone does better.

Get it through your thick, selfish brains.

[Hortensis]

17. How amazing. More people with disposable income

mean more demand for product. Who could ever have foreseen this?

[nycbos]

22. George Carlin did

Talks about Thou shall not covet thy neighbor's goods at 4:22

[Hortensis]

25. Thanks, Nycbos! Suggests you might appreciate this from Vox,

if you haven't read about it lately. I hadn't hadn't seen this Carlin clip for years and thoroughly enjoyed it. I miss him. A special illuminating voice even if too dark to be comfortable for constant exposure. Trumpism certainly validates his pessimism, though...

If you want to understand the age of Trump, you need to read the Frankfurt School
Author Stuart Jeffries on why now is a great time to dust off this forgotten school of criticism.

What they saw in America was a dictatorship of ideas, a consumerist ethos that propelled the machinery of capitalism through the instrumentalization of popular culture.

http://www.vox.com/conversations/2016/12/27/14038406/donald-trump-frankfurt-school-stuart-jeffries-marxism-critical-theory

[DonCoquixote]

18. the people who want to keep minimum wages low

do not understand that their products are often geared towards people making lower wages if not minimum-wage. Therefore the more money working-class full get to spend, the more profits they will make. Conversely, if people on the lower wage spectrum do not think that they have spare money, they will not go ahead and go to the stores..

I myself am on the lower end of the economic spectrum, which is pretty way to say that I'm on Social Security. If I ever shop at Walmart, it is because I have a bit more money than normal to buy something at Walmart. if I think I cannot afford groceries at Walmart, guess what I will go to the dollar stores, or I will go to ALDI which is a very cheap, but good store. Now, if I was a billionaire, or even a millionaire, or even what ever upper-middle-class is supposed to be, I would be able to go ahead and invest more money, but very often the sort of investments that it takes to maintain that lifestyle mean taking the money outside of the community.

For example, along the border with Mexico, exactly where Trump wants to build that wall, there are many Americans who were living off of their Social Security money, as well as more than a few American soldiers. Literally right across the border, in places like Texas, California and Arizona there are whole communities that sleep on one side of Mexico and shop on the other side of Mexico. It makes me wonder how Trump is going to build a wall right through the Walmart. The point is, we see an example where Social Security is too poor for many to even stay in their own country, and we see Mexico not benefiting at all because the money is not spent on their side of the border. Now let's make this even more interesting, because oh yes there are billionaires who do the same thing except they don't even invest their money in Mexico or the United States, but have their money invested in place is so diverse you cannot tell where they are, of all you'll know a lot of it is Asia, some of it Russia. So much money is wasted on the rich, will show absolutely no loyalty towards the country that helped them make their wealth, instead of the working classes that have no choice but to invest in their community.

This CEO seems to have run right into the hard wall of reality, which as we know, does contain a liberal bias. However, the folks like Andy Pudzer, CEO of Hardee's, and one of our new cabinet members thanks to Trump, is still dreaming about replacing cashiers with touchtone screens. He does not seem to realize that that wasn't for working class people adding disposable income most fast food today would be dead. No one who feels that wages are tight is going to go ahead and spend extra money on fake gourmet burgers, no matter how many models you paid to eat them on television. Apparently this fellow has not walked into a McDonald's or Burger King or Wendy's or Taco Bell and wondered "why is the dollar menu all of a sudden so popular?" Think about this folks, people are walking into a Taco Bell and trying to save by not getting a regular taco, but instead getting the cheaper fake version of the fake taco that most prison systems would not feed their inmates!

[Initech]

43. Yup, heads up their asses!

The people that run these companies do not realize most of their profit comes from having more disposable income, and it doesn't take a Harvard educated economist to figure that one out!

[justhanginon]

19. "Trickle up theory" works, "tickle down theory", not so much!

[matt819]

20. And don't forget the credit card company that increased its minimum wage to $70,000

Sure, it's been the subject of quite a few articles, and not a little controversy, inside and outside the company. But when I read about this in mid-2015, I switched my credit card processing to this company. Knowing they are paying their people well, that they are in the US, and that they are willing to take this sort of gamble, I thought it was worth a try. Plus their discount rates were below what I was paying with a "name brand" credit card processor.

So, I hope the company has shown greater sales and profitability. My sales aren't affected by this, but my costs are, and I've saved money. Win. Win. What a shock, do the right thing, and it pays off.

[DeminPennswoods]

21. Well, whaddaya know?

Just like economists and economic theory have always said, give low income people more money and they'll spend it on necessities like food and clothes.

