Pretending costs don’t matter when “doing good” or that we’ll find ways to make it work doesn’t pay the bills and doesn’t make it work.
Central planners and do-gooders often make things worse for those they claim they want to help. Once again, today, the “Restaurant Apocalypse” is in the news. It is largely the low-cost, chain restaurants that are closing down all over the US, and one of the big reasons they are shutting down and killing tens of thousands of jobs was the forced move in liberal states to adopt much higher minimum wages, pretending there is no limit to what you can demand of businesses.
The “Restaurant Apocalypse” was man-made
Anyone with an engaged brain could have seen this coming.
The businesses forced to pay higher wages, according to an article by Shark Tank star Kevin O’Leary, are ending the jobs because keeping those jobs means losing money hand over fist indefinitely. Higher minimum wages are not the sole cause, but the other causes are also entirely due to central controllers. Rising inflation due to central banks was already hitting consumers, which made it nearly impossible for restaurants to pass on the additional inflation that comes from increasing labor costs without driving away their customers who have been stretched beyond what they are willing to bear.
The Retail Apocalypse, where stores have shut down all over the nation as online retail took over, is also hurting restaurants. The Retail Apocalypse plus high inflation, thanks to the Fed and a liberally spending government near you, were almost unbearable for restaurants after all the damage restaurants barely managed to weather due to centrally-mandated Covid lockdowns.
Then, as if there were no limits to the torment restaurant owners can bare and survive, Democrats stuffed much higher wage demands down their throats, too. So, here we are where the central planners and do-gooders have done more than I ever imagined they would to shut down tens of thousands of jobs around the nation just so those jobs that no longer exist could pay a living wage. But there was a lot more central planning than that involved in these failures:
The US restaurant industry finds itself on the menu.
Seemingly every day, there’s a headline announcing a bankruptcy, layoff or store closure impacting one of the country’s most beloved brands.
Last month, Red Lobster filed for Chapter 11 after closing nearly 100 stores. Cracker Barrel – with restaurants in 45 states – has seen its share value plummet over the last year. The once-booming chain Boston Market, which boasted 1,200 locations in the 1990s, is now reportedly down to two dozen.
So, what’s behind this fast-casual reckoning?
It’s proof the inflation virus is still infecting America’s post-pandemic economy.
So, prior to these forced wage increases, you already had the severe impact of the central health planners with their forced lockdowns and social distancing requirements that only allowed restaurants to run (impossibly in many cases) at 50% occupancy. Those forced lockdowns by the central planners of government and medicine created other lasting problems for the restauranteurs to deal with:
Supply chains crippled by the COVID pandemic lockdown haven’t recovered. Food costs – especially for proteins like chicken, beef and seafood – are up 30 to 40 percent over the last 36 months. Worst of all for the restaurant industry – customers haven’t returned from the shutdowns.
You can pretend you can do anything you want with an economy, but you cannot pretend your way out of the wreckage you create when you do it.
Business closures and social-distancing mandates forced people to change the way they eat. Sixty million Americans – a massive chuck of the population that is aged 60 years and above – were forced to use their smartphones to order a ‘treat’ dinner for the very first time in 2020.
Habits alsochanged, and they don’t always return to what they were when new habits form. The permanent social transformation from the centrally imposed lockdowns (with Trump’s support) was massive:
An estimated 22 millions employed adults (about 14 percent of the workforce) haven’t returned to the office, according to Pew Research Center.
That means fewer people are going out to lunch or meeting colleagues for dinner after work.
With so many man-made forces, you would think the central planners wanted to create a Restaurant Apocalypse. You’d think they hated restaurants. These were things I specifically warned would happen as we went through the first months of the lockdowns. You can pretend, you’ll just throw the switch back the other way when you decided to re-open for business, but it doesn’t work so easily as if everything just turns back on the way it was. The whole nation took massive, enduring damage. Some of the forced transformation has opened up new forms of business we might not have tried, and that will be good in some cases, but it doesn’t change how severe the damage is for many.
This has been devastating to businesses that invested in brick-and-mortar locations. Eateries in urban locations have been hit especially hard as their expensive locations are no longer receiving the footfall they need to meet rent.
And it will get worse. Over time, entire areas of once popular downtowns may suffer core rot and become undesirable because business is being so slow to return … if it ever does.
Inflation is devastating for average-income earners (making $68,000 a year) with budgets already tight and hikes in transportation, housing and energy costs.
Unfortunately, there’s no telling when – if ever – these prices will come back down to Earth.
With all of that due to the government-forced Covidcrisis, the one new thing that has added a huge impact on prices is minimum-wage increases:
Red Lobster has suffered a business-busting triple-whammy. Volatile seafood prices and costly real estate were likely bad enough. But California’s calamitous new regulations may have proven to be too much for the chain that has multiple West Coast locations.
The biggest new regulation was California’s sweeping minimum-wage mandates.
Indeed, the restaurant industry’s struggles are most pronounced in deep-blue California – where Democratic Governor Gavin Newsom has turned the not-so-Golden State into the closest American facsimile to Venezuela….
Newsom signed a law in September jacking up the minimum wage for fast-food workers from $16-per-hour to $20 – making decades-old businesses unprofitable overnight.
As if surviving the centrally-planned disaster of the Covid lockdowns was not bad enough, Newsome decided there would be harm in hitting restaurants with much higher costs, given that restaurants are very labor-intensive. California’s minimum wage was already too high. Of course, the argument was that $16/hour is not a livable wage, so minimum wages needed to rise again.
