May 12 2014

Subway and the Minimum Wage

Charlotte Hays

Subway and the Gap have come in for praise for calling for the government to raise the minimum wage. Such socially conscious companies, you say. 

Amy Otto points out on The Federalist that this may not be quite as idealistic as it sounds:

Minimum Wage increases not only hurt the poor and consumers, it insulates big business from new competition.  

 It should not be surprising that now that Subway, has expanded “to more than 41,000 restaurants in 106 countries—making it the largest restaurant chain in the world” it has a new comfort with minimum wage policy that previously it did not.  The reason is simple.

Subway started out just like any other big company, as a small one.  One imagines they had to manage through many moments of adversity, gaps in income flow, and false starts before they became the known entity they are today. 

Subway CEO Fred Deluca has argued that the minimum wage hike would affect Subway and other companies equally. But that’s not true: a neophyte business going through the rough patches of getting started might (conveniently for established operations) be nipped in the bud.  Subway would face less competition.

Smaller, single-store businesses with no corporate back up are more likely to have to lay off employees to meet new minimum wage standards. A hike in the minimum wage will imperil smaller operations that would have to raise prices because ultimately raising money to establish the business would become more difficult.

Otto writes:

Subway hasn’t suddenly gotten magnanimous toward “the people”. They have gotten to the top of the market for “healthy fast food” and they want to stay there.   The easiest way to do that is to never have to face a competitor.  If you raise the cost of doing business, new ideas have a higher hurdle to even get a shot at being tried out.   Having the federal government set a wage price is taking off the table one point of flexibility for a new business.

Small businesses are the engine of job creation in the U.S. Raising the minimum wage, which sounds good, will only make it more difficult for such operations to get off the ground.

Subway of course isn't the only footlong phony on the minimum wage front.

Raising the minimum wage sounds idealistic—but it is in reality a way to help a few at the expense of many people who, if the price of hiring them is too high, won’t be able to make that vital first step on the ladder of self-reliance.

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