crocodile wrote on Sep 7
th, 2014 at 6:54pm:
John S wrote on Sep 7
th, 2014 at 12:31am:
If a coffee shop or restaurant has a average of 200 customer for a days trading and the business employs 4 staff and penalty rate is cut to single time and the business still get 200 customers would the business employ more staff.
poll added
It's not quite so simple. It depends whether the business faces competition from other businesses that lower their retail price since the marginal cost of production would decrease. If this should occur and the business grows its market share or the demand for coffee increases due to cheaper prices then there would be scope for increasing staff levels.
Your trying to simplify something that is not so simple. There are hordes of factors at play. Given the right circumstances the abolition of penalties could allow employment opportunities. In other cases it may not. Believe it or not, it could, in some cases be detrimental.
You would probably find that if one of the competitors reduced their rates the others would follow and because they all understand this they more than likely would all keep their prices up and take the increased profit. They would all get the same advantage.
I won't buy that one. Business owners are there for profit. If they can garner a competitive edge you can bet your balls they'll go for it. Not only is commercial collusion against the law it also leads to diminished demand as the reactions to market conditions disappears. You are neglecting the situation where increasing the turnover through lower retail pricing may lead to increases in profit so long as the increased volume is sufficient to cover the diminished price.
The overall point shown here though is that these guys are not short on staff because of penalty rates - the options relate to demand change or additional opportunity.
Demand change is what the whole argument is about. It is possible, but not always that reduced marginal input costs leaves the additional opportunity bit wide open. If it widens sufficiently to justify the employment of another body, that is what will happen. If not, it won't
Of course since the change would still maintain the same competitive status quo they could always do the same things with no change.
You're assuming that the relationship between the retail price and product demand is a perfectly linear one. This is a fraught assumption as they mostly never are, particularly when market saturation is reached.
There is also the supply / demand situation to be considered on the labour side of the equation. It is also possible in some industries that the abolition of penalties may even cause the supply of labour to dry up as employees seek other opportunities due to income reduction. In this case it is even likely that employers may find themselves actually paying above the rate to keep staff.
Like I said. It's not quite so simple.