Minnesota’s Economic News – W/E 7/16/21
State and local taxes and spending Star Tribune: St. Cloud will use federal relief to offset lost revenue KNSI: Minnesota to Finish Fiscal Year 2021 Stronger Than Expected Pioneer Press:…
Minnesota’s businesses are struggling to find workers. Some are cutting back their hours. Some are offering higher wages. But, of these latter, who is going to cover the higher wages?
Some businesses will simply pass the cost onto customers by hiking prices. That is what Chipotle is doing. But there is a limit to this. A steak burrito with white rice and black beans might sound pretty tempting at $9.64 with tax, but as that price climbs you will become less willing to pay until, at some point, you just won’t.
Some businesses are getting creative, however. One way to make people swallow higher prices is to make the consumer think that they are righting social wrongs by paying them.
That is the innovative trick that Broders’ in Minneapolis is trying on its customers. The restaurant has announced that, from now on, it will be levying a 15 percent “Benefits & Equity Charge” on all meals. Broders’ clothes this all with language about:
…inequity and built-in bias in the way consumers give tips. In general, Black or Brown servers receive less tips than Caucasian servers. There is gender bias as well. In restaurants, immigrants and people of color work mostly in the kitchens and have no access to gratuities to supplement their hourly wage.
(H/T Jon Miltimore)
Broders’ is simply paying its workers more and passing the cost on to the consumer, just as Chipotle is doing. The difference is that Chipotle isn’t cloaking its price hike as a tool to fight social injustice.
This might work. People do not just buy the cheapest thing they can find: how many of you have taken your wife to A&W for Valentine’s Day? If price were the only factor in purchasing decisions, then nobody would buy craft beer or anything but store brand dish soap. The fact that Surly Furious and Dawn exist proves that people will pay a premium for certain things. And one of those things might be righting social wrongs, which you can do by paying 15 percent extra for your ravioli at Broders’.
Broders’ website shows you that they offer:
…a $16 minimum hourly wage for customer facing employees, $18 minimum hourly wage for kitchen employees (more with increased responsibility) above all government standards, to provide benefits of paid time off & health insurance…
But it will also show that their prices have not gone up. But that is only because the cost has been passed on to the consumer in disguise. There really is no such thing as a free lunch.
John Phelan is an economist at the Center of the American Experiment.