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By Ed Rogers
Minimum: The point on a curve where the tangent changes from negative on the left to positive on the right. The smallest amount possible.
It would seem that there are people out there who have no idea what “The Minimum Wage” is all about. Facebook is alive with statements about how stupid it is to pay someone $15.00 an hour to put a pickle on a bum. These same people would be the first to bitch if the pickle they had asked for was overlooked, and their bun came without it.
This, however, is not about placing a pickle on a bun or a safety pin on a bomb. You see, work is work. Today there are many people working in the fast-food market who had high-paying jobs not long ago. I’m sure that, as they sat behind their desks and worried—not about putting food on the table, but about which college their children would be attending—they also didn’t think that someone in a lowly service job should be paid a living wage. Now, my guess is, they have changed their minds. At one time, these were jobs that only school kids preformed. Now those kids compete against ex-managers and ex-customers.
The job market has become a dice game; if you pick the right job (roll the dice), you stay employed. Pick the wrong one and you are flipping burgers. Your college education, which you still owe a large sum of money on, and the degree hanging on your wall will get you nothing. Those good jobs are gone for good.
Don’t get me wrong, I’m for higher education. However, the sad fact is that when the seventeen-year-old kid next to you can flip burgers better than you can, where do you go from there? Dumbing down America is almost complete. Not too far into the future, only the children of the wealthy will have a higher education. The newly poor will still blame those who are poorer than themselves for their misfortune, because they dare not speak ill of their masters. Make no mistake, there is a class war going on, and so far the wage earner has been losing. Two per-cent of the country own more money than the national debt, and with it they control Congress and most of the churches. Those of you who go to church on Sunday, and sometimes during the week—when was the last time you heard a preacher speak of the sin of money? Jesus spoke of it often.
There is a lot of abuse of our wage system. However, it does not come from the bottom up. Here is an excerpt from an article in the Bloomberg Report, “CEO-to-Worker Pay-Ratio Disclosure Proposed by Divided SEC,” written by Dave Michaels:
CEOs at eight companies, J.C. Penney Co. (JCP), Abercrombie & Fitch Co. (ANF), Simon Property Group Inc. (SPG), Oracle Corp. (ORCL), Starbucks Corp. (SBUX), CBS Corp. (CBS), Ralph Lauren Corp. (RL) and Nike Inc. (NKE), were paid more than 1,000 times the average worker pay in their industries, according to the data. The ratios were based on company disclosures for CEOs and data for rank-and-file workers wages and benefits by industry gathered by the U.S. Bureau of Labor Statistics and the Bureau of Economic Analysis.Here’s another, from the AFL/CIO, which had this to say on the subject:
The CEOs of S&P 500 Index Companies made, on average, 354 times the average wages of rank-and-file U.S. workers in 2012. CEOs in the United States don’t just make a lot more money than their own employees. On average, U.S. CEOs also make far more than CEOs of comparably sized companies in other developed countries. [Go to their web-site and you can] click on each country to compare.The idea that someone who works at a service job is less important, or of less value, does a disservice to every man, woman, and child who goes to work each day. Tomorrow it could be anyone of us flipping that burger. I’m retired and on Social Security, but that doesn’t mean I’m safe. More money is pumped every day into lobbying for the end of entitlements (which for some reason has become a dirty word). Bush came close to destroying Social Security with his plan to privatize it. Next time we may not be so lucky.
The Republicans were playing games every time they voted on the minimum wage. There is no justification for not passing the increase, so they scare the working class into believing that by putting out a helping hand to their fellow workers, they will be causing everything to be priced so high they can’t afford it any longer. This has never happened in the past and it will not happen this time. The price of goods has already surpassed any wage increases. Last year, United States workers made the lowest amount of money since 1998. All this, while the top wage earners saw their salaries soar.
Raising wages has never hurt business or stopped people from buying. In fact, just the opposite is true. Give poor people more money and they will spend it on food, clothes, and other things they need, thereby helping the economy. The two per-cent, on the other hand, will take their tax break and hide the excess in an off-shore bank account.