[bullimiami]

23. Because Trickle Up Economics works for everyone.

More money in the pockets of the 90% means more spending. More wealth for everyone.
More money in the pockets of the 1% means more wealth for them.

[MontanaMama]

24. I spent recently spent a month in New Zealand

and their minimum wage as of July 1, 2016 is $19.80 per hour. New Zealandanders believe that this hourly wage is what a worker needs to participate as an active citizen in the community. This concept is beautiful and simple. From my perspective, as a traveler, it was such a wonderful place to visit in terms of the spirit of the people. They are the happiest folks I've ever met. You don't tip your servers at restaurants because servers actually make a living wage. Many of them took advantage of the opportunity to tell me that they think we are crazy in the US regarding...well...just about everything.

[caballojm]

26. I'm stunned that he was stunned.

I'm stunned that most CEOs are unable to grasp the simple concept that treating employees better reaps all kinds of benefits for any company. Crack a history book for God's sake! Too many CEOs are little more than brain dead Ayn Rand fanboys. Henry Ford figured this out around 100 years ago. He may have had different motivations when he significantly raised worker pay, but having more people being able to buy his product was a striking and happy byproduct.

[BlancheSplanchnik]

27. Pretty clear economics theory in action, to me.

I don't remember who's the theorist---Keynes, maybe?---but you pay people better, they spend more.

Duh.

[barbtries]

30. just think,

now a whole bunch more people can afford to eat out once in a while. who knew?

[Adrahil]

32. Headline: CEO doesn't understand businesses are demand driven.

It frustrates the hell outta me that these supposedly smart business people can't figure out something as simple as a demand driven economy. If the segment of the population that spends the majority of its disposable income gets more income, that means more business. It't not all that hard. They've been trained for so long to squeeze labor that they forget the basics.

[pansypoo53219]

34. the POOR SPEND THEIR MONEY. the rich HOARD money.how many yachts can they buy?

[TlalocW]

35. Time and time again we see this, but conservatives reject the facts

They prefer to believe in an economic theory based on a graph doodled on a cocktail napkin and shown to Jack Kemp in the 1970s. A theory that most sane economists reject. But why do they reject it? I think there's no one answer, but it's a combination of a few things...

1. Pride and keeping up appearances. After all, their most holy icon, Reagan, believed in it. To be a disbeliever would be the ultimate sin.
2. They're assholes who can't stand to see other people - especially people in lower income brackets than they are - get ahead.
3. They don't play the long game or can't think out any possible consequences to their actions. Raising the minimum wage automatically registers as less money for them (owners of companies, not that they're all republicans but just play along), and it is to start off with as any change to an economic system takes time, but over time, people are able to afford to buy more of their products, they make more money.

TlalocW

[democrank]

37. I wish more people realized

what a difference an extra ten bucks means to someone living on the edge.

[PoindexterOglethorpe]

38. Back in 1937 when the 40 hour week became standard,

business owners were utterly astonished that their workers were now MORE productive in 8 hours than they had been in 10 or 12. Unfortunately, we've been moving back to a longer work day in many fields, especially nurses in hospitals. I don't know about anyone else, but I really would not want to be cared for by an exhausted nurse who has already worked 11 hours. Yes, I know that they usually are scheduled only three 12 hour days, but it's not an easy job by any means.

And that's just one example. A bus driver who's been driving for 10 hours straight, or a police officer in the final hour of a long shift.

It's genuinely criminal that a lot of employment has come to resemble sweatshops of the 19th century.

[CaliforniaPeggy]

44. When I was still working as a nurse on a 12 hour shift, I loved it.

It meant that I had more time off, time for myself, my family, etc.

We worked 36 hours and got paid for 40. Everybody was happy.

And it was unusual to be really exhausted at the end of the shift, no matter if it was on days or nights.

[PoindexterOglethorpe]

48. I know that a lot of nurses like the 12 hour shift,

but I find it hard to believe you can be as up and productive at 11 and a half hours as you are 30 minutes into the shift.

The only times I've worked 12 hours straight was when I was an airline ticket agent, and 8 hours could be bad enough, especially if there were delays and cancellations. 12 hours, which I worked more than once, was an incredible grind.

[CaliforniaPeggy]

49. I would be lying if I said I was as productive at the end as I was at the start!

Of course you're not. But the same thing is true of 8 hour shifts.

But you deal with it because it allows you to have more of a life on your off days. At least, those of us who liked the 12 hour shifts felt that way.

[PoindexterOglethorpe]

50. I'd think there would be a very noticeable drop

in energy and productivity in the 10th and 11th hours of those shifts. You deal with it, but what about the patients? I honestly worry about the patient care. Of course, if you really do work only three 12 hour shifts, that can be pretty good, depending on exactly how it's scheduled. Three in a row? One on, one off, one on, one off, one on, two off? Lots of potential variations.

