Pizza hut lays off all its drivers just because minimum wage was increased.

[Shaul]

One thing I find interesting is the myopicy regarding the driver labor costs. There are many costs of maintaining in house drivers besides the labor costs. Of course there are the benefit costs such as health insurance and unemployment insurance. There are training costs. Often overlooked would be liability costs such as negligence or illegal actions of a driver employee, which necessitates insurance costs. Then there are the vehicle costs such as purchase, depreciation, insurance, maintenance, garage costs, etcetera. Anyone that has been an employer knows that wages are just the tip of the iceberg of employee costs.

 

[Nakosis]

Why should Pizza Hut accept a financial loss on delivery service? They are in a rather competitive industry.

Every place I've worked, it is some person job, at least part of their job to find ways to reduce expenses.

Even if they are making a profit. There's no guarantee the profit will last. Their business model will remain viable, they'll keep their market. Saving expenses is their job. If that is cutting jobs it is not being malicious, it is just business.

People want their business to be profitable, remain profitable. It's not greed it is just the mentality of having a profitable business. If you don't have that mentality, your business won't remain profitable for long.

I doubt it was so much the minimum wage increase as much as it got the bean counter to focus on employment costs this round of figuring out ways to be profitable.

The drivers will have to go work for Uber or who ever is taking over deliveries. There is an opportunity there. It's a mistake to think one's job is going to be there forever. If they made that mistake, hopefully they learn from this.

 

[George-ananda]

They aren't dropping delivery service; they're outsourcing it.

Same logic. What’s in the company’s best interest.

 

[9-10ths_Penguin]

Same logic.

"We can't afford to keep doing what we've been doing, so we have to make a change despite the impact it's going to have on some minimum wage workers"

... is not the same logic as:

"We can afford to keep doing what we've been doing, but we'll make even more money if we screw over some minimum wage workers"

What’s in the company’s best interest.

... given the legal environment they operate in. If the California government gets rid of that minimum wage loophole for app-based delivery drivers, the company's best interest would lie elsewhere.

I hope the state government fixes their mistake.

 

[Revoltingest]

The article never says that either of the franchisees would suffer a financial loss; it only says that their expenses would increase.

This is good reason for the business to change
how it operates. It's purpose is profit...not
supporting as many employees as possible.

 

[Kfox]

Actually, businesses closing due to increasing utilities and rent costs is fairly common - at least here in the UK. It tends to affect small businesses significantly more though, for obvious reasons.

I don't think that is very common in the United States.

 

[Kfox]

There are wage rates that are so low as to be unethical, yes.

What is an unethical wage to pay someone? Where do you draw the line?

No, it's better that the workers improve their BATNA by unionizing, or that the law recognizes the unbalanced bargaining power by enshrining protections for workers... such as fair minimum wage rates.

But if that's not an option, is it better that they have a choice to work or not?; even if it's at a wage that does not meet your appreoval?

 

[9-10ths_Penguin]

What is an unethical wage to pay someone? Where do you draw the line?

Just so we're clear: you're arguing that the minimum wage - whatever it happens to be where a business is - is ethical, right? You're saying that a business that's fulfilled its legal obligations has behaved ethically, correct?

I think there are a few ways of looking at an ethical wage. None of them necessarily pop out a single number that covers all circumstances:

- how much would a full-time worker need to make to no longer qualify for low income supports? When an employee makes less than that, there's effectively a government subsidy to the business, which needs to be justified.

- what's the "living wage" in the region? How much would a full-time worker need to make to survive and participate fully in society (usually measured as the total cost for a representative basket of goods)?

- if the worker's choice weren't coerced, what wage would they find acceptable? IOW, if turning down that job wouldn't cause them to lose their home or cause other undue hardship, what salary would they need before they'd say "yes" to the job?

But if that's not an option, is it better that they have a choice to work or not?; even if it's at a wage that does not meet your appreoval?

I think you're trying to create a false dilemma. When we raise the minimum wage and get rid of union-busting laws, the options get better across the board.

 

[Stevicus]

That's not really what the point was about.

This is not about how you treat people in social situations.
This is about how I "owe" them a job.

If tomorrow I have no more use for employee X or if my business would be better of without employee X, why would I keep him/her and throw money out the window?

