Civilization, Whither Art Thou

Inconsistencies in Arguments Concerning Minimum Wage

Minimum wage has been in the news quite a bit and also has been discussed here on CWAT.  I saw an article talking about minimum wage again and because of that I began looking around today for some numbers on how many low-wage hourly employees there are working in the US today.  I never found the answer, but the number must be something big; more importantly, however, the search took me down a different road (as the internet often does to us).  I kept finding articles from all sorts of sites from blogs to Forbes about the issues with raising minimum wage.  But there were always odd inconsistencies.  Let's look at a few.

In this article from Forbes inconsistencies abound.  For one thing, Forbes first just cited this guy Arnobio Morelix who they claim is a business student at KU.  Who cites a student?  Forbes is supposed to be this huge giant in finance and they cite a student?  I thought that big guys like Forbes, CNN, and the like cite experts.  Well then they retract the part of the article where they use Morelix's data and add to it some "feedback" they received from professors.  So what did Morelix say?  He claimed that to make up for the 8 billion dollar increase in payroll that the BigMac would have to go from $3.99 to $4.67.  But wait, was this assuming that the only thing that changed was the price of the food?  It appears to be that way.  Well that's just asinine, I'm sure those professors straightened it all out...

It turns out that all those other guys said some pretty wacky stuff as well.  Forbes cites Tim Worstall in claiming that the price of the BigMac wouldn't change.  But they then completely miss the point of Worstall's article.  They (and let's be clear here "they" is Clare O'Connor who works for Forbes) say that the way the price wouldn't change is by reducing labor costs by increasing automation or decreasing hours and cutting jobs.  But this just can't be the case and in fact it isn't what Worstall says!  In fact, the point is that it costs pennies for McDonald's to produce that soda for you.  They charge you, as Worstall says, as much as they can get away with.  Wendy's, Taco Bell, Burger King, etc. all keep the price down by providing competition.  So why would the BigMac price go up if they were still in the black?  It wouldn't.

Then there's this crazy comment by Dr. Bittlingmayer about how the fact that all these employees are protesting their low wages is just a sign of a failure of our education system.  Now this one is the craziest.  I mean what Bittlingmayer says is probably the most absurd thing I've ever heard.  There are roughly 246 million working adults in this country, according the the U.S. Bureau of Labor and Statistics.  Now, if you go into Walmart, Target, King Soopers, HEB, McDonald's, Taco Bell, or any other low-wage hourly employer you will find mostly adults working there.  According to Bittlingmayer if education was working, somehow, miraculously all these adults would be wearing suits working at amazing jobs.  You should have your PhD taken away Bittlingmayer.  The education system in this country sucks, but that's not why millions of Americans are working low-wage hourly jobs.  They are working low-wage hourly jobs because that's all there is. 

Now you may say wait a minute, that was a little harsh, maybe Bittlingmayer has a point.  Perhaps if education was improved in the country then there would be less adults working low-wage hourly jobs.  Well I just don't see that.  For instance, let's look at jobs in the biological sciences.  The model today for universities is to hire as few full-time faculty as possible while hiring as many adjunct and part-time professors as they can.  The fastest growing sector of academia is in fact part-time professors and adjuncts.  These non-full-time faculty make at least a third less than full-time faculty for the same amount of work and are not given any benefits.  In Colorado around 65-70% of all classes are taught by part-time or adjunct faculty.  What about research?  It used to be that a PhD in the biological sciences did a year or two as a post-doctoral fellow and then found a tenure track position at a university.  Today, post-docs work for on average 7 years before finding another job.  These post-docs are considered in many aspects "students" or "contract labor" and are denied many of the benefits of full-time workers.  What about in industry?  Well the model there is to hire one PhD who manages a bunch of workers with a Bachelor's degree.  This is the same model that is seen today in health care where one MD is hired to manage many nurse practitioners or physician assistants.  In truth, there are only enough jobs in the biological sciences for 1 in every 20 PhD's to have a job in the biological sciences.  The other 19 need to find something else to do.  All this data comes from government agencies.

