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"Slicing More Than Pizza"

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intellectualammo
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Well, with his re-election, some are already feeling the effects...

Front page of the newspaper today here in Pittsburgh:

They're Slicing More Than The Pizza

From coal companies to home retailers to pizza makers to community colleges, employers across the United States have taken measures to fire workers, reduce their hours or postpone corporate expansion plans.

The reason, some of them say, is the re-election of President Barack Obama and the assured implementation of his 2010 health care reform law.

http://www.post-gazette.com/stories/business/employment/theyre-slicing-more-than-the-pizza-companies-cut-employment-blame-new-health-care-law-under-obama-667621/

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It's interesting that, facing higher costs, companies are choosing layoffs and contraction instead of raising their prices.

Given that these companies are apparently able to get along fine without these workers, maybe they shouldn't have been working there in the first place.

This is a very deflationary story, that's for sure...

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This is a very deflationary story, that's for sure...

From the article...

"Papa John's CEO, John Schnatter, said the Affordable Care Act and the re-election of Mr. Obama would cost his business about $5 million to $8 million per year, meaning he'd have to increase the price of pizza and cut workers' hours so they don't qualify as "full-time" employees and become eligible for employer-provided health care coverage."

Sounds more inflationary to me.

The end user (consumer) always pays for the cost of government taxation regulation and litigation.

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From the article...

Sounds more inflationary to me.

The end user (consumer) always pays for the cost of government taxation regulation and litigation.

Not always, no. If the business in question is under competitive pressure, those costs will be charged against profits.

As for Papa John, I guess it remains to be seen what he will actually do--i.e. what mix of that $8 million will be passed on to consumers.

I looked it up (and I guess I'm not alone in thinking this from the looks of things) and sure enough, if the entire cost of the $8m was passed along to consumers, it would amount to something like $.14 per pizza.

Meanwhile, everybody who criticizes OC forgets that we already pay for the health care of these people and we always have. All OC did was change how we pay for other people's heath care. It did not invent the idea of socialized heath care as that was done in the 1940s and later perfected in the 1960s.

But oh yes, go ahead and sound like a moronic conservative and blame "socialist Obama" on suddenly inventing the social safety net--the social safety net that is fundamentally supported by both parties without question.

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Not always, no. If the business in question is under competitive pressure, those costs will be charged against profits.

That helps to explain the choice of dumping employees instead of raising prices.

Meanwhile, everybody who criticizes OC forgets that we already pay for the health care of these people and we always have. All OC did was change how we pay for other people's heath care. It did not invent the idea of socialized heath care as that was done in the 1940s and later perfected in the 1960s.

Perfected? What an odd word to describe a system based upon every moocher's expectation that someone else will pay their bills... as well as every looter's dream of getting paid by the government to nurture and promote the moochers' expectation.

But oh yes, go ahead and sound like a moronic conservative and blame "socialist Obama" on suddenly inventing the social safety net--the social safety net that is fundamentally supported by both parties without question.

Throw down a government safety net... and the moochers will come flocking to turn it into a trampoline.

There's no need to stoop to misplaced blame when in my view, the government is not the enemy. For it is nothing more than the political creation of the moocher majority who demand that someone else pay their bills. It's a something-for-nothing scam that would make Charles Ponzi proud. The moochers are getting exactly the government they demanded... and they deserve to choke on it.

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Not always, no. If the business in question is under competitive pressure, those costs will be charged against profits.

If the industry in question is highly competitive, then the businesses in it are already making close to zero economic profits. If profits in the industry fall below zero, say from an additional cost, then businesses will begin to leave the industry. This will cause price to rise to the point where businesses, on net, stop leaving.

In short, lower profits directly result in the price rising for the consumer.

Edited by Dante
Grammar
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Perfected? What an odd word to describe a system based upon every moocher's expectation that someone else will pay their bills... as well as every looter's dream of getting paid by the government to nurture and promote the moochers' expectation.

It's accurate in the narrow context I used the term. It certainly wasn't a value judgement...

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It's interesting that, facing higher costs, companies are choosing layoffs and contraction instead of raising their prices.

Given that these companies are apparently able to get along fine without these workers, maybe they shouldn't have been working there in the first place.

Your reasoning is priceless. Two sentences, right next to each other. One points out that companies are contracting. The next sets up the premise that companies are getting along fine.

Whatever fits into the magical Universe of rationalizations your built in your head, I guess.

