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Richard Rider

BAD NEWS: Economics IS taught in our schools!

Many people (including myself in times past) have often complained that “economics is not taught in the schools.”  But that’s a false assertion.  Economics IS taught in today’s schools — taught in a very selective, all pervasive manner in just about EVERY class — not just in some economics class.

What is “taught” today throughout the education process by economically illiterate teachers is that:
1.  Businesses make huge profits.  Excessive profits.  Downright evil profits.
2.  Businesses can “afford” to pay more — more taxes, more mandated labor costs, more whatever.
3.  CONCLUSION: Businesses need to pay their “fair share” — which always means MORE.

Of course, the MSM AND the movie/TV shows preach the same gospel.  Facts be damned.  So we really should not be surprised it how little most people know about business, costs and profits.

A 2015 survey found that people think that businesses make about 36% profit on every dollar of sales.  The real profit margin is 6.5% to 7.5%.  Roughly 7 cents of every sales dollar is profit (assuming the business stays in business).  Hated Walmart makes about 3.5 cents average profit on every dollar of sales (even less in recent years).

Restaurants usually fail. 60% of restaurants fail in the first year — 80% don’t make it to five years.  For those that survive, the average profit is about 6% of sales.

Let’s dig down a bit deeper into restaurant costs and profits.  The rough rule of thumb is that about 1/3 of costs go to labor, 1/3 to food costs and 1/3 to other expenses — the biggest one being rent.

Let’s assume restaurant labor costs are 32% of sales. Let’s now raise labor costs 15% via minimum wage increases (the actual increases are usually more). That would be almost 5% of sales — almost all of the profits of the average restaurant. So CLEARLY a restaurant owner is not going to pay that increase out of profits — they’d simply go out of business.

So the only options to pay for the owners are some combination of reduced hours of operation, automation and price increases.  Short term, it’s mostly paid for by the customers — both in price increases and fewer restaurants open in the off hours.

So when you hear progressives say that “business can afford to pay more for employees — it’s not BUSINESSES that will pay the tab.  It will NOT be coming out of profits.

Assuming the business survives, it’s paid for by the CUSTOMERS.  If such costs go up for all retailers, it’s a PASS THROUGH cost.  Ultimately ALL business costs are pass through costs.  Otherwise the business either moves or folds.

It would be wonderful if such facts WERE taught in schools and colleges. But they are not.  Most people today are better off NOT taking a modern economics course.

BTW, I have a 1960’s BA in Economics from “the” UNC.  Even then, the economics courses were skewed to the left. But now they are simply socialist indoctrination courses.

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