I am not a charity.

Even charities have to operate like a business. But I don't think anyone has claimed that a business is required to act as a charity. Nor do the people, as collectively represented by the state, has any requirement to act as a charity. However, liberal social programs have been found to promote greater political stability within a society. Concepts of individual human rights have also implied a certain measure of human compassion, at the very least.

As a result, because of shared political and societal values, governments have had to become de facto "charities," even though it's not automatically implied as a proper role of the state. Nevertheless, it falls upon the state to uphold and enforce individual human rights, as well as implement the social programs to maintain the internal stability which business absolutely depends upon.

But business is not required to uphold human rights or implement social programs or any of the other functions of government. Their only real focus is on their own business, its success and profits. They have no obligation to concern themselves with the overall issues facing society as a whole, and very often, they don't. That's why it often becomes the role of the state to guide them and sometimes even issue mandates and requirements.

The government does not mandate that a business become a charity, but it is within the purview of government to safeguard the rights of its citizens. A business is not required to hire any workers at all, but if they do, then the government has a responsibility to uphold the human right (as detailed in the UDHR) for "adequate remuneration." Not charity, but an adequate living wage.

Of course, businesses can complain about it. Those who could have already transferred their operations overseas to take advantage of impoverished, underdeveloped countries and pay extremely low wages - a process which still goes on today throughout the world. But then there are certain types of businesses which can't really outsource that easily, such as a fast-food restaurant which gains a good deal of revenue from delivery. So, in the case of Pizza Hut, the minimum wage in California, as mandated by law, was considered too high in their judgment, and so they've let all their delivery drivers go.

No one is saying they have to employ them at all, and I'm sure most of those drivers will find other jobs. I think the only reason this becomes an issue at all is the idea that Pizza Hut is trying to "send a message" that they don't like the minimum wage, which is a refrain I've heard repeated by numerous businesses over the years.

 

[ImmortalFlame]

I don't think that is very common in the United States.

That may be the case. Here in the UK we're experiencing something clumsily called the "cost of living crisis" (we're not very good at coming up with catchy names for things over here...).

 

[TagliatelliMonster]

However, liberal social programs have been found to promote greater political stability within a society.

Sure, and I'm all for that - very much so. But that's the state's job. Not the job of a company.

The government does not mandate that a business become a charity, but it is within the purview of government to safeguard the rights of its citizens. A business is not required to hire any workers at all, but if they do, then the government has a responsibility to uphold the human right (as detailed in the UDHR) for "adequate remuneration." Not charity, but an adequate living wage.

I agree. And when they vote in new laws which would increase the costs for companies to keep people employed, those companies reserve every right to lay people off to offset those costs.

I'm just tired of this hypocritical idea that employees reserve this right to maximize the value they extract from the companies they work for, while many see it as a bad thing when the companies / business owners to the exact same thing: maximize the value they extract from the business.

In the end, we all work to make money, right?
If firing folks means I get to make more money, why wouldn't I do it?
If I restructure my company and 10% of staff ends up being "baggage" that is no longer critical for the workings of the company, why would I be a bad person to fire them?

That's the general sentiment I always get in discussions like this. Like I, as a business owner, have to "apologize" for trying to maximize profit within my company. Just look at the OP.

Honestly, I care not at all how many billions in profits Pizza Hut makes (or not). If they can continue operating their business without any losses in profits by letting go a bunch of people, why wouldn't they?

Sure, it's not nice for those people to loose their jobs. But people aren't in business to be nice. They are in business to make money.

Of course, businesses can complain about it. Those who could have already transferred their operations overseas to take advantage of impoverished, underdeveloped countries and pay extremely low wages - a process which still goes on today throughout the world.

Yeah, don't like that either. For various reasons. Not in the least because it hurts your home economy since you move wealth and money outside of your own economy. Secondly, because I am against exploitation of people also. But this also, is something that governments should tackle and could easily tackle. They could for example impose taxes on imports of such situations such that it would no longer be financially interesting to make such a move.

From a business perspective, I get it though. In a business, everything is about the numbers on the screen.