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If the industry in question is highly competitive, then the businesses in it are already making close to zero economic profits. If profits in the industry fall below zero, say from an additional cost, then businesses will begin to leave the industry. This will cause price to rise to the point where businesses, on net, stop leaving.

In short, lower profits directly result in the price rising for the consumer.

This is oversimplified to say the least. Prices are sticky since there are plans around those prices and so forth. Then there's the role of investment, which can nullify the effects of negative profits (video game device makers lose money for years before turning a profit; retailers carry lost leaders all over the place; etc.).

I think in the case of PJ, would they really raise prices and risk losing customers? (Pretend for a moment that OC cost them something actually significant).

The proper answer is, it depends... on a lot of factors. Barring a wage spiral, which will only occur in a low unemployment situation (and unemployment among pizza flippers and the like is huge right now), those extra costs will most likely hit earnings and wages long before they hit consumer prices.

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Your reasoning is priceless. Two sentences, right next to each other. One points out that companies are contracting. The next sets up the premise that companies are getting along fine.

Whatever fits into the magical Universe of rationalizations your built in your head, I guess.

Charming, Nicky. I guess that's one way to "win" an argument...

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If a pizza owner raises his price by 14 cents, that only covers the additional costs for his own workers. What if his suppliers try to do the same, passing on the increased costs of their workers? We end up with a pizza price that has to go up even more. Anyhow, I doubt prices will rise significantly. I agree with what Crow said here:

... ..., those extra costs will most likely hit earnings and wages long before they hit consumer prices.

Most owners will try to cut back on wages, on inputs and on their own earnings. Reduced wages does not imply reduced wage-rates. They might cut back a few hours on certain days for certain employees. Reduced input costs might mean cutting back on a piece or two of pepperoni per pizza. Reduced capital outlays might mean deferring repainting the store until next year, or cutting back on fliers. And, they will bear the rest -- anything that they cannot push onto the other costs.

If these employers earn $250 K or more, they will also face a new 3.8% marginal tax rate that kicks in to cover Obama's healthcare plan. In addition, if Obama has his way, they will see a higher income-tax bill too. These will motivate them to decrease costs just as much as the direct employee-heath increases.

All this has second-order imp[acts as well. If they're earning less, they will probably spend a bit less while they'll also save a bit less. And their suppliers -- the pepperoni company, the paint company and place they buy their consumer goods at -- will see reduced revenues. Somewhere in that downstream chain, there will be more pressure to lower wages by firing people or cutting back hours.

The only offsetting factor will be the aspect that Crow mentioned before -- today we have hidden health costs inside private insurance premiums. These will be lessened as more people become "entitled" to healthcare on their own account. It seems reasonable to conclude that private health-care premiums will therefore fall or not rise as much as they otherwise would. However, since people who feel entitled might well use more healthcare than they otherwise did, the overall impact will probably rise. In addition, new mandates continue to be imposed -- not just by Obamacare, but by states that are Republican -- healthcare cost will likely go up and not down.

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This is oversimplified to say the least. Prices are sticky since there are plans around those prices and so forth. Then there's the role of investment, which can nullify the effects of negative profits (video game device makers lose money for years before turning a profit; retailers carry lost leaders all over the place; etc.).

There are a number of ways for businesses to get around the stickiness of prices. One common way is simply to increase or decrease the frequency of sales. If you decrease the frequency and quality of the sales that you offer, that will raise the average price that people pay for your product. Sales are currently abundant in the pizza business; I basically never buy a pizza that doesn't have some kind of a discount. It's actually weird how deep the discounts are in the pizza market.

I think in the case of PJ, would they really raise prices and risk losing customers? (Pretend for a moment that OC cost them something actually significant).

But this is a cost being imposed on everyone. Other pizza companies would also be facing these cost pressures, and would be inclined to do the same thing. Why would PJ lose customers when pizza prices and food prices more generally are rising across the board?

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But this is a cost being imposed on everyone.

Not necessarily everyone. Obamacare starts at 50 employees. Most single unit independent restaurants have less than that.

Many believe this will, through illegitimate government means, serve as an "equalizer" between the big companies and independent operators.

It is the reason many small operators have foolishly welcomed this nonsense.

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Not necessarily everyone. Obamacare starts at 50 employees. Most single unit independent restaurants have less than that.

Many believe this will, through illegitimate government means, serve as an "equalizer" between the big companies and independent operators.