Let me bring it home for those who still feel that their work is so much more valuable than that of their less fortunate fellow workers. The wages you are paid—or, for that matter, the commissions some are paid—weren’t pulled from thin air. They started at the minimum wage base, which the government sets by law. Most companies have a starting position. This is a minimum-wage, or a little-above-minimum-wage, position. Every salary of every person in that company is based on the lowest-paid employee. This means that the more the employee who puts pickle on buns is paid, the more those above him can make. The minimum wage is the foundation of our economy. Without it, the other boats do not rise, and we will all sink together.
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Copyright © 2014 by Ed Rogers
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THANKS, ED. I LIKE YOUR COLUMN MORE EVERY TIME I READ IT.
ReplyDeleteConcludes the author: "The minimum wage is the foundation of our economy. Without it, the other boats do not rise, and we will all sink together." Read Ed Rogers to learn the reasons he thinks so.
Ed, I so wish we could garner many, many more readers for this column than we have had—to judge by the absence so far of any comments besides my own, anyway....
ReplyDeleteI asked a few friends whether they would comment on Ed's column and/or bring it to the attention of any friends they might have who have opinions on minimum wage policy and might be willing to comment.
DeleteI also asked them to give me their reaction to my request, for I wasn't sure I wasn't being intrusive or impertinent to ask it. Eric Meub gave me permission to post his email reaction:
I can’t imagine you being intrusive or impertinent, although, as James Goldman has Eleanor of Aquitaine say in The Lion in Winter: “Lamb, in a world where carpenters get resurrected, anything is possible.” I guess it’s just highly unlikely.
Bravo Ed!! I agree with you completely. Business America is pathetic in its attitude toward human value in the work force. Australia has a minimum wage higher then $15/hr and it is considered one of the strongest economies in the world right now. And there is more "middle class" here the in most. Also look at the Swiss. Wake up America! Vic
ReplyDeleteThanks Vic. It's hard to believe a country that cares for its middle class hasn't gone broke yet. You think maybe we've been lied to.
DeleteHa! Ya think? I don't care...I'll say - YEP!!
DeleteHere's what Krugman had to say about this recently:
ReplyDeletehttp://www.nytimes.com/2013/02/18/opinion/krugman-raise-that-wage.html
I think there would be some serious problems with a $15 minimum wage. Many businesses would close down if they had to pay that much. There is no guarantee of business booming drastically as more people make more money.
ReplyDeleteThe kicker for me is that if you can make $15 doing the easiest job, why ever go to school? Why ever better yourself at all? Does someone doing a super-easy job really deserve $15 an hour?
One or two people could survive on $15 an hour quite well.
I understand the reasoning that there may be educated people that eventually can't find a job. However, to that I would say, Just be smart. Save your money. Live within your means. Have food storage.
I also understand that some people make way more money than they should based on their contributions to society. However, if what you are doing makes a company a lot of money, then you will be paid a lot of money. It doesn't matter if the skill set is high or not.
First, the $15 figure came from the crap the right wing put out over the airways. The real figure is $10.10. A wage that would have been more in line 10 years ago. When faced with a sick child, or empty icebox a person does have very many means to live by. To store food---you first need the money to buy it. People who are smart enough to go to College and have the money will always pick College over flipping burgers.
DeleteSeems to me that there is a false premise, or in Krugman's term a "zombie" lurking here. What should be under discussion is a "living wage", a standard measuring that your job creates enough income that your family actually could live on it.
ReplyDeleteHistorically the "minimum wage" concept was that the pay an individual got for doing a job met a minimum standard for the industry, and paid the individuals bills; but the reality of today's economy is the distribution of the gains in productivity has skewed farther and farther to the management class, leaving the workers scrambling to just stay in place.