I care deeply about the well-being of my employees - I really do.
But when the time comes that I sit at the table with the accountant going over the numbers, and if those numbers don't look good, the well-being of the company quickly overtakes the well-being of the employees. It sounds harsh, but that's just the reality of being in business. Something many people don't understand, especially those who never owned a company.

I think the only reason this becomes an issue at all is the idea that Pizza Hut is trying to "send a message" that they don't like the minimum wage, which is a refrain I've heard repeated by numerous businesses over the years.

I don't think so. If that is the case, then those managers are really stupid. They'ld be hurting their own business just to "send a message".

 

[Revoltingest]

That may be the case. Here in the UK we're experiencing something clumsily called the "cost of living crisis" (we're not very good at coming up with catchy names for things over here...).

The trick....
Catchy names here are seldom based on
what's being described, eg, the "Inflation
Reduction Act" is really about more
government spending. It will actually
increase inflation because of deficit
spending.
But the name sounds really good!

Instead of "Cost Of Living Crisis", why
not call it "A Chicken In Every Pot"
or "Affirmative Action".

 

[9-10ths_Penguin]

I'm just tired of this hypocritical idea that employees reserve this right to maximize the value they extract from the companies they work for, while many see it as a bad thing when the companies / business owners to the exact same thing: maximize the value they extract from the business.

The difference is in the bargaining position. A single employee, negotiating without a union, isn't going to be able to coerce a business owner into doing something against the business owner's interests.

OTOH, if the business owner has the power to decide whether the employee is going to be evicted and out on the street, he has quite a bit of power to coerce.

In the end, we all work to make money, right?
If firing folks means I get to make more money, why wouldn't I do it?

Because firing creates human misery. Anyone who has compassion should care about that.

If I restructure my company and 10% of staff ends up being "baggage" that is no longer critical for the workings of the company, why would I be a bad person to fire them?

Because you were the architect of that situation. You hired them on in the first place. You decided on the restructuring.

You say that they're "no longer critical for the workings of the company" as if this is some unchangeable fact that you had no control over. The reality is that as the person deciding your company's business strategy, they're only "no longer critical" in the context of a business strategy that you decided.

There were a whole range of options available to you with a whole range of staffing needs - with no option objectively better than the others - and you chose the option that required fewer people.

If you can't see how to make more profit with more people, then this is a failure on your part. Whether it's a failure of your creativity, skill, foresight, or ability to get capital, it's a failure that other people who have done nothing wrong will end up suffering for.

 

[ImmortalFlame]

The trick....
Catchy names here are seldom based on
what's being described, eg, the "Inflation
Reduction Act" is really about more
government spending. It will actually
increase inflation because of deficit
spending.
But the name sounds really good!

Instead of "Cost Of Living Crisis", why
not call it "A Chicken In Every Pot"
or "Affirmative Action".

Good suggestions, but too sensible and not British enough. It would need to be something along the lines of "Less Clinkety-Clank In Your Trouser Holes", or "Don't Turn On The Heating Or You'll Get A Beating".

Or we could try cockney rhyming slang? "Al Qaeda and ISIS - cost of living crisis".

 

[Stevicus]

Sure, and I'm all for that - very much so. But that's the state's job. Not the job of a company.

Yes, that was a point I made earlier. It would be wise, though, for a company to be cognizant of the situation faced by society overall, just as it's wise for any citizen to be aware. That seems to be a common malady throughout society, where more and more people are concerned with their own personal benefit and well-being than they are about society as a whole. (I'm not saying that you do that, but it seems a common attitude nowadays.)

I agree. And when they vote in new laws which would increase the costs for companies to keep people employed, those companies reserve every right to lay people off to offset those costs.

I'm just tired of this hypocritical idea that employees reserve this right to maximize the value they extract from the companies they work for, while many see it as a bad thing when the companies / business owners to the exact same thing: maximize the value they extract from the business.

In the end, we all work to make money, right?
If firing folks means I get to make more money, why wouldn't I do it?
If I restructure my company and 10% of staff ends up being "baggage" that is no longer critical for the workings of the company, why would I be a bad person to fire them?

That's the general sentiment I always get in discussions like this. Like I, as a business owner, have to "apologize" for trying to maximize profit within my company. Just look at the OP.

