From Rob Gill:
Wayne Pankratz of @Applebees says that higher gas prices are great for business because most employees live check to check and hopefully they can start lowering wages. pic.twitter.com/BiRfeSmsYX
— Rob Gill šØš¦ā¤ļøšŗš¦ (@vote4robgill) March 23, 2022
Jaybird
Jaybird is Birdmojo on Xbox Live and Jaybirdmojo on Playstation's network. He's been playing consoles since the Atari 2600 and it was Zork that taught him how to touch-type. If you've got a song for Wednesday, a commercial for Saturday, a recommendation for Tuesday, an essay for Monday, or, heck, just a handful a questions, fire off an email to AskJaybird-at-gmail.com
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The text follows:
Team:
Everyone has heard that gas prices continue to rise. The advantage this has for us is that it will increase application flow and has the potential to lower our average wage. How you ask?
Most of our employee base and potential employee base live paycheck to paycheck. Any increase in gas price cuts into their disposable income. As inflation continues to climb and gas prices continue to go up, that means more hours employees will need to work to maintain their current level of living.
We are no longer competing with the government when it comes to hiring. Stimulus money is no more, supplemental unemployment is no more. This benefits us as prices rise, people who we relying (sic) on unemployment money, simply will have less money to spend. It will force people back into the work force.
Furthermore, other competitors (especially mom and pop companies or smaller businesses) will have to either raise prices, cut employee hours, or pay employees less hourly to hit their profit margins. Some businesses will not be able to hold on. This is going to drive more potential employees into the hiring pool.
We all competed to hire out of the limited applicant pool and there was a wage war. We all saw businesses hiring team members at $18-$20 an hour. They will no longer be able to afford to do this. Trucking is the backbone of America and as fuel costs rise, so will the charges for shipping. If those costs cannot be passed on to the customer in terms of menu price, the only area they can cut sizable costs will be in labor.
The labor market is about to turn in our favor. What can you do?
Besides hiring employees in at a lower wage to decrease our labor (when able) make sure you have a pulse on the morale of your employees. Your employees that live check to check are impacted more than the people reading this email. Be conscious of that. Many will need to work more hours or get a second job. Do thinks to make sure that you are the employer of choice. Get schedules completed early so they can plan their other jobs around yours. Most importantly, have the culture and environment that will attract people.Report
Now, my take on the letter is not some variant of “how dare he?” or “I’m never eating at Applebee’s again!”
I mean, the pandemic has already resulted in me not eating out.
You can’t boycott a place you don’t go to.
I’m wondering whether his insights into what happens next are accurate.
If they are, the next two years get *INTERESTING*.Report
Hmm, some things that weren’t making sense to me are suddenly making sense to me.Report
Such as?Report
He’s making a ton of assumptions, like he can’t pass cost increases to customers via menu price increases; he can’t generate more business by paying people more; he can’t adjust profit margins to reflect current realities. His only recourse is artificially depressing wages.
Its that kind of thinking that now has Applebee’s and other in a wage induced labor shortage. Its that kind of thinking that is driving Starbucks stores to unionize, Amazon fulfillment centers to continue holding union elections. And it’s that kind of thinking that a lot of labor fled in the great resignation.
But at least its out in the open now. Yay for that I guess.Report
Is that kind of thinking wrong or is it merely distasteful?
Because the wage induced labor shortage has been going on for a while. Goodness gracious, we can’t get sysadmins to save our lives. (I don’t think I see that turning around anytime soon either.)Report
It’s distasteful, and a lot of the implicit assumptions were kept implicit without being questioned, which does not inspire a ton of confidence.
That doesn’t mean they weren’t considered and dismissed for one reason or another. Believing that they can’t pass on price increases to customers is at least internally consistent.
Anyway this is one of those times where I think it’s best for everyone to see what’s on the end of their fork.Report
I’m not looking at the fork. I’m looking at whether he’s right.
Because, if he’s right, this is going to be true for On The Border, Olive Garden, Denny’s, and Chipotle.Report
He’s wrong but the wrongness is consistent with rejecting one of the alternative possibilities that Philip suggested.
And the more I think about it the more clearly wrong he is.Report
We can’t hire sys admins because our wages aren’t competitive.Report
It could be a lot worse. He’s saying the market wage will go down, yay!, but we need to make Applebee’s an attractive employer by being sensitive to workers’ needs and improving working conditions.Report
maintaining market wages at or above current levels would be a great way to be sensitive to workers needs.Report
Don’t talk crazy.Report
Individuals, even individual companies, don’t get to “maintain the market” any more than you do. The market decides, you do not.Report
My first question before comment is, is this real?