Further complicating the simplicity of setting a "minimum wage", the costs of housing, education, food etc. vary significantly within the state or region, so that a pay scale that is adequate in one town may be barely survivable at the other end of the state. Which means that re-framing the measure, from the minimum that can be paid to what is necessary for a family to actually live comfortably, is the way to actually have an impact on poverty, and to start getting out of the doldrums the US economy have been in since 2007.
The mechanisms to make this change are already in place. Most State County and Municipal governments yearly calculate and establish the "Living Wage" standard as part of their contracting process. And the procedures and measurements involved are commonly published, so that even the most retrograde local government can do the math.
Defining the "minimum" wage as a "Living Wage" is one of three or four steps that can win the "War on Poverty" that LBJ began 50 years ago this week.
Tom says he should have inserted link to Wikipedia article [http://en.wikipedia.org/wiki/Living_wage]
DeleteTom, there never was a chance for a War on Poverty. Since the day the bill was signed into law; it's been a war with the Republican Party who have been waging war on every social program that is on the books. That is the war we have been losing. Bush almost did away with Social Security and nothing can work with no money and the Republicans know that. Without a change in Congress all the good ideas in the world will not help. I believe the Democrats are fighting a delaying battle, in hopes the American people will come to their senses. I don't hold much hope of that happening.
DeleteTrue. The current Congressional Democrats often seem to me to resemble Franco's "Fifth Column". So that's the first problem to confront, then we can accomplish something.
DeleteTom, you commented that instituting living wage rather than minimum wage is but one of three or four steps that could help the country ensure that we eradicate poverty. Could you identify those other steps and outline how all the steps together lead to the desired outcome? Thanks!
DeleteEd Rogers has made some excellent points. I thoroughly agree that we need to raise the minimum wage in this country. The standard conservative argument against raising the minimum wage has been that it will result in the loss of jobs because the price of goods will have to be raised to accommodate it and fewer persons will be able to buy those goods. This argument had some surface plausibility when our economy produced all sorts of goods manufactured in the USA. Instead, thanks to the success of "take-over" capitalism, perfectly solvent companies have been taken over through various strategies (nearly all of which burdened the company taken over with huge debt). A good portion of that debt went to line the pockets of the groups that engineered the takeover. Then, to keep the company alive, its assets are sold and the manufacturing contracted out to low-wage third world companies, who then sell the same items (probably not as well made) back to the American consumer. The American consumer, believing that shopping at Walmart is wonderful because its prices are so low, buys there. Smaller retailers are forced out of business.
ReplyDeleteThis same story is repeated in all sorts of American businesses, including food. Tyson, one of the largest meat suppliers in the country, is now setting up chicken growing and processing plants in China, supposedly in the name of giving us higher quality goods! Tyson, of course, can't stand even the flabby efforts of the USDA to protect the consuming public. No such problem in third world countries, and just think how bribes are the mother's milk of life in those places. The meat will then pass into the fast food industries, which Americans think are wonderful because they have cheap prices and one doesn't have to put in an effort to prepare the food.
The above scenario has resulted in an actual deflation in the cost of goods in this country. Unfortunately, even at deflated prices for second rate stuff the number of persons who can afford to purchase them gets smaller because the number of decent paying jobs decreases. Will McDonalds, Walmart, Del Taco, Pizza Hut, etc. go out of business because they are forced to pay higher minimum wages? No!
Moreover, if Congress had the will to do it, we would put duties on every imported item that comes from countries that permit payment of workers less than a living wage. If that were to happen, you would see a growth in employment here and a growth in wages. Raising the minimum wage would actually make it impossible for these companies to profit as much as they do from their economic styles and we would all benefit from that.
William I agree 100%
ReplyDeletePart 1 of 3
ReplyDeleteAs an economic conservative, I have never been particularly enthused about minimum wage legislation. In theory, this legislation should have the impact of decreasing the number of jobs. In practice, however, minimum wage legislation has had a very limited effect on the number of jobs. I think there are two reasons for this.