It is the reason many small operators have foolishly welcomed this nonsense.

You raised a highly relevant principle: People demanding that the government economically punish others who they envy. Problem is that the government eventually gets around to economically punishing them too when they also become a source of envy of others.

This principle also applies to taxation, where the government responds to the envious demand that others who are not being taxed enough be taxed more. In time, the demanders become the less taxed who are envied by others who demand they be taxed more.

This is the snake which devours its own tail as the envious get what they wish onto others.

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Not necessarily everyone. Obamacare starts at 50 employees. Most single unit independent restaurants have less than that.

Many believe this will, through illegitimate government means, serve as an "equalizer" between the big companies and independent operators.

It is the reason many small operators have foolishly welcomed this nonsense.

Interesting, thanks.

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Another thing rarely discussed in business owners making affordable healthcare "available" is: do they have to pay for it? Because to make something available does not necessarily mean that you give it for free. Here is how the ACA stands now:

"the health care insurance provided by the employer must pay for at least 60 percent of covered health care expenses, and employees may not be forced to pay more than 9.5 percent of their family income (before deductions and adjustments) for coverage offered by employers."

An unintended consequence of this is going to be that employers will be actively (while avoiding the appearance of discrimination) avoiding hiring people from low income households. The amount the employer is forced to pay could be 60, 70, 80 or 95% of the expenses depending on the employees' household incomes.

This is the *real* problem of Obamacare- that employers cannot make financial plans around known expenses in this matter.

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Obamacare just rearranges the deck chairs on the Titanic. Calling it out as something uniquely bad whitewashes the wider problem. Remember that OC was invented by a "conservative" think tank in an attempt to deflect some of the costs of socialized medicine away from rich people and toward the middle class.

And yes, insofar as it shifts some of the costs around, some will applaud it and some will demonize it. If the situation were reversed, then would the small pizza shop owners suddenly become heroes and PJ become the villain?

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Obamacare just rearranges the deck chairs on the Titanic. Calling it out as something uniquely bad whitewashes the wider problem. Remember that OC was invented by a "conservative" think tank in an attempt to deflect some of the costs of socialized medicine away from rich people and toward the middle class.

And yes, insofar as it shifts some of the costs around, some will applaud it and some will demonize it. If the situation were reversed, then would the small pizza shop owners suddenly become heroes and PJ become the villain?

If you believe what you are saying you have no idea how Obamacare is going to be implemented and enforced.

Are you aware that you can read it online?

It might be enlightening.

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It's accurate in the narrow context I used the term. It certainly wasn't a value judgement...

It was your own counterpoint value judgement in support of people expecting others to pay their bills, as you preceded it with...

everybody who criticizes OC...

Clearly you support that system.

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Meanwhile, everybody who criticizes OC forgets that we already pay for the health care of these people and we always have. All OC did was change how we pay for other people's heath care. It did not invent the idea of socialized heath care as that was done in the 1940s and later perfected in the 1960s.

But oh yes, go ahead and sound like a moronic conservative and blame "socialist Obama" on suddenly inventing the social safety net--the social safety net that is fundamentally supported by both parties without question.

Why do you assume that everybody that criticizes OC forgets that we already pay for others' healthcare? Maybe I just don't like OC and don't think it is a good solution - actually I think it is a horrible solution and an expensive one.

You're basically saying: "people that criticize a new additional property tax are forgetting that we already pay a property tax. But sure, blame "socialist" Obama on suddenly creating the tax system and inventing the property tax."

OC is immoral, and, practically, it won't work - it will make the situation worse. This does not mean that the system in place now is moral and working - it's not - but that doesn't mean that we accept replacing it with another immoral system that won't work.

Edited by thenelli01
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So I support Obamacare?

Exactly.

You softpedalled Obamacare as being no different than the system already in place. When in truth it is, because for the first time the government will economically punish people for not buying something.

But the government did not cause Obamacare to be implemented. It was hundreds of millions of irresponsible people who have demanded that someone else pay their bills.

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Exactly.

You softpedalled Obamacare as being no different than the system already in place. When in truth it is, because for the first time the government will economically punish people for not buying something.

But the government did not cause Obamacare to be implemented. It was hundreds of millions of irresponsible people who have demanded that someone else pay their bills.

Wow, I had no idea. What else do I believe in? I'm making dinner reservations right now--do I believe in eating meat or should I try to find something with a vegan selection?

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