Has anyone been able to confirm the authenticity of the memo?Report
Seems to be legit:
https://www2.ljworld.com/news/general-news/2022/mar/23/an-email-urging-lower-wages-for-new-employees-due-to-higher-gas-prices-sparks-walkout-at-lawrence-applebees/Report
I don’t really understand the causation that high gas prices will lead to lower wages. I think PD Shaw is pretty spot on in his analysis.Report
He’s assuming that, if revenue is stable, wages have to be lowered to account for increased gas costs passed on as increased prices from suppliers.Report
He’s saying higher gas prices and lowered gov payments will force more people into the labor market. I.e. the net effect will be the supply of labor increases so the price of labor should go down.
He’s phrasing it awkwardly but whatever.Report
I’m old enough to remember when the expression “Don’t put anything in writing that you wouldn’t want to appear in the New York Times” was an expression used to encourage restraint and get people to think twice. I don’t think anyone needs to be perfect about this and I do not expect it. But it is clear to me that there are all sorts of things people are willing to write down and do not follow the sage advice above. There are all sorts of reasons for this but the prime ones might be lack of shame, motivated reasoning, and being unable to think about the consequences.Report
My guess is that when you need to communicate policy ideas to tens or hundreds of people, you need to put it down in writing for efficiency’s sake even if it is bad, bad idea.Report
He could have phrased this a LOT better.
Because of X,Y,Z, we expect the over all supply of labor to increase which may mean the price will go down. We need to be prepared for this contingency.Report
Applebee’s is a franchise, and I suspect the actual audience for this e-mail was its real customers, the franchisees to whom Applebee’s sells its food and brand. Those customers were hurt by loss of demand from the pandemic and subsequent trouble with finding/keeping labor. They are presumably cancelling or not renewing their franchise agreements.
The Applebee’s closest to me closed this week, and directed customers to one on the other side of town. The e-mail strikes me as telling franchisees that things are going to get better, keep buying our stuff. The notion that higher gas prices depresses wages seems like pass the bong in the dorm kind of thinking.Report
in a world where shareholder value via profit margins must be preserved at all costs, cramming down labor is about all a corporation, or its franchisee’s can do when other costs rise.Report
On closer look (after reading your link to the Lawrence Applebee’s), the executive works for a franchisee that operates 47 Applebee’s, probably around Kansas City. So I don’t think my take is good, but Rob Gill is misleading people by saying this guy is from Applebee’s.Report
I think your analysis is still pretty spot on but this also strikes me as a kind of bone-headed thing to put in writing. Writing that could be leaked all over the internet.Report
In Colorado Springs, all of the sit-down restaurants get their stuff from Sysco.
McDonald’s has McDonald’s suppliers, In-N-Out has their own, I’m sure that there are others… but the places that we thought were a classy place to take a date in our sophomore year of college (compared to Wendy’s or Taco Bell) here in town all get their stuff from Sysco.Report
Since Applebee’s doesn’t seem to think b it is a hoax, I’ll go on the assumption it reflects the actual thoughts of one of its managers.
About all I can say I’d the strategy doesn’t seem to make a lot of sense.
Wages will soften now that the stimulus is over? Sure, that probably is valid.
Wages will soften as prices rise? Not sure how that works.Report
Yeah, I’m with you on this. This manager is acting like their employees’ only options are work at Applebees or die, which is an interesting assumption when the labour market is this tight.
Weirdly, this manager seems to believe in the Iron Law of Wages.Report
From: Chip
To: Residents of Chip’s Apartment Building
Re: Inflation and rents
Tenants-
Now that prices are rising this is our chance to force our rents down, because our landlord will be more desperate to keep apartments occupied.
We can also force gasoline prices down, as oil companies are more desperate to keep their revenues up.
In fact, this is our opportunity to lower all prices, since everyone is being squeezed by higher prices.
I see no flaws in this plan.Report
I’d say that that would work… if there aren’t people standing in line waiting to apply for a two bedroom (but a one bedroom would do in a pinch) outside of the main office.
Let’s assume 25 apartments in the building because I am lazy.
If 10 of the apartments are full, the tenants might be able to pull this off. One tenant saying “Screw you, I’m out of here!” cuts 10% of the apartment manager’s income off. Whammo, it’s just gone.
He might be willing to discuss a rent decrease of 5% for everybody because 5% less for him is better than 10% worse.
But if all 25 apartments are full and there is a line outside the door and halfway around the block for the form to get notified if/when someone moves out/gets evicted, the whole “hey, he’ll be desperate to keep apartments occupied given the amount of inflation!” argument evaporates.
