December 11, 2013

Wage Wars

By a show of hands, how many of you are conflicted about the latest wage wars?  I'm not talking about CEO pay compared to employee pay, I'm talking about the minimum wage protests that are occurring at Walmarts and fast food restaurants across the country. Bueller? Anyone?

I readily raise my hand on this one.

In case you missed it, protests were organized last week by the Service Employees International Union (SEIU) and other labor groups. Much of the effort has been pushed towards this magical $15 hourly federal minimum wage, the thinking being that at that level, a person is making a living wage - over $31,000 annually for a full time job, compared to about half that at today's minimum.

Am I the only one that doesn't agree with the assumption (presumption?) that minimum wage earners are predominantly full time workers who need to make a 'living wage' in order to support themselves and their families?

Well, no. According to Bureau of Labor Statistics for 2012, here are your minimum wage employees:

  • workers under age 25 make up about half of all minimum-wage workers
  • about 21% of teenagers and about 5% of whites, blacks, and Hispanics who are paid hourly earn the federal minimum wage or less (which is legal in certain situations). 
  • part-time workers are much more likely to earn minimum wages than are full-timers, and 
  • so are never married people, and those without high school diplomas.

But, again according to the BLS data, the percentage of all hourly-paid workers who earn minimum wage in 2012 was 4.7%, down from 5.2% in 2011; these are nowhere near the high percentages that were seen back in the 1970's. (And, not for nothing, at least at one of the events in my neck of the woods, the protesters were not current minimum wage workers, but looked rather more like aging liberals who conceivably could have worked for minimum wage back in the day when that percentage was way up there.)

Another reason I'm conflicted is I don't understand how we can double the minimum wage without making corresponding changes in the wages paid to everyone else.  Here's an example from the local job listings; many of them don't include salary info, but I did find this ad which did:
Location: Syracuse NY Hourly $11 - $15 
Always seeking candidates with experience in Accounts Payable, Accounts Receivable, Bookkeeping, Reconciliation and Payroll. Qualified candidates must have 2+ years of experience. Strong attention to detail, great organizational skills, computer proficiency including strong data entry skills and MS Word and Excel. Knowledge of specific accounting software a plus (QuickBooks, etc.). Pay DOE and level of skills. 
So, pretend you're working at the high end of the range in that ad, making $15 per hour with a corresponding set of skills/education/training, and suddenly you're on equal footing with a minimum wage worker.  If the work you were doing yesterday was worth about twice minimum wage, wouldn't it be worth about twice minimum wage today and tomorrow and the next day, even if some unions protested and politicians listened and randomly decided to double the minimum wage? Wouldn't you expect your employer to double your wage?

And wouldn't the same be true for the wages of the person earning $18 per hour? $20 per hour? $45 per hour? I don't think it really matters what the non-minimum wage salary is, it's hard not to think it should be doubled if the minimum wage is doubled. It's also hard not to think what it would do to our economy if suddenly wages doubled and prices went up accordingly to support them.

Another concern  -- call me crazy -- is that I don't trust politicians to make a change and do it logically. Why?  Well, let's look at New York, my home state. The minimum wage here will increase to $8 for 2014, and then move to $8.75 for 2015, and finally to $9 for 2016.  Sounds good, right?

Not so fast, my friends, not so fast. This is New York, after all.

To make the wage requirement more palatable to businesses, there's a 'minimum wage reimbursement credit' that we taxpayers will have to pay, in order to allow businesses to offer the higher base wages. From the Bloomberg Businessweek article:
Employers would be compensated at a rate of 75 cents an hour per employee when the minimum wage rises to $8 beginning next year, an election year.  Employers would get $1.31 an hour for workers paid minimum wage when it rises to $8.75 in 2015. When the minimum wage raises to $9 in 2016, employers would be subsidized $1.35 an hour for three years. 
So, to recap:  the NY State legislature, with the support of our Sonofa Governor Andrew Cuomo, increased the minimum wage but are making regular Janes and Joes pay for it, not just in the reimbursement credit, as they so delicately call it, but almost certainly in the higher prices that goods and services will cost once the minimum wage goes up. Do you wonder why I'm cynical? And conflicted?

Do I believe the minimum wage should be increased? Sure. The benefits, including the potential for folks to get out of safety net programs and instead be more economically productive members of society, are probably worth it.  And after all, if we are wiling increase other programs on a fairly regular basis (Social Security, for example, has an inflation multiplier), we should be willing to have regular, reasonable increases in the minimum wage.

Oh -- one more thing: there is no requirement for businesses to pay only the minimum wage. They are free to pay hourly employees what they like as long as it's at least the applicable federal minimum or state minimum, whichever is higher. Some businesses do, some don't, but ultimately they have the choice - and they'll likely base that choice on a combination of their business needs, their social compass, and our buying habits.

Maybe we should think about that the next time we the pull into a drive-through to grab something off the dollar menu.

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