Chipotle had its stock downgraded on Wednesday by an analyst at Bank of America. It makes sense. The chain has endured a tough time. Health-safety issues that had scared customers away resurfaced this summer. Bill Ackman—the erratic, hypomanic hedge-fund manager—has amassed a large stake in the company, which is often a contrary indicator. Chipotle’s latest game-changing product—queso!—hasn’t met a rapturous reception. In this golden age of lunch, competition is intense, and consumers have fantastic, affordable choices. The stock has fallen about 20 percent in the past year—a year in which the S&P 500 rose 20 percent.
So, yes, an analyst might question Chipotle’s prospects. But this one had another problem: the wages of the generally low-paid people who staff Chipotle’s locations. While the company has aggressively cut down on the number of hours per employee as its sales have fallen, analyst Gregory Francfort noted, “We believe further gains from trimming hours will prove difficult which limits the opportunity to get labor below 27 percent of sales even if traffic recovers.” Simply put, Francfort is down on the stock because Chipotle can’t lower the percentage of every dollar of revenue it spends on labor.
Which tells you everything that is wrong about our economy. There is a widespread mystification about why wages have failed to grow in the past several years even as the labor market has tightened. Technology and automation and the decline of unions are of course partially to blame. But the underplayed, unspoken, and often unrecognized problem is a broader pathology about wages. We’ve raised a generation of managers, executives, investors, and stock analysts to believe that labor costs shouldn’t have to rise, that people don’t deserve raises in line with the rising cost of living, and that the labor market shouldn’t function like all the other markets that businesspeople have to negotiate.