He is not desperate in the latter situation. Indeed, he’ll probably see your old lease as a liability given that he can rent your apartment for 20% more to 95% of the people standing in that line.
So assuming that 40%-100% capacity is a continuum, where on the continuum are we? If we’re at 100%, are there people in the leasing office wanting to know if someone is moving out soon?Report
Ron Howard voice:
It could not, in fact, work.Report
Is it because there’s a line around the block?
What percentage of apartments are empty?
(Colorado Springs, for example, has a housing shortage. We have lines around the block.)Report
It’s because the fluctuations in bargaining position strength are very complex and rely on a lot of variables.
What’s driving the rents and vacancy rates in my building or any other is beyond my ability to analyze much less summarize.Report
Well, lemme tell ya, one of the things that seems to be driving the rents is the *LACK* of vacancy in our buildings over here. And that lack of vacancy is compounded by the lines of people outside of the building.
I mean, if I wanted to give a summary, it’d be “there’s not enough supply and way too much demand and the demand keeps going up and, as a result, the price is rising too”.Report
The answer here, as with most things is “Yeah kinda sorta.”
For example, Los Angeles has a severe shortage of apartments.
Yet until recently my building had a vacant rate as high as 25%.
And a building down the street was cutting rent to keep tenants.
Wot? How can?
Because even in a tight market there are fluctuations and variables which alter the balance of power between buyer and seller.
In the latter case, I happen to know the developer. His initial proforma analysis of cost was predicated on strong demand and constrained supply such that his rental floor was higher than actual market demand.
Plus the neighborhood did not gentrification as was anticipated, softening demand ( but only for his property!)
IOW, this stuff is complicated and the variables are constantly changing.Report
The key difference here is that while most people are withholding labor from the market (in the sense that most of us could work more hours than we do now), landlords generally aren’t withholding property from the market.
If landlords were withholding a substantial fraction of the supply of units from the rental market to use as second/third/etc. homes, and a real supply shock raised their cost of living to the point where they decided to put those units on the market for extra income, then that would indeed increase the supply of rental housing and lower rents.Report
Seems more like the opposite of the Iron Law of Wages. ILW says that if cost of living rises, some workers will starve to death, reducing the supply of workers and raising market wages up to the new subsistence level. A key assumption is that workers are already working as much as they can, and can’t simply work more hours to make up the difference.
The logic in the memo is that if the cost of living rises and non-labor sources of income dry up, unemployed workers will have to get jobs and people already employed will have to work more hours, resulting in an increase in the labor supply and lowering market wages.
No assumption that Applebees is the only game in town is required; an increase in labor supply would lower market wages for the whole sector. In fact, the memo explicitly does not assume this (“make sure you’re the employer of choice”).
The basic idea here seems sound, as long as the increase in cost of living is driven by real supply shocks rather than by monetary inflation. Cost of living goes up, people need more money, they supply more labor with no offsetting increase in demand for labor, wages go down. I wouldn’t venture a guess as to the magnitude of the effect, but the sign seems correct.Report
The dynamic seems to be here in this section:
Report
I and my business am being hurt by the tight labor market, so I want it to loosen up. I see a fact and spin it so of course it will increase the labor market.
The only thing we know about this guy is he’s dim enough to write this memo, but that may be enough.Report
It looks like Wayne Pankratz is an executive of one of the franchise companies that owns a hundred Applebee’s. I’m sure the organizational structure and his role in it will become clearer as the story develops. That said, the economic thinking in the memo doesn’t make sense.Report
The economic thinking of a _large_ amount of the wealthy and powerful doesn’t make sense, and one of the major problems with this country is we assume it does because we think that’s how they got their position.
(Instead of what it actually was…going to the right school, nepotism, and above all having wealthy parents and knowing people who will give them even more money.)Report
This is common, but not universal.
But even in cases where people didn’t get where they are through nepotism etc., that doesn’t mean they got where they are by knowing anything about economics! Grit, luck, and good people skills also contribute a lot and also confer no understanding of economics.
Also I worked as an economist for quite a few years–like my actual job title–and it’s not like that confers any understanding of economics either. I know more than this dude but I still don’t know shit.Report
Economics and business seem to me to be like car repair and physics; Sure, the mechanic uses the principles, but doesn’t need to know them. And likewise, the physicist can talk about torque but may not know how to rebuild an engine.
Few actually functioning business people have anything more than a layman’s knowledge of economics.Report
This is correct.Report
Most people go into business because they want to make money. Commitments to economic principles like free trade are irrelevant and maybe hazardous to this goal.Report
When I was a physics grad student, my advisor once said, “My car is in the shop because they need to fix the alternator. Do you know what that is? I think it has something to do with the electrical system.”
