The headline on the Wall Street Urinal (WSJ- I didn’t get paywalled but it might be there) here is now:
Chipotle’s Labor Costs Are Rising. Customers Will See It in Pricing.
The fast-food chain plans to offset higher labor costs in California with price increases
Let’s run the numbers (from Google)
Chipotle Mexican Grill annual operating expenses for 2022 were $7.474B, a 10.86% increase from 2021. Chipotle Mexican Grill annual operating expenses for 2021 were $6.742B, a 18.4% increase from 2020. Chipotle Mexican Grill annual operating expenses for 2020 were $5.694B, a 10.74% increase from 2019.
From Macrotrends.net
Ok, so total expenses went up just under $1.5 Billion in 2 years — that must mean that employee wages must have gone up ¾ of a billion dollars to be a major contributor, right?
Well, also from Google, the numbers don’t support that. Seems labor is just a drop in the bucket. The report is:
The Newport Beach, Calif.-based company spent $616.3 million on labor globally for the quarter ended Sept. 30, up around 10.5% from the prior-year period and a more than 50% increase from the same period in 2020
From Wall Street Journal
So, expenses went up $1.5 billion since 2020 and labor costs are up a ‘massive’ $320 million — making a guess from the round numbers above.
That is 21% of the total increase — if we add a 100% margin on labor costs (really?) that is still less than 50% of the increased expenses. Please, that means that over 50% of the inflation push is non-labor.
BTW, executive compensation for Chipotle’s top 6 executives, including equity compensation was almost 9% of the $616 total labor cost. Or the CEO’s compensation in Salary.com was shown this way:
For its 2022 fiscal year, CHIPOTLE MEXICAN GRILL INC, listed the following CEO pay ratio data on its annual proxy statement to the SEC.
CEO NAME |
CEO PAY |
MEDIAN EMPLOYEE PAY |
CEO PAY RATIO |
BRIAN NICCOL |
$17,190,000 |
$16,010 |
1074:1 |
Yup, it’s those $16,000 dollar a year greedy bastards causing the problem.
To close, I would like point people to an interesting academic paper by Kuochih Huang, and Chyi-Horng Lu — www.umass.edu/… — that says:
Analyzing a sample that matches firm, manager, andworker information in the U.S. economy over the period 1992-2016, we showthat higher equity-based pay is associated with lower average wages acrossvarious measures of pays and model settings. Using a novel instrumentalvariable strategy based on a tax policy change, we provide evidence thatan increase in the CEO’s equity-to-salary ratio by one unit, say, from 1:1to 2:1, leads to a 4% decline in the average wage
So, how do we push back on this gaslighting?
UPDATE:
CNN has added a little background to my analysis on this topic here. Their headline today is:
American inequality is rising despite higher wages
Wages are rising, but so is inequality, reports CNN. While the top 10% of wage earners enjoyed an income jump of about 22% between 2019 and 2022, middle-income earners saw only a 5% rise in that period — "one of the largest three-year increases in income inequality" ever recorded, according to the Federal Reserve. Similarly, top earners pushed the average household net worth to $1.06 million in 2022, once adjusted for inflation. Yet the median or mid-point net worth — a more representative metric that is less skewed by outliers — is a much lower $192,900.
So the discussion in comments about wages cause inflation comes back to the biggest wage inflation at the top.