Well, of course it wasn’t. Not all jobs need to be “livable” wages or even should be. Most of the people employed in these restaurants were teenagers and college students just learning to work in a commercial environment. These were starter jobs, and a nation needs starter jobs for unskilled people to start gaining skills. Pretending it does not and forcing all jobs to become livable-wage jobs just forces a huge number of people whom the central planners intended to help out of work entirely. Now they have no wages unless they can find other jobs. They are hurt more than ever.
One California trade group estimated the Maduro-style edict led to the firing of nearly 10,000 workers even before the law went into effect on April 1.
That is because when businesses see the law is coming, they try to position themselves for survival. They start cutting labor before the new laws even hit. And then they start cutting their actual restaurants.
A West Coast Burger King franchisee with 140 restaurants announced he’d replace workers with digital order-taking kiosks. A major Pizza Hut operator eliminated delivery services and laid off thousands of drivers.
Now, just 90 days into the new regime, businesses are dropping like flies.
Of course they are. Many of us who are more conservative and who don’t pretend we are all-knowing gods who can centrally plan an economy, said this would happen. The “progressive” Democrats refused to listen, pretending this wouldn’t happen or simply blaming the businesses that went broke because of it for not magically making it work.
Earlier this month, beloved Mexican chain Rubio’s Coastal Grill announced it was shutting 48 restaurants in the state because of the ‘rising cost of doing business….’
Newsom’s far-left government is completely disconnected from the reality of inflation – and the Governor has the blood of these failed businesses on his hands.
They’re always disconnected. They always keep pretending the massive, permanent shutdowns under Covid had nothing to do with how they changed the rules of business engagement or pretend they had no choice. Yet, their narrow-minded determination to force social changes for the good of everyone wound up deeply hurting everyone:
It all adds up to terrible news for the US economy.
While major chains Red Lobster and Burger Fi make headlines, mom-and-pop restaurants across the country are facing these same struggles.
While government created a Restaurant Apocalypse, it’s fleecing tax payers to line the pockets of big business.
The big companies, of course, got big-government help during the lockdowns:
A staggering 62 percent of jobs in this country are created by companies with between five and 500 employees. But during the pandemic, President Biden only focused on propping up the S&P 500 companies with hulking stimulus packages.
(The same is equally true of Trump and the Republican House, under whom many of those stimulus packages were designed, benefiting major companies like Trump’s own while mom-and-pop companies lacked the lawyers to figure out how to apply for their share.)
Still …
Take a look at the Inflation Reduction Act and the Chips and Science Act, which have been estimated to cost as much as $1 trillion and $80 billion respectively. Neither bill included a dime for small businesses.
You have the Welfare Party or the Warfare Party. (Right now, on all but social issues, it’s hard to tell them apart.) Both parties are very aggressive about creating corporate welfare, which is what “Build Back Better” is all about. It’s fascist economics where the government partners directly with big businesses to get big projects done by having the public pay for much of the venture, reducing the risk for the favored big corporations, and then big corporate reaps the profits down the road via big government contracts, again paid for by the public.
Biden may claim he is rebuilding the economy from the ground up; but, in fact, he’s building from the top corporations down (and not down very far) while smaller companies or big companies with many small labor-intensive local establishments go to waste under forced welfare via minimum wages to single teenagers and college kids who didn’t need a livable wage in the same way that someone feeding a family does. They are living off their parents in many cases still or helped by student-aid packages. Many are just learning how to work, which is a process that sorts out the useless from the useful, so livable wages are not yet merited by many of them. It is not that it is wrong that they benefit as much as possible; it is that those designing the benefit had no reality check within themselves to even think about what really was possible.
So, they’ve stuck a dagger in the heart of numerous small businesses that were already wounded by their central planning during Covid. Instead of helping people with better wages, they managed to get tens of thousands of them fired. And the loss of the businesses is a loss for all of America because we like our restaurants. We are rapidly winding up with fewer options (less variety) as customers just cannot afford the multiplied cost increases, so the business starves.
There are limits, and the limits are not decided by how much good you think you can do or want to do. You cannot force people to keep spending their money at any price at a restaurant as you raise food prices with forced closure of production during Covid and with forced quarantine of international shipping, badly mangling supply chains, and raise them with inflation created by massive money printing and government stimulus, and raise them more by cutting the allowed occupancy a restaurant can entertain by half to create room for social distancing, which forces all customers to pay a double portion of the fixed costs, and then raise those costs by central design even more with forced wage increases.
All of those things were imposed by people intending to do forced good for everyone else (central banks, central medicine, central governments) by imposing their beliefs as if there is never any limit to how much central control you can impose. Just keep thinking up “good things to do” and imposing them without seriously or honestly evaluating the long-term damages.
There is more centrally-planned damage coming.
You can see the same thing happening in the blue State of California with its forced convernsion to all electric vehicles in just a few years, even though the state is already suffering brownouts as utilities are forced to shut down during high winds and dry spells to avoid lighting more forest and brush fires and as the state fights oil and gas sources of electric power. Newsome is decreasing electrical output while forcing the increase of electrical demand. That will end as badly as the Restaurant Apocalypse.
You cannot force economic realities into being by pretending the costs will take care of themselves. Supposedly the fantasy electricity will come from increased solar and wind, but those are not increasing anywhere near fast enough to run all the new electric cars that are being forced on the grid as other sources of power get stripped away. It’s a disaster being made by central planners who don’t deal realistically with the costs, including the huge environmental costs from those other sources of power while they operate and then when all their toxic chemicals from the solar panels and EV car batteries go into landfills.
You can easily see it coming, but you just cannot seem to stop them from doing it. California will pay a very high cost for very limited and erratic electricity in the future and wind up with a lot of stalled electric vehicles, just as it now has a lot of closing restaurants.
Pretending doesn’t make the costs work out.