One is that minimum wage legislation has been set at such a low level that the statutory minimum is lower than the economic minimum in many areas and increases in the same generally get it back to the same level, adjusted for inflation, that it had been at one point in the past. (Of course, that means that raising the statutory minimum will have only a limited impact on real wage rates.)
Second, at this point in time minimum wages are paid primarily to employees in the service area. There is little ability to replace workers at McDonalds or Walmart’s with capital equipment or to offshore their jobs. Accordingly, raising the minimum wage at this point in time will not really impact the number of jobs in those areas because the competitors of all of these companies will have to raise their wage rates to comply. I do not see any great economic catastrophe (or any great economic benefit) if the minimum wage is raised to $10.00 per hour.
Part 2 of 3
DeleteOf course, raising the minimum wage will presumably increase prices for McDonald’s hamburgers.There is no free lunch.
Now, I think the better approach to the problem of the working poor is
(1) creation of a single payer national health insurance program such as Medicare applicable to the whole population and
(2) the negative income tax program originated in the Nixon administration, which is based on the principle that everyone is this country has an obligation to work and that everyone who works is entitled to a decent income.
Obviously, such programs can and have been subject to abuse, but it is the responsibility of competent administration (something that this country has not had since the election of Obama, who does understand what happens in his own administration or what he is saying to the American public) to limit fraud to the greatest extent possible, and it is up to the court systems to impose sufficiently severe penalties on those who are defrauding the system to discourage future fraud.
One major approach to saving money in the government is to have a strong negative income tax system and to eliminate all other special programs such as food stamps, energy relief, Obama-phones (which are given to the poor because otherwise, allegedly, they will not be able to call for help—something that is so ridiculous one would think it was a joke). These special programs provide employment for a lot of middle class bureaucrats but serve no other purpose if we have a strong enough negative income tax program. The idea of piecing out various benefit programs is fundamentally unsound since we should be looking at income and needs on a total rather than piecemeal basis.
Part 3 of 3
DeleteI should point out that my sympathy is for the working poor. I represent under the auspices of Neighborhood Legal Services a number of individuals who have been terminated by employees for alleged “willful misconduct.” Almost all of these individuals were employed at or slightly above the minimum wage. Some of them are discharged for reasons that I would never have discharged employees at U.S. Steel. Others are discharged for poor performance (which often does not constitute “willful misconduct” for the purposes of the unemployment compensation laws and does not disqualify them for unemployment compensation). I am puzzled by the willingness of employers to discharge for relatively minor offenses workers who have worked on poor paying jobs for years, given the fact that the employers will probably get worse employees in exchange.
I would like to see legislation that would further unionization of these employees—not that I am a great advocate of unions, having spent my career at U.S. Steel fighting the USWA—but I believe that the greatest benefit of unions is not in raising wages but in protecting employees from arbitrary action.
However, I must point out that in addition to the working poor there is the non-working proletariat. One of my nieces “teaches” in a Job Corps center where almost all of the trainees are black teenagers who are unwilling to pay any attention in class because they are spending most of their time on Obama-phones. The essential problem with liberals is that they are not willing to deal with the proletariat, and the essential problem of conservatives is that they are not willing to deal with the working poor.
As a side note, I think we should eliminate the unemployment rate and use as measuring grounds the following:
(1) labor-force participation rate based on employees working 35 or more hours a week and
(2) labor force participation rate of employees working less than 35 hours per week other than for voluntary reasons.
Using the unemployment rate as currently constituted is misleading because it does not reflect those who have dropped out of the work force due to discouragement and does not measure those who are working less than full time for other than voluntary reasons.