And how about those who didn't like the 12 hour shifts? Was it because they were spending much of the days off recovering?

The real crime is that we haven't long ago gone to a 30 hour work week.

[Coventina]

39. Wow! People with money actually BUY THINGS! Who'da thunk?

[Bettie]

40. Hey Einstein!

Poor people spend the money they earn. Give them a raise, it goes straight into the community, to businesses!

Give the rich a raise or a tax break, it goes into a bank or Wall Street, not Main Street.

[tclambert]

41. I tried to find out if minimum wage hikes stimulated the economy a few years back.

It seemed so according to my memory. Other factors may have been at work, though. So I turned to economists' research to see what they had pulled out of a hundred years of real world data. Um, no such luck. Up to the early 1990s, they had ignored the real world data and assumed raising the minimum wage had precisely zero net effect on the economy. A perfect balance like that was the one option I dismissed to start with. But that was their foundational assumption. No wonder their computer models then told them the wage hike would result in fewer jobs.

Then in the 1990s, somebody (Card and Krueger) started looking at actual real world data and found the opposite might be true. These results have been hotly debated ever since.

It seems clear that if you give minimum wage workers more money, they will spend it. That spending spurs more spending. There is a multiplier effect where every dollar ends up creating more than a dollar of new economic activity. That means more business, which may mean more hiring.

Many politicians (let's call them Republicans) and many businesspeople cling to the old model mostly for political reasons. Really, economics has been very unscientific about this. Run some experiments, like raising the wage in California in 2014 and 2016. Then look at the results. A lot of economists would rather just run computer models based on unsound assumptions.

[Warpy]

42. Well, DUH, stupid

Once the minimum wage has gone up and stayed there for 6 months. no businessman in his right mind wants a rollback. It's counterintuitive, but raising wages increases profits because those higher wages increase demand for goods and services across the board. The money pump works from the bottom up.

America needs a raise, a big one.

[aggiesal]

45. I'm all for raising the minimum wage ...

But on Jan 1st, I went to the Corvette Diner in San Diego at Liberty Station.
When I got the bill I noticed, and I'm not kidding, a
"surcharge 3%" line item on the bill.

I asked the waiter what the "3% surcharge" was about and he said it was to
pay for the new $11.50 per hour wage increase. Although at the bottom of the
receipt is says the 3% surcharge is for "Government requirement" or something
similar, it's purely for the increase wages.
http://www.sandiegouniontribune.com/business/restaurants/sd-fi-restaurants-minimumwage-20161214-story.html

So, if I'm to understand this correctly, the CEO of Wetzel's Pretzels sees an
increase in business, that shocks and stuns him, but whoever runs the
Corvette Diner feels like taking and extra 3% just for ordering food, on top
of the increased business that the wage hike always seems to provide.

This surcharge is enough for me to go back to Corvette Diner.
I don't mind the increase in wages, but I don't like having a restaurant
create these phony surcharges.

[JHB]

58. Just pay your bill, sign the check, give a good tip, and add a note...

"But your boss is an asshole!"

[TexasBushwhacker]

70. I remember there was a Denny's franchise owner

who added a health insurance surcharge because he didn't like the gubmint telling him that his sick employees should be able to go to the doctor.

[zentrum]

51. We've been telling them

...this for years.

Stimulation for the bottom always trickles up. Never the other way around.

[Crunchy Frog]

56. Well duh.

When people have more disposable income, they have more money to buy the shit you're selling.

[certainot]

60. fpr 30 years every sack of shit ignorant lying rw talk show host

has spread the "min wage kills small biz" bullshit on 1000 radio stations

and the left sticks their ipods in theirears and wonders why no progress

[4lbs]

62. It's simple logic. "Rich people" don't eat at fast food restaurants. Those that benefit the most

from minimum wage increases do.

[El Mimbreno]

63. Trickle-UP economics! 'Bout time.

[IronLionZion]

64. Who do they think is buying their products?

It is truly shocking how many executives don't believe in consumer demand is good for business and creates jobs. I think consumer demand is the ONLY factor that creates jobs.

And of course profits and jobs soar in very liberal states for some reason, while conservative states wallow in poverty and low wages.

[niyad]

67. not only is it basic economics, every time I hear the argument about higher wages costing jobs,

my response is, "if the damned ceo cannot afford to pay his/her employees--the ones who produce the goods or services for the company--then the ceo has no business in that business.

[Lil Missy]

73. Pretty simple - more people can afford to buy a Pretzel. (Or a burger with fries)