I told him that I didn’t know either, but was pretty sure he was right that it has something to do with the electrical system.Report
An alternator is an electrical generator that converts mechanical energy to electrical energy in the form of alternating current. (wiki)
I love our current world. All the knowledge of the universe at our fingertips.Report
Precisely.Report
“Businessman Makes Bad Analysis” isn’t the story here, or even “Businessman Makes Bad Spin”. What’s going to potentially give this story legs is the idea that Applebee’s (and by extension, all employers) want to take advantage of their employees. The story will probably stick around longer than it should, and may affect revenues at Applebee’s operations including those owned by other groups.Report
This ties in with the argument yesterday.
I go to the nearby Applebee’s once in a blue moon. And I noted with interest that the guy who wrote this has nothing to do with it, so it will not (rationally or not) interfere with the modest enjoyment I get when I eat there.
(Modest because, like, Applebee’s.)Report
Paging Karl Marx, Paging Karl Marx on the Iron Law of Wages courtesy phone.Report
It seems his thinking is:
– Applebyās employees and potential employees are hurting financially due to increased gas costs and inflation
– Stimulus funds and additional unemployment are not available to help ease financial pain
– Two ways to ease financial pains that are still available are to get a job (if unemployed) or work more hours (if employed)
– If more people are needing more work, that makes for a more employer-friendly market
– That could allow Applebeeās managers to hire people at lower wagesReport
That seems straightforward enough.
We have recently been in a place where it seems that there were more employers saying that they were having trouble hiring people. “Sorry, we’re closed, nobody wants to work” and the like. I’m sure you’ve seen the various signs taped to drive-through speakers. “Please be nice to the people who *DID* show up to work today.”
Employers had more hours than they had people.
The question is whether they will soon have as many people as they have hours. Perhaps more people than they have hours.Report
To add, I have no idea if heās right. Just that seems to be his thinking.Report
I still listen to the radio stations here in town. I prefer NPR and CPR to RXP, (now “The X” or something), but for the last decade on RXP, there have quite regularly been ads for job websites during the ad breaks.
In 2011 and 2012, the ads took the form “Do you need a job? Use our job website to help you get a job. We have hundreds of employers looking for someone just like you!”
Today, they take the form “using most job websites will just give you a lot of hay, Ziprecruiter will find you the needle in the haystack!” and other ones are having us listen to a busy business owner taking orders, asking where ingredients are, wondering if the Johnson shipment has gone out. “I need Indeed.” “Indeed you do.”
The ads target the business owners looking for employees rather than employees looking for employers.
So that’s one measure I have of how the pendulum is swinging.Report
What’s the point of these things? The real story is that some internet person got hold of some potentially viral information and is using it to boost their own profile. Hence, the second Tweet is a poll and the third is an attempt to reel in noted labor economists Patricia Arquette, Kathy Griffin and Debra Messing.
We really may live in the dumbest possible timeline.Report
I imagine it went viral in order for a lot of people (such as Patricia Arquette, Kathy Griffin and Debra Messing) to loudly state that they’ll never go to Applebee’s again.
Not that I think that Debra Messing spent a lot of time getting Applebee’s.
That’s the dynamic that brought it to my attention.
What *I* found interesting was the guy’s take on the effect of gas prices on labor availability.
Even if he apologizes or resigns or gets fired or whatever for saying what he did, that will only give endorphins to the people who will be thrilled to hear that Cher tweeted “I will never go to Dollar General ever again!”
It won’t change whether his observation is accurate.
*THAT* is the part that I found to be the point. I’m currently chewing on whether it was.
I reckon it’s measurable.Report
At the meta level it is certainly interesting. But just where is this supposed to go? Some guy put his thoughts about his business in an email. Maybe he is a well-meaning executive trying his best to successfully run a medium-sized business that employs hundred of people and returns a reasonable profit to its investors. Or maybe he is a greedy, heartless cigar-chomping villain trying to ground the working class down to grist for his capitalist mills. How would we even know? Does anyone think that Rob Gill is here to give us meaningful information or appropriate context?
Again, what is the end game? Is it a glorious future in which the evil capitalists are neutered, profit has been relegated to a tertiary concern, and all business decisions are A/B tested to make sure they play on the timeline? Does anyone believe that gets us to a happier, healthier and wealthier society?
Maybe there is some version of stakeholder capitalism that is more equitable, more ethical and more sustainable than our current model of shareholder capitalism. But can anyone make a strong case that internet pile ons ought to be one of the stakeholders?Report
But just where is this supposed to go?
