If the company was run efficiently in a competitive market, any destruction of the margin will be destabilizing and needs to be passed on to a third party: the suppliers (including labor suppliers a.k.a. workers), customers, or both. If those third parties can absorb the costs, a new equilibrium is found quickly, the company will survive. If not, the short term "gains" for the workers will eventually sink the company and become a total loss.
None of this means that equilibriums are fixed -- they're not, equilibrium is never reached and the market is always dynamic. But a disruption like a sudden labor cost increase breaks the adaptive momentum of an organization.
All this said, however, this Cheng dude in the article is kind of an idiot. He, as an owner, decides to come in to replace his now at home employees? So, he prices his own time as unskilled labor level, instead of either using it for more productive tasks, like managing his finances, or work for a higher wage even if it's a part time job?
Absolutely, minimum wage laws are destructive, as we can see. But if he is able to cut down the labor of a shift from 12 to 8 (seven, plus
himself), without affecting his productivity (hours worked, service,
sales), that means he wasn't doing a good job to begin with.
His math doesn't math out and he is actually incurring a financial loss. Way too many family owned and small businesses where the owner is involved in the operation make this enormous mistake and dig themselves into a perpetually broke business situation.
quotingHe also raised menu prices about 8% in January in anticipation of the law.
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