The Minimum Wage Debate – My 2 Cents

I have read many posts and articles on both sides of the $15 per hour minimum wage debate. Often, the comments sections devolve into accusations, inaccuracies, or downright hate-speak. I have also watched as politicians on both sides stake out positions most appealing to their base. Like with many issues, the politicians are free to espouse any position that is politically convenient knowing the issue is never really going to come to a true debate. If the minimum wage does increase, it will do so only one way: The Republicans will want to pass something so unpalatable to the Democrats that it would otherwise be dead on arrival. The Democrats, knowing Republicans would never vote to increase the minimum wage, agree to find the votes needed for passage of whatever monstrosity Republicans are proposing IF Republicans include a minimum wage hike? And they will protect each other by doing so.  Representatives in districts where casting a ‘yes’ vote on the bill would be toxic (or in tough re-election races, or facing a primary challenger) will be permitted to vote ‘no’. The bill will pass on the strength of those in secure seats who can safely tout what they ‘got’ instead of what they ‘gave up’ and their constituents will eat it up.

I support higher wages, and raising the minimum wage is a good place to start, but here is where things get tricky for me:

Let’s look at a typical chain hotel. When we increase the wage of the hotel housekeeper to $15 per hour (and I think we can agree that while training on standards expected and customer service is required, this is a fairly unskilled task), how much do we then increase the wage of the maintenance workers at that hotel? Most make in the $12-$15 per hour range now for a job requiring skills and often certifications (HVAC, Pool). Do they get a raise to $20, or do they now make the same as the unskilled housekeeper? What of the desk attendant, or the manager? Often times these days those positions require a college degree, yet seldom do they pay much more than $20 per hour.

Can we actually pay the dishwasher at our local restaurant $15 per hour? If so, how much do we need to pay the hostess? And if they are both making $15 per hour, other than at very peak times, the guaranteed $15 per hour of the dishwasher and hostess now becomes a better wage than what the bartenders and wait staff are earning.

When I look at the economics of it, I sadly must disagree with an across the board hike to $15 per hour in the minimum wage.

If one goes back to when I was a teen working at McDonald’s in 1980, the minimum wage was $3.35. That $3.35 in 1980 has the same ‘buying power’ at $9.85 does in 2016. So yes, those making the current minimum wage of $7.25 are not getting anything close to fair value for their work. Specifically, they are getting shortchanged by just over 25%. But using that math, a raise in the minimum wage to $10 per hour is much closer to maintaining the same standard as a generation ago than $15 per hour.

Among industrialized countries in the world, only Australia has a minimum wage that would be at $15 per hour or higher when converted to US$. And most industrialized nations do not have the safety nets we provide in America. Yes, it seems backwards that businesses (WalMart is mentioned most often) pay their employees only $7.25 per hour and then taxpayers provide healthcare and food subsidies and Earned Income tax credits to make that $7.25 a ‘livable wage’. But unless we are going to continue providing massive subsidies to low-wage workers after any hypothetical increase to $15 per hour, taking them from $7.25 per hour with medical/housing/food assistance to $15 per hour without any such assistance would likely be a lateral move or a step back for many.

The issue is not just wages. The bigger issue is skill set. That is where we need to make changes.

When a child attends a failing school with underpaid and overworked teachers and a lack of adequate resources (up to date textbooks, internet access, nutritious meals), they are destined to fail and are likely to be in a position to only ever able to get minimum wage work and needing subsidies from the government. Or they end up in prison. Either way, in the long run we as a society end up spending way more of our tax dollars for having them fail than we would have to ensure they succeeded. That needs to change. Simply throwing higher wages at unskilled workers without fixing the root causes of their poverty (and inability to obtain a better-paying job) will just put us right back in the same situation a generation from now. As a side note, this is the most likely scenario. Our elected officials have become masters of kicking the can down the road instead of actually addressing issues.

We need to find ways to bring back manufacturing to America. Sure, it is never going to be $50 per hour like it was in the glory days of ‘Generous Motors’, and it likely will not be union, but if we can find a way to be cost-competitive AND pay wages of $20 per hour or more, we can begin rebuilding at least the lower end of the middle class.

