Raising The Minimum Wage To $9 And The Unintended Consequences Of Good Intentions
Two interesting pieces on the minimum wage.
One is by Elizabeth Scalia, "The Paradoxical Meanness of the Minimum Wage," referencing Tyree Johnson of Chicago, who's worked for 20 years at McDonalds, and is earning $8.25 an hour:
I don't know how anyone can accept an idea that a man who has worked faithfully and industriously for 20 years, at any job, should still be making minimum wage.
(The Bloomberg story at the link below explains how this has come to be in Johnson's case -- changing franchisees at his workplaces, etc. It is possible to do as the other Johnson did at McDonald's -- the CEO -- who worked his way up to his current position from being a store employee.)
Scalia continues:
When I got my first job, as a department store cashier, I made $2.10 an hour. After 30 days, I got a "raise" to $2.30 and a year later I was making either $3.40 or $3.50 an hour. Had I remained with the store, it is unlikely I would ever have gotten rich (or made "enough" money; I am still waiting for that day) but certainly had I remained there for 20 years I would have -- like most of the Department Managers, who were promoted from within -- seen my responsibilities rise and my wage, as well. Such managers may not have been rich, but they managed to own homes and raise families on what they made.To keep a loyal, well-trained and dependable employee at minimum wage -- the same wage paid to unskilled workers newly hired -- is pretty unconscionable. The job itself might not be "worth" $15 or $18 an hour, but the intangibles that such an employee brings to the job (dependability; knowledge of policy/procedure; demonstrated sense of responsibility; did I mention dependability) should be worth $12.50 an hour or so, shouldn't it?
Last April, the HHS Mandate-rejecting Hobby Lobby store chain -- citing its Christian sensibilities -- voluntarily bumped up their minimum wage scale for their employees -- $13 per hour for full-timers, and $9 for part-time. They've done that for the past four years.
In so doing, Hobby Lobby exhibits a tendency to broad-mindedness that goes missing within our minimum wage policies, and exposes a paradox inherent therein: by dictating what the minimum wage must be, we have trained business owners to a somewhat narrow, reactionary way of thinking. Prior to minimum wage laws, a smart employer knew that he could not keep good employees without paying them their worth. Once employers were told what they "must" pay, however, it created a baseline that mentally (and perhaps emotionally) narrowed, rather than broadened an employers sense of what wage was fair or deserved. In fact "fair" and "deserved" went out the window. If all a businessman (or woman) had to do was make sure a minimum wage was being paid, what did fairness or merit have to do with anything?
And that sort of thinking, born of the good-intentions of our own government -- is how we get to the reality of a 20-year employee making $8.25 an hour, and having to live a pretty hardscrabble life.
Scalia linked to this Leslie Patton story at Bloomberg, "McDonald's $8.25 Man and $8.75 Million CEO Shows Pay Gap."
The problem with raising the minimum wage? Steve Chapman writes in a 2009 piece at reason:
If you're a minimum wage employee, your job will pay more, but only if it still exists. These days, most companies are scrutinizing every position on the payroll to make sure it's worth the cost. Raise the toll, and some employees will find they are no longer valuable enough to make the cut....Even proponents of the increase understand the tradeoff. Otherwise they would demand an even bigger hike. If you can force employers to pay higher wages without reducing employment, why set the minimum at $7.25 an hour? Why not $17.25? Why not $37.25?
The suspension of disbelief required to support the minimum wage will only take you so far. It's impossible to deny that if it were illegal to pay someone less than a mere $36 an hour, a lot of jobs would vanish. But a small dose of poison is still poison, and in this case it's being administered to a patient who is already ill.
Supporters make a virtue of bad timing by claiming the change will provide a stimulus exactly when the economy needs it. The liberal Economic Policy Institute in Washington insists that a minimum wage increase "would not only benefit low-income working families, but it would also provide a boost to consumer spending and the broader economy."
Not likely. Companies, unlike the government, can't create cash at will. Any money they give to workers has to be obtained by cutting jobs, reducing employee benefits, or slashing other expenses that happen to be someone's income. Net stimulus: zero.
I like the minimum wage from the viewpoint that most mangers and high school kids (or recent grads) don't have to figure the pay scale.
