Sticky Notions

It’s a really pretty hotel, in a pretty spot by the river.

As we check in, the woman behind the glass, who is wearing a mask despite the fact that we are all vaccinated and have discussed as much, is making excuses.

“I don’t think you have this in New York, but in California there’s a labor shortage. It’s really hard to find people to work. We’re really just stretching to get by.”

She continues to explain that we might not be able to have dinner at the restaurant, because the kitchen is so understaffed that it’s a miracle they are able to feed anyone.

It turns out she’s wrong about New York. We had recently been at a NYC restaurant where just one young woman was servicing all the tables, and all their delicious and substantial dishes still cost a mere $8.00. It is clearly the same on both coasts.

Prices aren’t going up but services are getting worse, because nobody wants to work at current prices.

Markets fix this. There’s a reason that it’s a labor market. They could staff the kitchen in this place — it’s simply a matter of raising wages. Perhaps management feels that the kitchen job is only worth $15 or $20 an hour, but the market clearing price is actually more like $35 or $40 an hour. And perhaps management feels that they couldn’t make a profit. Yet, their hotel rooms are completely booked up, as are their dinner slots, indicating that a price raise on the customer end may be much more feasible than they realize.

But markets only fix this once people allow their mentality to shift. I’m struck by how sticky notions are of how much a thing costs, or should cost. Maybe this is part of why the dollar game has been able to go on for as long as it has.