Price Points

May 6, 2014 · Filed under Uncategorized

I reached for the Raspberry Kefir in my Winn-Dixie store, then recoiled when I saw the price had gone up. Again. I bought it at Winn-Dixie for convenience even though when it was $3.50 there, it was $2.75 at Walmart. Last week, the price at my Winn-Dixie was $4.39. Today, the price was $4.55. I walked out without it. They had passed my price point. It isn’t something I need but, with my frequent stomach upsets with celiac disease, I like to try to repopulate the gut with happy, friendly bacteria. I want happy bacteria that are having a group hug with my intestines, not the hostile thug bacteria with tattoos that are threatening my intestines with a switchblade. However, I can substitute with yogurt, probiotic tablets, or kimchee. I can make my own sauerkraut for that matter.

I didn’t get milk, either. Winn-Dixie’s no-name milk (that was probably milked out of radioactive cows from North Korea) is $4.19 per gallon. Milk that comes from a dairy with name recognition (whose cows are probably not radioactive mutants) is much, much more expensive. It is in the “have you lost your freakin’ mind?” range of expense. Milk, cheese, and butter are things that I now buy on sale only.

I imagine a lot of people are reaching their own personal price points of one kind or another now. After all, you decide that you will accept a certain amount of money for doing a particular job, and you will not do it for less. As an employer, you have an amount that you can afford to pay for an employee.

President Obama has decided that $10.10 an hour is the least amount that people should be paid. By this, of course, he means that the sorriest excuse for an employee that can be scraped up out of the alley is worth $10.10 an hour. “Well, excuse me all to hell!” says the person that does more skilled labor that used to earn $12.00 an hour. “I don’t get much more than that, I’m a good employee, and I had to have training for this job, unlike Mr. too hungover to get out of bed on Monday morning. If that person gets a big raise, I deserve one, too!” President Obama has no knowledge whatsoever of economics or job markets. Or working, for that matter.

Of course, to pay all those increased wages, the prices that you as a business charge for your goods and services must go up. You go to your customers and tell them that you have to increase the prices due to new wage laws. You go to your suppliers and tell them that they have to sharpen their pencils and cut prices because you don’t have the cash to pay them as much as you used to because you have higher expenses. So your customers all say “Why yes, we’ll be overjoyed to pay 50% more for your services!”, right? Uh, no. They’ll say “Sorry, buddy, I have wage problems of my own, and I can no longer afford you. I’m going to go with either Ramon’s Truck of Illegals where there is no insurance or minimum wage, or outsource to a very cheap labor country.” Your suppliers will likely say “Sucks to be you. Sorry to lose your business. If that will be all, I have a meeting with Ramon in 20 minutes about a large order.”

At this point, you, the owner, have to decide whether it is in your best economic interests to shut down the business, radically downsize the business so that you and family members are the only employees, whether to substitute machinery for labor, or whether to go to cash only, not keep records, and escape all regulation. You could decide to keep on losing money in the hope that everything will eventually work, but math is a real bitch, and you’ll end in bankruptcy.

Doctor’s offices are facing the same dilemma for they are independent businessmen whose prices have radically increased via government regulation, and whose compensation has drastically declined. This is not good news for you. There will be fewer suppliers of medical care as many will opt to go out of business and retire. Others will decline to enter the market. Existing physicians may decline to take any insurance at all. The ones that do enter the market may not necessarily be the best and the brightest, but the dumber and lazier. You might want to start thinking about alternatives for medical care.

“But I thought this was about Winn-Dixie’s high prices!” you may whine. Well, you were right. It is, but it’s also about how people have a range of prices that they are willing and able to afford for goods and services but, once that ceiling is breached, they will no longer be in the market or will seek out competitors. Will Winn-Dixie earn more money from me by increasing the price of the Kefir? No, for they will earn no money from me, since I’ll just drive down the road to a competitor which is less convenient but where the prices are lower. If I’m in pain and the price of (legal) narcotics is too high, I’ll substitute illegal products. If taxes are too high, I’ll reduce my taxable income partially or completely.