The problem is that corporate offices limit the raise and changes that would allow them to keep good employees and dump the worthless employees.
Jim P. at February 12, 2013 10:19 PM
As my friend told me back in the day when he was a manager at Burger King and the state minimum wage...
for a month or two they cut hours of the hourly staff and expect the managers (salaried so no extra pay) to pickup the slack. Then prices would creep up and things would be back to normal...just with a little inflation.
Of course if the people making minimum wage get a pay increase the ones above them expect to get one too. My friend said that eating the increased cost (which wasn't much $0.10 to $0.15/hr - don't remember exactly) would eat most all the profits of the franchise (I am sure he didn't know exactly but had a good idea).
The Former Banker at February 12, 2013 11:25 PM
No, No, No - you have missed the biggest offense of a mandated hourly minimum wage!
It always - ALWAYS - devalues the dollar.
It does this by requiring that more dollars be paid for exactly the same labor. Since the dollar is actually a measure of how much work must be done, you are not getting more for your time. All you are doing is changing the number.
Take the lesson. No one is "giving" you anything, and the minimum wage is WHY illegal immigrants are here AND textile and other jobs are overseas.
If you wonder why sugared water costs $1.49 rather than a quarter, here you go. It's not just that some people think their time should be "worth more" - it's a government mandate that it IS.
Radwaste at February 13, 2013 2:13 AM
By the way - DO NOT observe or cite the Dow and try to gain comfort from a big number there.
Notice it's measured in dollars?
Adjust it for the cost of a mix of commodities, like a loaf of bread, gallon of milk and a beer, and suddenly it's not so impressive.
Radwaste at February 13, 2013 2:25 AM
Why would any company want someone who has worked for 20 years without wanting a raise? He might be dependable but he's no ball of fire.
KateC at February 13, 2013 3:38 AM
...keep good employees and dump the worthless employees
The worthless employees are usually the salaried managers making the most money and providing the least value. But since they're the ones tasked with making the decisions over who stays and who goes...
This also engenders the poor attitudes of the entry level workers. Why do better when you just make someone else's check bigger? Kids who somehow make it into the workforce with a good work ethic get it beaten out of them pretty quickly.
But hey, if you don't want to do it, there are hundreds out there who will do it for less.
Try making a living on minimum wage for a while, with no insurance. But then again, that's how we get people to enlist in the military.
DrCos at February 13, 2013 3:44 AM
"The worthless employees are usually the salaried managers making the most money and providing the least value"
While anecdotally I have seen a few poor managers who fit this description, I would disagree with this view as a general rule.
Anybody can flip a burger, that's why why this job gets the low pay scale.
But not just anybody can manage the store, and this is the important part, AND TURN A PROFIT.
It is for this reason that the store manager makes more money. It requires a less common worker that has more ability and training.
With regard to the worker attitude, it is my experience that this depends on both upbringing and a minimum level of awareness. Children that are brought up and instilled with a good work ethic tend to have better attitudes at work. So too do those with enough awareness to realise that $9.50 an hour is better than $9.00 an hour, and that $9.00 an hour is better than getting nothing because you were replaced with a worker with a better work ethic and attitude. Especially in this job market.
Typically, the sullen problem workers are the same mugs who were sullen problem students. Being a waste in life tends to lead a mug to being a waste at work.
And it is possible to make a living on minimum wage. You just have to forego some of the luxuries like cell phones, cable big screen tv's, fashionable clothes, X-box, and all the "bling". Depending on where they live, they might need to have a roommate and live without those shiney 20" rims on their hoopty.
This nation doesn't have a problem with poverty, it has a problem establishing worthwhile priorities.
Azenogoth at February 13, 2013 4:58 AM
I'm working two part time jobs and going to school, making a slight amount more than the minimum wage in my state (just raised to $7.85/hr.). All minimum wage raises do is cause prices to rise. They cause inflation, because every job becomes more expensive, and the cost of goods is either flat or increasing. Therefore if the price of both the goods and services (due to increased labor costs) increases, the price of most items will go up. Every time the minimum wage has gone up, it has reversed my hard work (getting to about $3-4 dollars ahead of the minimum wage) and caused my wages to effectively stagnate. Plus, this kills opportunities for work that most teenagers have, because at $9/hr, if I were an employer, I wouldn't even hire my cousins, who I know are hard workers, because of the onerous regulations regarding minors working hours and allowable job duties.
spqr2008 at February 13, 2013 5:16 AM
The surest way to destroy jobs is for government to mandate businesses pay labor costs in excess of a natural rate.