So what Bittlingmayer?  If we could get all those McDonald's employees educated we would solve the problem?  We already don't have enough jobs for the educated people we have!!!  How would his proposal work?  It doesn't.  His comments are so out of touch with reality as to make someone wonder if he is senile or just an idiot.  Someone has to work at McDonald's if McDonald's is to stay in business.  They employ around 800,000 Americans and Walmart employs over a million Americans.  If we add up all the other low-wage hourly jobs we get a huge number.  Millions and millions and millions of jobs.  Sears, Macy's, Dillard's, Penny's, The Foot Locker, and in fact all those stores in the mall; McDonald's, Taco Bell, Burger King, Wendy's, Arby's, and all the other fast food chains; Walmart, Target, KMart, Sams Club, Costco, and all the other warehouse discount stores; and the list goes on.  All those jobs are low-wage hourly jobs.  As an ex-Barnes and Noble employee I can tell you that when I left in 2007 an employee working on the floor was given a 25 cent raise every year.  They started their employees right at minimum wage when I was hired.  So it would take you 14 years to be able to reasonable be expected to make a salary over $20,000 a year.

Here's the math.  You start at $8/hour here in Colorado (which is above the federal minimum wage).  That year you make around $14,000 a year working full-time (35 hours a week for 50 weeks a year).  After 5 years you are making $9.25/hour; and that year you make about $16,000.  After 14 years you are making $11.50/hour; and you make just above $20,000 that year.  Now, if you meet a woman and have a kid at some point in that 14 years then you are almost certainly living in poverty unless mom works, too.  Again, someone has to work the floor at Barnes and Noble for these types of stores to exist.  Barnes and Noble didn't have many teenage workers.  It felt to me as if the average age of the worker was around 30 years old.  Most employees had been there for 5 years or more.  This idea that all these low-wage hourly jobs are supposed to be for teenagers is ludicrous.  It sounds like some sort of lie that some intrepid political propagandist came up with years ago.  Pay attention the next time you go into one of these stores and look around.  Count the number of teenagers (high school or college age kids) working at the store and compare that to the adults.  And remember, the managers, the ones who in the propaganda model make good money and manage the kids, are only making a dollar or two more an hour than the teenagers.  

It seems we are asking all the wrong questions.  The question we should be asking is how are these companies doing and where is the money going?  The truth is, it's going to the CEOs, the shareholders, and the other individuals at the top.  The Walmart CEO made 20 million dollars last year.  I haven't worked at Walmart, but I am guessing that it's pay and raise model is similar to that of B&N.  So I did a tiny bit of math using Excel.  Let's start by taking a new hire at B&N and giving him the Colorado minimum wage of $8/hour.  Then let's say he works there for 30 years at the standard 25 cent raise per year.  Well if we add up all the money he made in that 30 years (all of it, prior to taxes, so gross earnings) that individual makes a lifetime gross earnings of $610,312.50.  Now, if that employee had a kid, and that kid started at B&N at $8/hour and worked for 30 years and then made a lifetime gross earnings of $610,312.50 then together they would have made 1.2 million dollars.  Woohoo.  So this means that it would take 33 generations for this family to make the annual salary of the boss.  Think that's high, think my math is off?  Check it yourself.  And if you think that you would even be allowed to work 40 hours a week for 52 weeks a year you're out of your mind.  I never got 40 hours a week even if I was scheduled for 40 hours.  The managers sent people home if it was slow and hours were cut.

That's where the money is going.  The model is simple.  Charge the consumer as much as possible and pay the employees as little as possible.  It makes sense from a capitalistic standpoint; but not from an ethical standpoint.  This point that I just made about the discrepancy between boss and worker is out there in the news and blogosphere; but it wasn't made anywhere in the Forbes article.  If Worstall is right, and McDonald's wants to stay competitive with its competitors then perhaps the McDonald's CEO will just have to make less money.  Frankly, the CEO isn't the one degreasing the equipment, serving customers, cleaning the bathroom, or anything else that makes a McDonald's run (at least at the local level).  The CEO needs the hourly worker or else there isn't a McDonald's.  But the manner in which the pay works you'd think that the CEO is some sort of magical fairy that somehow unlocks the doors to all the McDonald's, cleans every store, and personally hand delivers each burger to every customer.  The only reason that this model isn't a complete failure is that somehow all these corporations keep getting away with it.  We, the common American people, keep making less and less money, and then we, the common American people, keep shopping at the same corporations who keep giving us less and less money.  And the cycle continues.