In general, I think increases in the minimum wage have historically just brought it up to a point where inflation would have increased it, so it has had little impact on prices and investments. But if the increase is more than that, it can force employers to use less labor and more capital in meeting the demands of their customers. Many companies that pay minimum wage exist in very competitive industries and have low profit margins so they have limited power to raise prices and pass on the increase in labor cost to their customers. Also, we tend to underestimate the ability of technology and automation to displace workers in labor intensive industries. It doesn't happen right away, but it does happen, and that means that a significant increase in minimum wage will, in time, displace workers. So, on balance, I am not a supporter of using the minimum wage to address poverty. I think the better alternative is to increase the earned income tax credit or to offer a wage supplement through tax credits. Changes like this spare employers from having to make the labor displacing changes that I have mentioned above.
ReplyDeleteThe idea of a minimum wage is that it is the lowest paid job in the USA. It was never intended to fight poverty. What has happened is the wages have fallen so far behind the cost of living that these workers are now called the working poor. As for companies being competitive, they all have to pay the same wage so it will have no effect. And, businesses have and will always look for ways to replace works with machines. The wages they pay--no matter how small, will still be to high when compared to a machine.
ReplyDeleteI find it strange that so much worry goes into minimum wage and there is but a ripple about the CEO's pay. Why is it always the workers, who must shoulder the blame. They don't run the business, nor set prices. They are not the ones who sigh the trade deals that ship jobs overseas. But, if the economy goes into the toilet all arrows point downward. No one working for minimum wage, should have to be on food stamps. Our soldiers should not have to be on food stamps. That however is not the case. While congress protects the wealth of a few, the workers are told to eat cake.
I would agree that CEO compensation is indefensible and needs to be trimmed, but I don't want to suggest that this is not occurring now. It is, according to stories that I read occasionally in the NYTimes or the Wall Street Journal.Shareholders, government regulators, and corporate boards are all pushing to see this happen, and I think they are having some success.
ReplyDeleteAs to the minimum discussion, I would like us to consider that labor-saving technology and capital are having a profound impact on available jobs today and I don't see that turning around. Also, the pressure of foreign competition is keeping a lid on wages generally and particularly in the USA where wage levels have been high historically (even the minimum wage in comparison with so many third world countries).
So, the ability to raise the minimum wage is limited today. And while I agree that business always has an incentive to consider investments in labor-saving capital and equipment, increases in the cost of labor spurs that on and accelerates the pace of making those investments.
Finally, as to the reference to using a negative income tax (NIT) as an alternative to increasing the minimum wage, I would note that the Earned Income Tax Credit today is a version of the NIT. By expanding its eligibility and its generosity, we would move closer to having an NIT as originally envisioned.
Your readers might be interested in knowing that the first economist in this country to espouse using the NIT to alleviate poverty was Milton Friedman in 1962 (Capitalism and Freedom), proving that conservatives and liberals might someday find common ground.
It does appear to me that the task of bringing CEO's pay in line with their true worth is something that will not come about in the near future. It was the same boards that approved these high paying job to begin with. No one likes to admit they were wrong.
ReplyDeleteI have questions about how many homeless families, how much crime, how many children must die, before we stop the debate and do something to help those who cannot, and have no voice, to help themselves.
I hear fine ideas within these comments, but I see no will in congress to change anything. The only will is to destroy the old lifeboat, without providing a new one. There were Republicans at one time who believed in the common good. Where are they today? Without them the USA will revert back to a system of robber barons. We are one trade agreement away from chopping off our heads. Then the world will truly be equal, as we become the largest third world country.
Am I overstating this? I hope so, nothing would make me happier than to be wrong.
Ed, I want to thank you for your fine and illuminating article, and I want to also thank the readers who responded with comments. I have learned a great deal about this issue, thanks to all of your contributions. I am struck by the parallels with other periods of history, most notably the mid-nineteenth century, since I am preparing an article for Third Monday Musings on Matthew Arnold. That period saw the very beginnings of the enfranchisement of the English working poor, which the arsitocracy (I get Joycean at times) fought, almost to a man, at every tiny gain. To read their rationales today would tax any sane person's credulity. Let us hope the arguments of our current aristocracy meet the same fate. Well done Ed!
ReplyDeleteLook forward to reading your article, Eric. Thanks for joining in.
ReplyDelete