And Radwaste makes a good point - the real problem is not that pay isn't high enough, but that Congress and the Fed continually debase the dollar.
Snoopy at February 13, 2013 5:19 AM
If minimum wage was the cure all Dems thought it was, with no downside like they claim, why not make it 1,000 an hour, right now. Because even they knowthere are huge obvious downsides, even though they won't admit it.
A side thing but, in the same viegn, I really hate the term "living wage", that gets thrown around so much. It assumes so many things, such as everyone is the sole breadwinner of a family of 4, or that your pay should be based on how many amily memnbers you have not on , what job you do or how well you do it.
Joe J at February 13, 2013 7:14 AM
Minimum Wage goes up every year here in WA (can technically go down too, but that doesn't happen), and so do the prices.
Many employees don't seem to understand that a business' priority isn't creating jobs. It's about keeping the lights on, making a living, and hopefully, a profit. If more employees are needed to keep up with the demand, then great. Small businesses here cut hours, cut benefits, cut staff, and raise prices to try to accommodate the rising wages, and when they can't, they sell, move elsewhere, or shut-down.
Many employees also complain that their wages won't support their family. Sorry, but not the employer's problem. They didn't ask you to have five kids.
Also, some people assume that higher minimum wages assures better workers. Bull shit. You have the same surly teenagers giving shitty service like before, and because the minimum wage becomes the "maximum wage" for many small businesses, some of these employees use that to justify not trying any harder. Why should they? They're making the maximum wage they will make with that employer, until next January 1, when the state implements a raise for them. As long as they do what's required to avoid termination, there's no incentive to do more. And then they bitch because their hours are cut, etc. It's a vicious cycle.
Meloni at February 13, 2013 7:58 AM
The minimum wage is ridiculous.
It's not like these people are forced to buy milk or gasoline that's price-manipulated by government policies.
They can drink water and ride a bike in the snow or just refuse to work and get on a welfare/Section 8 handout program and get everything free.
Gog_Magog_Carpet_Reclaimers at February 13, 2013 11:07 AM
bbbbut... fairness, and the rich, and the poor, and living...
don't you SEE!!!!!11111??????
because, shut up.
:how massive is my eyeroll:
SwissArmyD at February 13, 2013 2:34 PM
I'm with KateC on this one. Twenty years at the same job, and nary a promotion? If he wanted to make more money, he coulda TRIED FOR A HIGHER PAYING JOB!!!!!!
Juliana at February 13, 2013 3:04 PM
Anybody can flip a burger, that's why why this job gets the low pay scale.
But not just anybody can manage the store, and this is the important part, AND TURN A PROFIT.
Store managers in fast food typically make marginally better pay than the line guys. And while anybody can flip a burger, those who can do so with minimum supervision are worth more, but typically aren't paid more.
My pain is with middle management in manufacturing where 'good managers' think they can force square pegs into round holes. And when they fail, it must be because of the pegs.
DrCos at February 13, 2013 4:21 PM
Why do people not grasp that is the minimum wage goes up, everything else goes up. There will be no gain. There will, however, be a loss for people making over minimum who don't get bumped up by law but do have to pay the higher prices. Want more money? Be indispensable.
Think you arne't getting what you're worth where you are? Apply elsewhere! Chick Fil A pays better. SHow a little gumption, don't expect people to hand things to you.
momof4 at February 13, 2013 4:39 PM
What is the profit margin difference between a Hobby Lobby and a McDonald's?
Is Hobby Lobby's business model to sell what is essentially a fungible pre-prepared food item at low prices? Or is it to sell a higher-profit-margin non-fungible specialty item at a competitive price?
Hobby Lobby can get away with paying an employee $13 an hour. By doing the same thing McDonald's would have to raise prices (and lose significant business to the other chains) or cut the staffing levels to the bone to avoid losing money on every item sold.
