When discussing increased minimum wage, mandatory sick days, higher taxes and other government mandated business costs, what is too seldom mentioned is that the Left assumes the increase will come out of (bloated) profits. But reality dictates that most of the windfall wages are passed though to the customers in the form of higher prices. Yes, that’s obvious to those of us we even a modest understanding of business, but you’d be amazed how few people are aware of this.
Try this experiment. Next time you discuss (evil) business with a Progressive, ask this simple question — How much of a dollar of sales do you think is business after-tax profit? Allow them time to answer — PRESS for an answer.
Few will guess less than 20%. 40% is not uncommon. The reality is that it’s maybe 8% — eight cents of every dollar of sales. 92 cents goes for costs.
It’s usually significantly less in labor intensive small businesses such as fast food and restaurants. Here’s a good summation of average profit margins in various types of restaurants:
But one fun choice is to use the Walmart example — the one liberals can’t rage against enough. Their after-tax profit margin is generally between 3%-3.5% of sales. BTW, latest Target margin — 2.45%.
Yes, the public (and the MSM) have many misconceptions about business and economics. But if I could pick just ONE such misconception that needs to be changed, it’s this one. It’s the difference between “making business pay more out of its excessive profits” and “making businesses pass through increased government-mandated costs to their customers.”
Of course, that assumes that the customers will willingly pay higher prices to cover the increased costs. To the extent that business patrons choose not to pay, then the business suffers (cutting costs/employees as it scales down), moves, or goes out of business.