Personally? I’d put it in the sidebar.
Again, what is the end game?
For me? It’d be whether he’s right.
And *IF* he’s right, whether he’s right in a way that was predictable before the fact.
And *IF* he’s right in a way that was predictable before the fact, whether it’d be fair to question “Cui Bono?”
So instead of asking “what is the end game?”, I’d put it like this:
“Quo vadis?”
“Cui bono?”
But can anyone make a strong case that internet pile ons ought to be one of the stakeholders?
I assure you: I am not interested at *ALL* in the pile on.
Heck, I could make a case that he was arguing that Applebee’s needed to be the best option available to the hordes surely coming to alleviate the need for qualified (but not overpaid) help! He was a *GOOD* greedy guy chomping on a cigar.
What *I* found interesting was the *PREDICTION*.Report
Jaybird, for clarification, I was not objecting to your positing this. If nothing else, it is interesting. My questions are about the larger context of how we talk about these things.
Some benefits are clear. Rob Gill gets to be the guy who goes viral for spreading some juicy information on the interwebs. The called-in celebs get to stand up on their soapbox and call for boycotts. Some people who take celebrity way too seriously get to feel the kinship that comes from joining these boycotts. We get to make quippy comments and feel righteous about it. But nowhere do I see where this results in a material improvement for Applebees’ workers or for any other working class people who may be struggling with current economic conditions.Report
But nowhere do I see where this results in a material improvement for Applebeesā workers or for any other working class people who may be struggling with current economic conditions.
Ah! NOW THERE IS THE NUT OF THE PROBLEM!
Some people will argue that the solution (or material improvement, anyway) sits in bringing the price of gas back down to ~$2/gallon.
Others will argue that they’re not in it for the short term but for the long term and talk about the importance of the environment and reducing the impact of people driving and eating animal proteins and whatnot.
I suppose that I would argue that the former group needs to be disincented away from voting for Trump or Desantis or whomever and the latter needs to get a lot better at getting people to agree with them if they assume democracy as a baseline.Report
These distinctions are artificial. But it is the maintenance of these artificial distinctions that create the opportunities for people to go viral or to virtue signal on either side of the artificial distinction.
Things get much clearer when you stop using ideology as your starting point and instead try to think in terms of cause and effect. We (collectively) chose to make large parts of the country navigable only through private car ownership. We chose to put in place the financial infrastructure that allow someone making $30k/year to drive off the lot with a $50k Ford F-150. And now we are shocked that some people are living paycheck to paycheck and have been hit hard by rising gas prices?
There is a way out of this, but the first step is to admit that much of this discourse is BS and completely disconnected from material reality. The next step is to start paying attention to incentives.Report
What’s the goal?
Is it one of the short-term ones or one of the long-term ones?Report
It’s supposed to go with executives, well-meaning or otherwise, learning not to put shit in emails–especially widely disseminated ones–that are going to make them and their companies look like absolute crap if someone does something extremely sneaky like print them out and post a screenshot to Twitter.
I am seriously beginning to think we need Ad Board PSAs about this. Full on campaigns with Bono getting up there and saying, “Just meet over lunch to they that stuff, you idiot!”
Otherwise we’re gonna be stuck with exactly this whether we like it or not:
Report
I admit: I miss the days when our greedy, heartless cigar-chomping villains were *COMPETENT* greedy, heartless cigar-chomping villains.Report
Heh.
Also in case it wasn’t clear from my reaction, @j r’s comment was extremely good.Report
I think it was a good comment too.
But, as the guy who put up the post, being told that, yes, at the meta level it was interesting but at the object level it was dull, dull, dull…
Report
Quite the opposite of dull. It elucidates what’s wrong with our contemporary politics.Report
Memo
To: All Leftists
From: Chip Daniels, Antifa Thought Leader
Re: This Is Our Moment
Comrades-
Everyone has heard that gas prices continue to rise. The advantage this has for us is that it will increase odds that some dumbass middle manager will write something incredibly stupid and become the subject of an internet pile-on.
How you ask? We apply the Saul Alinsky strategy of letting him write and disseminate a memo then allow everyone to read it and laugh.
The mockery market is about to turn in our favor. What can you do?
Spread the memo far and wide to rouse the rabble and exhort the cadres.
Once a sufficient critical mass is reached, the worker’s revolution will ignite.Report
The goal is to make hay. It’s so someone who gets his news from Twitter without even reading the document can say, “hey, hay!”. It’ll find its way to someone’s mental list of evidence if he has that particular confirmation bias.Report