Does Hobby Lobby depend upon traffic and volume to make up for the lower profit margin on items. Or are they a destination stores that attracts people willing to pay a little more because the competing item sold at Toys-R-Us or Target isn't as desirable or unique?
Does a Hobby Lobby sales clerk have level of enthusiasm for and knowledge about the products that the customer does not bring into the store with him? Do customers ask advice from the Hobby Lobby store clerk about the various products and expect semi-knowledgeable answers? When was the last time you asked a McDonald's clerk for advice about the best way to eat a cheeseburger?
Not a legitimate comparison.
Conan the Grammarian at February 13, 2013 5:04 PM
DrCos You know why they don't pay employees you can work without supervision more in minimum wage jobs? To avoid gender and minority discrimination lawsuits
lujlp at February 13, 2013 6:54 PM
Now if you do the math without taxes:
From the IRS Regulation:
So a family of 4 would have an insurance bill of $20K out of $37,440 income (pretax). That will leave $17,440 leftover to pay rent, food, clothing and transportation, the other 40% of medical bills, and all the other taxes they are subject to.
Jim P. at February 13, 2013 8:04 PM
The way our economy is manipulated by the Federal Reserve requires the money supply to double every fourteen years... More money competing for the same jobs and services debases the value of that money, driving inflation. As a result, our wages need to double every fourteen years, also. How many of us are actually making double what we did?
jefe at February 13, 2013 8:34 PM
Well, I'm not making double, not even if I wouldn't have been forced to change professions two years ago. My first "adult" job out of school in 2000 paid me $17 an hour. In the same profession two years ago I was making $24 an hour plus benefits. In my new profession I get $21 an hour. My same apartment has gone from $700 a month to now $1200. Gasoline has tripled. Groceries and utilities have gone way up as well. I can't even stay in the same economic situation I have been in, to say nothing of actually moving up. I doubt 14 years from now my wages will have doubled nor that I will have even maintained my same economic level.
BunnyGirl at February 13, 2013 9:55 PM
The minimum wage has many bad effects. It supresses hiring teens for entry level jobs, and reduces employment in general.
Minimum wage legislation did not arise from a noble effort to help the poor. Senator and future President John F. Kennedy of Massachusetts spoke at a Senate hearing for the minimum wage: "Having on the market a rather large source of cheap labor [hundreds of thousands of black workers] depresses wages outside of that group, the wages of the white worker who has to compete."
The minimum wage is just another way of saying: "Fire that person unless you can pay them say $7.25 per hour. We would rather that they be out of work, than work for less than we think is polite."
The government cannot help people by restricting their choices.
Up intil now, minimum wages have been set in flat dollars, usually at a level which affects only a small fraction of employees. Inflation erodes the job-killing effect by lowering the real value of all wages, eventually making the minimum wage apply to almost no one. Obama has proposed in his State of the Union speech that a national minimum wage be adjusted automatically for inflation. That would permanently kill the lower rung of jobs. Welcome to European economics and unemployment.
Amazingly, many economists like low levels of inflation because it raises employment somewhat. Essentially, they propose manipulating the currency to overcome the job killing effects of other government policies. This, even though inflation is a tax on cash savings and reduces all real salaries.
Minimum Wage Prosperity: Using the Minimum Wage to Attack Your Competitors
Andrew_M_Garland at February 13, 2013 11:02 PM
Actually, things that are made outside the US and don't have much labor involved inside the US don't go up all that much comparatively. Say a TV - probably all manufactured in China...only shipping and sales staff in the US. So its cost probably won't go up all that much. Things like food will go up just as much as wages.
The Former Banker at February 14, 2013 12:13 AM
"I can't even stay in the same economic situation I have been in, to say nothing of actually moving up."
Welcome to the
reality of the American Dream
Gog_Magog_Carpet_Reclaimers at February 14, 2013 10:17 AM
The above comment reminds me of when I worked for a well-known gadget store more than a decade ago. Oprah promoted a $99 Stereo / CD player at Christmas. The thing cost $1.00 to make.
Meloni at February 14, 2013 10:21 AM
Why does this remind me of Kramer's Strike?
Jim P. at February 15, 2013 9:54 PM
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