Honestly, I care not at all how many billions in profits Pizza Hut makes (or not). If they can continue operating their business without any losses in profits by letting go a bunch of people, why wouldn't they?

Sure, it's not nice for those people to loose their jobs. But people aren't in business to be nice. They are in business to make money.

I guess it would be hypocritical for employees to make such demands if they were in a vacuum, but we also have a historical context of the past few centuries of capitalism. Heck, it was less than a mere 200 years ago that capitalists were fighting tooth and nail against a government trying to tell them that they can't own human beings and use them as slave labor. They used strikebreakers and fought ferociously against the labor movement as well. There's a long history of sweatshops, exploitation, and numerous examples of atrocity and mistreatment - all in the name of making the rich richer and the poor poorer.

Again, this isn't really directed at you or any other business owner, but I think it should be easy to understand that, whenever a business claims "I will lose money" if compelled to comply with some government policy or regulation, some people might be inclined to take it with a grain of salt. We know that they're in business to make money, and as history has shown, many are quite aggressive and predatory about it.

And it's not as if the workers are asking for the Moon. They know how it is, and their demands are usually far less than what the executives and owners get. They're not asking for enough money to buy mansions, yachts, or memberships in exclusive country clubs. That's what the wealthy classes want - and they generally get it, despite whatever hardships they may endure from having to pay their employees, who are perfectly content to live on far less. So, yes, we all work to make money, but there are vast oceans of difference in terms of "how much is enough."

Yeah, don't like that either. For various reasons. Not in the least because it hurts your home economy since you move wealth and money outside of your own economy. Secondly, because I am against exploitation of people also. But this also, is something that governments should tackle and could easily tackle. They could for example impose taxes on imports of such situations such that it would no longer be financially interesting to make such a move.

From a business perspective, I get it though. In a business, everything is about the numbers on the screen.

I care deeply about the well-being of my employees - I really do.
But when the time comes that I sit at the table with the accountant going over the numbers, and if those numbers don't look good, the well-being of the company quickly overtakes the well-being of the employees. It sounds harsh, but that's just the reality of being in business. Something many people don't understand, especially those who never owned a company.

I think most people understand the basic idea that, whenever times are tough, everyone has to tighten their belts and survive on less. Part of the problem might be that, as a society, we've had it so good for so long that many think it can go on indefinitely.

Outsourcing is a consequence of the lowering of tariffs and other trade barriers which were done in the name of the global economy. Sure, governments could stop it all overnight with a stroke of a pen, but they won't. They practically break into a panic if anyone even hints at the idea.

I also get the "business is business" perspective. They have to look at the numbers and make the hard decisions, and I understand that every business is different, depending on who's running it. A mom-and-pop store in Podunk might operate much differently than a multinational corporation.

I don't think so. If that is the case, then those managers are really stupid. They'ld be hurting their own business just to "send a message".

It's a decision they could have made at any time, regardless of the status of the minimum wage. They may not necessarily be hurting their business by laying off their drivers and switching over to third-party delivery services. I just don't believe them when they say "we're doing this because of the minimum wage." They're doing it because other options are available. Not that I'm faulting them for that, but I just think they should be honest about it.

 

[Kfox]

Just so we're clear: you're arguing that the minimum wage - whatever it happens to be where a business is - is ethical, right? You're saying that a business that's fulfilled its legal obligations has behaved ethically, correct?

No, I am not arguing that. I am rather neutral about minimum wage, I think it restricts choices and causes more problems than it solves.

I think there are a few ways of looking at an ethical wage. None of them necessarily pop out a single number that covers all circumstances:

- how much would a full-time worker need to make to no longer qualify for low income supports? When an employee makes less than that, there's effectively a government subsidy to the business, which needs to be justified.

How about the number of hours a person is allowed to work? If your job pays a high wage, but you are only given 10 hours per week; not enough to live on, is this immoral? How about if they are given a low wage, but can work 60 hours per week enabling them to pay all of their bills with this low wage? Is this okay?

- what's the "living wage" in the region? How much would a full-time worker need to make to survive and participate fully in society (usually measured as the total cost for a representative basket of goods)?

- if the worker's choice weren't coerced, what wage would they find acceptable? IOW, if turning down that job wouldn't cause them to lose their home or cause other undue hardship, what salary would they need before they'd say "yes" to the job?