We need to figure out how to do college as something other than a profit generator. My mother graduated high school in 1954. Statistically, less than 10% of her high school classmates went on to college. I graduated in 1984. I would estimate less than 40% of my graduating class went on to college. By 2014, that number approached 66%. I spent a decade working at universities all around our country (in the student housing business) and I can assure you, the caliber of student has absolutely NOT improved since 1954 or 1984. If a student graduates and does not go to college, it is typically for one of these reasons: they choose military service; they are unable to afford it; they are going into a trade or family business; they are having or needing to support a baby. Otherwise, it seems attending college is simply a continuation of high school for most. It is done without even thinking it is an option. Formal education ended for most after 8th grade a century ago, but society gradually evolved to include high school as a standard rung on the education ladder. That ladder has now added college as the required next step. Some of these students attending college operate at around an 8th or 9th grade level. They needed to be left back a few times to catch up, but instead they are accepted to college? How many do you think fail out before they get to 50 credits? How much student loan debt do they accumulate? But what choice is there? When one needs a college degree to work the rental car desk at Enterprise, or the front desk at the Marriott, or to manage the lingerie department at Macy’s, either one goes to college or one makes minimum wage. Sadly, when students graduate (IF they graduate) with $50,000 or more in student loan debt, they would almost have been better off taking the lower paying job without a degree.

We are not even educating children in most colleges to have skills they need to perform a job. We are simply delaying their entry into the job market by 4-6 years. What does one learn in college that teaches the specifics required by a job or an employer? But because seemingly everyone applying for work has a college degree these days, any employer can demand a degree no matter how menial the position they are seeking to fill. That forces everyone to try for a degree, thus feeding the monster. College is fast becoming the military-industrial complex of our children’s generation.

We need to provide safe and reliable housing. We need to see no one goes to bed hungry. This is America, damn it. We can spend $35 billion on an aircraft carrier yet our children go to bed hungry?

That said, Americans need to decide what we want and what we are willing to pay for? Last year we purchased a 55” TV for the family room on sale at Best Buy, made in China. How much more would it have cost me if China paid a ‘living wage’ by American standards? Or if China had OSHA? Or Worker’s Compensation insurance? Or health care? Or Sarbanes-Oxley? The issue is not trade agreements. The issue is other countries are not held to the standards we hold ourselves to here in America. We do not manufacture a single TV brand in America anymore, not ONE. It has nothing to do with quality or craftsmanship or the American worker. It just gets to the point where Magnavox or Zenith can buy a TV from a Chinese (or Japanese, or Mexican) manufacturer, put THEIR name plate on it, and still sell it at a significantly higher profit than if they made it in American themselves. But as noted, as Americans we have to decide what we want and are willing to pay for? People bemoan the trade deals that have cost so many American manufacturing jobs. Yet that TV we paid $699 for would have been $1,000 back when it was made in America. That is what all the Trump fanatics who demand tariffs and sanctions do not see. Yes, 2,500 Americans who once made TVs here in America have lost their jobs as the globalization of trade took over. But more than 300 million Americans now buy their TVs at 30% off what they used to cost. When you add up the economic saving based on the 37 million TV sold in America last year alone, that is just over $11 billion dollars Americans had to spend on other things because they saved that money buying TVs. That far outweighs the cost of the lost jobs. The biggest issue is that sooner or later, so many people lose jobs across so many industries that the market for goods dries up no matter how inexpensive the product might be.

Lastly, what is this ‘living wage’ everyone keeps throwing around? My family and I live on an acre of rural bluegrass in Kentucky. What we paid for the house and land would not buy one a single-car garage in San Francisco or a one-bedroom flat in New York City. Can we truly have a national minimum wage with these economic disparities? Can we truly have a standard for a ‘livable wage’?

Do people have to earn enough to have an i-Phone for it to be a ‘livable wage’ or is earning enough for a prepaid flip phone OK as long as one still has a phone? Is Wi-Fi a must?

How about vacations? When I was a kid, we went to the Jersey shore one week each summer, and maybe a weekend trip to the Pocono mountains in the spring and fall. And I do not think my brother and I missed out on anything. Last year, my family went on two cruises, took too many weekend trips to count, and this month we are off to Europe for two weeks. When seeking a ‘livable wage’, does it matter that the definition of a ‘vacation’ when I was a child is nothing like today? I worked with a guy a few years who, once per year, took his family on ‘vacation’ to a fairly inexpensive hotel in our town. They got to use the pool every day, had great free breakfasts at the hotel, and would go out for dinner (even if usually fast food). But the rest of the year, they barely made ends meet. There was no eating out, no outside entertainment. For his family, that pool and the treats of eating out were the best week of the entire year. So I ask again, if a ‘living wage’ should be enough to provide a vacation, what are we talking about when we say ‘vacation’? Is it Disney World where a family could easily burn through $500 per day, or is it a close-to-home treat that likely costs $500 for the week?

Growing up in the city, my grandparents never had cars. They walked or took the bus or the trolley or they carpooled. How many people do you know today that have more cars than there are drivers in the house? Maybe those I know are an exception, but it is almost everyone I know.

