Quote of the Day:

This is something that’s become a bumper sticker,” Jamie Richardson tells me. “But it hasn’t really been thought through. There is a better way to get people out of poverty than hiking the minimum wage.”

–from "How White Castle Will Adjust to a $15 Minimum Wage in New York" at NRO

Jamie Richardson is a vice president at the famous mini-burger chain.

He talks to Mark Antonio Wright about how White Castle will cope with the New York's minimum wage hike from $9 to $15. White Castle has been operating outlets in New York since the 1930s. The effect of the wage hike puts the chain in uncharted waters:

Unfortunately, despite the Castle’s Empire State history, the road ahead may be difficult: “We’re disappointed. What this means for White Castle is we really have to evaluate how we manage our business,” Richardson tells me. “About 30 percent of every sales dollar covers the pay of our hourly workers, and that doesn’t include management.”

“It’s our biggest investment, our biggest cost. And it’s one that if we see increase dramatically through fiat, and we don’t do anything — it’s unsustainable,” Richardson says. “We are in uncharted waters.”
. . .

If labor costs rise dramatically, White Castle will have to balance its books by raising prices or changing its business model so that it needs less labor. “Is there any room to raise prices to cover costs?” Richardson muses. “We think we’d need to increase menu prices by something like 50 percent. It’s not something we’ve done before. It’d be catastrophic.”

In fact, Richardson says that White Castle has historically seen its customers react noticeably to even slight increases in menu prices. “Some people think that we can just raise menu prices to cover the increased labor costs,” he says. “But it’s a ripple effect. We’re not the only place to eat, we compete with other restaurants. And people always have ‘L cubed’: Making Leftovers Last Longer.”

Richardson says — and common sense dictates — that if menu prices at fast-food chains shoot up by anywhere near 50 percent, many people will stop eating out as much, replacing trips to White Castle with trips to the grocery store. Customers can always vote with their feet and their dollars. But thinking through the implications of raising prices to cover increased costs, which could reduce sales, isn’t what irks Richardson the most: To him and to White Castle, New York’s minimum-wage hike is a threat to a culture of opportunity in the neighborhoods that they have always called home.

“Candidly, this could create a whole generation of kids who won’t get their first job,” Richardson laments. “We’re in tough neighborhoods — and White Castle hasn’t abandoned those neighborhoods. On the surface, higher pay seems noble, but it’s not – because it denies the reality of the free-enterprise framework that has allowed small businesses like ours to thrive.”

But guess who will benefit from the minimum wage hike? Politicians who advocated it with scant appreciation of the real economic outcomes.