If you are in a position of supporting a household, perhaps a minimum wage job is not for you.

 

[Kfox]

Because you were the architect of that situation. You hired them on in the first place. You decided on the restructuring.

You say that they're "no longer critical for the workings of the company" as if this is some unchangeable fact that you had no control over

In the real world, this happens all the time, especially when a new store is opened in an area; when the store first opens you get a flood of customers, then when people in the community get used to it being there, business drops of to a reasonable level. Business often have to over hire to handle the opening influx that happens when it first opens. This also happens during holidays like Chrisman when people buy an unusual amount of products then quit buying when the holiday is over. Often temporary people hare hired for this reason

 

[9-10ths_Penguin]

In the real world, this happens all the time, especially when a new store is opened in an area; when the store first opens you get a flood of customers, then when people in the community get used to it being there, business drops of to a reasonable level. Business often have to over hire to handle the opening influx that happens when it first opens.

This is one of the reasons why "soft openings" are becoming more of a thing. Ramp up demand over time so your new staff aren't overwhelmed.

And there's so much attrition in the service industry that a new store generally wouldn't need to fire anyone to reduce staffing levels; they could just let them fall through attrition if they felt like this is something they needed to do.

This also happens during holidays like Chrisman when people buy an unusual amount of products then quit buying when the holiday is over. Often temporary people hare hired for this reason

Right: the emphasis there is on temporary. Be open with the people applying that the job is temporary in nature; with that information, they'll decide to apply or not. You may need to bump the wage up to entice them; you may need to be happy with a smaller pool of applicants.

 

[9-10ths_Penguin]

No, I am not arguing that. I am rather neutral about minimum wage, I think it restricts choices and causes more problems than it solves.

So you're more in the "reduce or eliminate the minimum wage" camp?

How about the number of hours a person is allowed to work? If your job pays a high wage, but you are only given 10 hours per week; not enough to live on, is this immoral?

Is the worker still able to get other employment, or do those 10 hours prevent them from getting some other job?

I remember when I worked in retail: several of my co-workers were trying to make a full time job out of two or three part time jobs. It generally sucked. One thing it meant was that they weren't eligible for benefits at any of their employers, even though they would have got them if they worked the same number of hours for one employer.

How about if they are given a low wage, but can work 60 hours per week enabling them to pay all of their bills with this low wage? Is this okay?

Do you think having to work 60 hours a week to make ends meet is okay?

If you are in a position of supporting a household, perhaps a minimum wage job is not for you.

The minimum wage was originally intended precisely for this case.

If paying a living wage to the workers providing a service isn't financially viable, what does this say about the overall viability of the service?

 

[TagliatelliMonster]

The difference is in the bargaining position. A single employee, negotiating without a union, isn't going to be able to coerce a business owner into doing something against the business owner's interests.

To be honest, I hate unions. Perhaps it is different in the US, but over here, they have a really bad rep. This is not the 1800s anymore. Worklife is heavily regulated through laws and the kind of exploitation that gave union's their raison d'être is long gone.
Today, unions are not really about "bargaining power" anymore as much as they are about straight up blackmail.

I get that in my company (software engineering) it is different as opposed to in low-schooled jobs like workers in a factory off course.
But if my employees come to me to work out a better deal for them and I don't treat them right - they just leave and go work someplace else and then I lose.
The job market itself takes care of it.

But even in that low-schooled worker job at the factory.... working conditions are heavily regulated. Shifts can only be so many hours. Minimum wage is quite high. There's a minimum of 20 days paid leave. There's paid sick leave. There's paid paternal / maternal leave. There's a compulsary "13th month" to be paid at the end of the year. Working floor conditions are also heavily regulated: forced breaks every x hours, mandatory lunch break of 40 minutes, minimum tempurature in the work place (heating, air conditioning, etc), health conditions with regular unannounced inspection and hefty fines for irregularities or transgressions, etc etc etc etc.

Whenever I hear about unions organizing a strike somewhere in the country, I read up on what they think the problem is and what the demands are.
And every time I think it's disgusting on the part of the union.

OTOH, if the business owner has the power to decide whether the employee is going to be evicted and out on the street, he has quite a bit of power to coerce.