So what are we using to define ‘livable’? Is it simply having a safe roof over one’s head and enough to eat? Is it having cool clothes like the other kids? Is it having electronics? Which brings up a whole new question: with smartphones now so integrated into everyday life, where does one draw the line when considering what is a necessity and what is a luxury?

We need to fix things with our economy and our way of valuing who does the actual work and who deserves the rewards. We need to reset the playing field. We need to find a way to pay workers (who actually do the work) more and the executives/profiteers who profit from the worker’s output less. But that requires a sea change in thinking.

How many CEOs did McDonald’s go through in the last decade? More than a half dozen by my count. All made millions. Some tens of millions. All, to one degree or another, failed. Several failed so miserably they could be labeled ‘incompetent’. This happened because McDonald’s, like so much of corporate America, thought there was a magic bullet to solve problems they created for themselves over decades of terrible decisions, and that if they paid ONE GUY enough, he could fix everything. News Flash: the dirty stores, the botched orders, the unfriendly staff who are treated horribly AND underpaid…those are why the stores were failing. So unless the next boy-genius they promoted to CEO was going to pick up a rag and get cleaning, or man a cash register or grill, nothing was going to get better. Now, according to those at McDonald’s opposing the minimum wage hike to $15 per hour, they would need to raise the price of a Big Mac by $1.00 to give the cashier that big a raise? Even with Big Macs at a ridiculous $3.99 now in my area (I see searching online they are even more elsewhere), a doubling of wages from $7.25 to $15.00 would result in only a .60 cent or so increase in the cost of the Big Mac if labor represented 15% of operating costs. And when using the same Consumer Price Index applied above to wages, the Big Mac that cost .95 cents in 1980 should cost $2.73 today. So right now, McDonald’s (and others, not trying to single them out, they are just the easiest to find data for) are reaping higher profits than their success should reward due to the minimum wage failing to keep up with inflation. And they are reaping higher profits than their success should reward due to the price of their signature burger (and I am sure, many other menu items) outpacing inflation by 32%. They have also automated where feasible, and eliminated roles like dining room attendants, so they are operating with far fewer employees than in 1980. Yet if they have to pay even $10 per hour as a standard, they are already making it clear it will be customers who take the hit for those wages with significantly higher prices, or employees who take the hit with reductions in hours or with automation replacing them altogether, and not the executives, franchisees, or shareholders that will be taking the financial hit?

We can provide a ‘living wage’ in America without resorting to Socialism or a ‘Rich vs. Poor’ civil war. Corporations are not inherently evil. Corporations exist to make profits. The trade-off for those profits SHOULD be taxes. Everyone should pay their fair share. Through bribes (and really, let’s call lobbying what it really is), our politicians have manipulated the tax code to ensure that many corporations reaping hundreds of billions in profits pay no corporate income tax. That is not to say they do not pay taxes. The have employees and payroll taxes. They have locations and property taxes. They sell goods which generate sales taxes. They are not freeloaders, but that is a long way from paying their fair share.

We need universal health care. This should not even be a question. We need to figure out how to afford it and how to implement it and get it done. Most of the industrialized world has already done it, so we must find out where the roadblocks are and eliminate them. Maybe that means tort reform? Maybe that means caps on prescription costs? Maybe that means taking the responsibility away from employers? Between Medicaid, Medicare, the Veterans Administration, and healthcare for federal employees, more people in America get their health insurance from the federal government than from any other source. Yet our elected officials have repeatedly refused to use that leverage to make demands. And that says it all. That takes it right back to the beginning, to the question of raising the minimum wage. Sure, the politicians will get around to it eventually, when it is a convenient bargaining chip for them. And sure, they will pass something like an increase to $10 per hour, which will start falling behind as early as next year. It is all about the money. Rich people have it. Corporations have it. Poor people do not. The laws get written the way the money pays for them to be written. And even after 35 years of this nonsense, look at the tax plans put forth by Ted Cruz, by Donald Trump, by Paul Ryan: Massive tax cuts for the wealthiest Americans accompanied by massive tax cuts for corporations with a side order of massive tax cuts on passive income like investment gains and inheritance. Where would all that money come from? Thin air, of course, just put it on our tab. But to make it look like they are actually paying for some of it out of ‘saving money’ they will cut welfare, food assistance, Earned Income Tax credits, education funding, pensions, the EPA, OSHA, Obamacare, National Parks, anything that corporations and the extremely wealthy do not personally use or find at odds with their attempts to make bigger profits.

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