How would he have such power?

Because firing creates human misery. Anyone who has compassion should care about that.

Compassion doesn't create value nor does it grow a business.
That sounds harsh, but it is what it is.

Because you were the architect of that situation. You hired them on in the first place. You decided on the restructuring.

So?
If I would have ran the business like that from the start, they never would have even had that job in the first place.
But that's also how it goes... you start a business and then you need someone for job X. Later on you take on a new project and need people for Y and Z.
And so it grows. And after a while, you learn that department X and Y could actually merge because you ended up having multiple do the same thing... or you purchase a software that automates a few things or can do multiple things at ones or whatever and you restructure to accomodate for that new workflow.

Very rarely are such things planned beforehand. I don't know of anybody who hired a bunch of people with some intentional masterplan to then restructure and fire half of them again. If they know beforehand that that is how it's going to end up, that's how they'ld do it from the start.

Take the Pizza Hut example from the OP. If from the get go there would have been these third parties that operate a delivery business and if they'ld knew at Pizza Hut that using them to deliver pizza's would have been cheaper then to hire a bunch of drivers, they never would have hired a bunch of drivers to begin with......

I mean, these are facts of life...
As an employee you aren't guaranteed a job at the company for life.
And as a business owner, you aren't guaranteed success either.

You don't know what the future brings.

An enterpreneur will grab opportunities to maximize profit as those opportunities come along.
So will the employee. If one of my employees gets a better deal elsewhere, he'll leave and that might put me in terrible spot also.

In fact, this happened to us a few years ago.
An engineer who was paid well and given a big responsability. He had an important position. He left for another company where he got paid a bit more (an amount we couldn't afford at the time). Him leaving hurt us pretty bad as we just had a big project and made up a planning that included all employees - him especially.
That hurt us very badly. I could also say that he was the architect of that situation. He took the job and made that commitment and then dropped us like a rock.

It's a two way street, you see...
You think I'm not "compassionate" because I'ld drop employees like a rock if it means I can maximize money for me as the employer.
But the employees wouldn't flinch to do the exact same thing. And that's fine - I'm not complaining. But what's good for the goose.... right?
It goes both ways.

You say that they're "no longer critical for the workings of the company" as if this is some unchangeable fact that you had no control over. The reality is that as the person deciding your company's business strategy, they're only "no longer critical" in the context of a business strategy that you decided.

Yes. If I see an opportunity to accomplish more with less, again... why wouldn't I do it?
Again, it's not like people plan for such. Such things simply happen. Businesses grow and as they grow they get bloated. Every once in a while you step back and audit your workflows and optimize. That's just good business sense to do so.

There are entire companies built around doing only that. You hire them to audit your company and they'll tell you where you can optimize workflows, where you loose time and money. And implementing their suggestions might very well mean that certain jobs become obsolete, enabling you to generate the same value with only 8 people then you did before with 10.


Back when I was an employee, I actually triggered such a thing once when I was working as a consultant and it wasn't even my job.
This was also a business that had grown over time and got bloated. They wanted a new software to streamline things again instead of 27 different excel sheets.
I analyzed the entire thing, worked out a solution and in the process, not even intentionally, a specific person's full day worth of work was reduced to 1 click on 1 button. Ironically, it was the person that everyone there felt was "hugely important" due to all the "hugely important" work that person did.

But by centralizing all those excels into a relational database, I managed to automate the woman's job and reduce it to just one click. And just like that, she was gone.

Sure sucks for her, yes, but what else is there to do? Keep her on the pay roll to do 1 click every day?

There were a whole range of options available to you with a whole range of staffing needs

All of which cost more money for less value.

- with no option objectively better than the others

Errr....
If I can accomplish the same value with 8 as opposed to with 10, then doing it with 8 is as objectively better then it gets...

- and you chose the option that required fewer people.

Because that's objectively better ....

If you can't see how to make more profit with more people, then this is a failure on your part. Whether it's a failure of your creativity, skill, foresight, or ability to get capital, it's a failure that other people who have done nothing wrong will end up suffering for.

This is short sighted.

The company does what the company does.
If I need only 2 people to answer phones for tech support, there is no point in hiring 4.