The $15 minimum wage will not hurt small business because:
The initiative specifically excluded
small businesses. Hotels with fewer than 100 rooms don’t count. Businesses with
fewer than 50 non-managerial employees don’t count. This may lead to dozens of
workers being promoted to “management” to avoid the requirement, but we’ll have
to wait and see if that inclusion worked.
So if an employee works for one of the excluded businesses which only
pays the current minimum wage but he could go across the street and get $15.00, why would
he choose to stay with his current employer? It seems as if this new wage law may create conditions under which it it much more difficult to keep employees unless the business owner
changes his payroll practices to meet the new demand created by this wage law.
This is not something radical beacuse as the article says:
This is not an experiment. 120 municipalities have enacted living wage laws, and it this sort of airport-only law has already been done with success in other airports up and down the west coast. Los Angeles has a minimum wage of 15.76$.
San Jose has a minimum wage of $15.07. San Diego has a minimum wage of $13.99. Oakland has a minimum wage of $13.45. San Francisco has a minimum wage of $10.55. Even the rate at Vancouver, BC’s airport is a mandatory minimum of $10.25 (CAN, $9.69 USD) but it includes full national healthcare.
The
fact that this new minimum wage law is isolated to the area surrounding the
airport may be its one saving grace. The negative effects of the higher minimum
wages can be minimized by the fact that most people don’t do their shopping at
the airport. We will see.
This will not cause businesses to leave the city because:
UT San Diego ran a story showing that businesses [are] not dying in spite of living wage. As long as you’ve got customers, and they can afford your product, you stay in business. Slightly higher wages for a handful plus more disposible income equals no net loss, it just means fewer of those working full time are able to collect food stamps and subsidies.
It is correct to say that IF
customers can afford the new prices caused by the new wage law, then a business
does not have to die. Try to remember where the funds to pay for the wages come
from. Those costs are not suffered by the business owner. Any increase in the
expense to run a business is suffered by the providers of funds to a business,
which is its’ customers. So you could argue that the increase in wages provides
the ability to pay higher prices, however, if that is your argument you are
suggesting that the worker is also the customer. In that case I have to ask,
what is the point of raising his wages just to increase his expenses at the
same time? Aren’t you just moving money around? Where is the creation of new
value or new money?
If
your argument is that the workers aren’t the customers, then I have to ask,
what makes you think that those who are the customers can afford the price
increase? Some may be able to do so and some may not. How do you know if you
have enough people who can afford those increases? What are the insightful studies
you performed to discover if consumers have the excess wealth which give them
enough buying power to pay higher prices? It rather seems as if there is some
assumption being made here that the buying power exists. Prove it.
Washington State already has the highest minimum wage in the country, fully 27% higher than many states, yet we still have a dollar menu and enjoy foot longs at Subway, even in high-rent places like Northgate Mall.
Businesses don’t mark up their product to cover their costs, but rather charge the maximum the market will bear regardless of wholesale costs.
Maybe consumers in Washington State have more disposable income. If low wages is the panacea, why is there no correlation between low-wage states and unemployment. In fact, the cities and states with the highest wages are also the most prosperous.
Yes, Washington State does have a dollar menu even with the highest minimum
wage in the country. This fact says
nothing about the profitability of that portion of McDonald’s menu. McDonalds does
not survive on dollar menu sales. In fact like most companies using traffic
driver pricing strategies like the dollar menu would prefer you do not buy from
that portion of the menu. McDonalds can offset increased costs with increases
in prices on the other sections of their menu and still have a dollar menu even
if such an option is a bit of a looser. See the following study by The
Employment Policies Institute which was cited in the LA Times (August 28th
2013) which shows that for every 10% increase in the minimum wage that there is
a corresponding increase in quick-service menu prices of 1.6% and a reduction
in industry employment by as much as 2.5%. http://www.epionline.org/studies/aaronson_06-2006.pdf
To say that businesses don’t mark up
their products to cover costs, but rather charge the max that the market will
bear is saying a lot without saying anything. They in fact sometimes do raise costs but
also they are restrained in how much they can raise costs without
losing market share. They may also cut benefits, hours, or number of employees.
Ultimately what we have to remember is that it comes down
to basic math. If businesses has attempted to balance its budgets, meet its
expenses, and raise a profit for the owner but has failed to do so and it has reached the maximum the
market will bear…such a company is going down fast.
There is a correlation
between low-wage states and unemployment. In fact with just a little research
one can find volumes upon volumes of studies showing the negative impacts for
the community as a whole but particularly the hardest hit being the low skilled
workers. With some unbiased research one can find the truth, and the truth is
that, while good intentioned, minimum wages decrease employment, decrease
buying power, and increase expenses to all. Consider that only a few are
positively impacted by the higher wages, however, any benefit to them is lost
with higher prices of goods and services. Their buying power has not actually
increased. Many lose work or cannot get work because of these new wages. So
those people lost all of the money they made at their previous wage rates
and now they also have to pay higher prices for their goods and services too.
And finally, all the rest of the earners who did not see an increase in wages
because they already earned more than the minimum, those people now have to
also absorb the pain of the higher prices as well.
This does not destroy entry level positions for young workers because:
Not sure which airport, let alone which decade, you’re shopping in, but these are not teenagers working after school. The person fueling up or de-icing your plane at Seatac is no teenager, yet currently earns about $10 an hour. How do you feel about having your plane’s fuel supply handled by a $10/hour worker?
Personally, it scares the hell out of me. Someone willing to work with hazardous chemicals all day for $20,000 a year? That’s untenable. Paying a pair of fuelers an extra $5/hr would only amount to four cents per ticket on a domestic flight, and about 2-3 cents per ticket on an international flight*.
This argument looks at just one job title. How many other workers are
employed at the airport, the hotels, the rental car agencies, the gas stations,
the mall shops, the eateries around the airport, all the retail locations, and
any industrial businesses which try to capture low rent building spaces nearer
the airport? All of those thousands of other jobs are completely left out of
this argument, but, let’s talk about that one job anyway.
Has there been a
failure of minimum wage workers to properly fuel or de-ice airplanes? Airlines
have immense liability at hand. Considering that air travel is the safest form
of all travel, and they have done so with razor thin margins. I would have to
say bravo to them! It is even more amazing that they are able to do so with
those whom the author deems to be too unskilled for the job. Would raising
their wages $5 an hour somehow make them more capable of performing the task?
The author goes so far as to suggest that this person shouldn’t take the job
because the author doesn’t feel they’re paid enough. As if to say that unless
they pay you $15/hr you may not accept this employment. Why does it scare you
any more that he is willing to work with hazardous chemicals for $20,000 than
if he did it for the proposed $30,000? Does the extra $10,000 make it safer to
do so?
He refutes the argument that burger flippers shouldn't make more than a starting professional by saying:
Do you know a teacher making $30,000 you’d like to compare this to? Maybe someone with a bachelors in arts working retail, sales, or an entry-level corporate job? Maybe they should be paid more too, but this is apples to oranges.
Teachers have summers off and a full pension, while airport workers will only accrue one hour of sick pay per 40-hours of work. Fuelers and de-icers endure harsh chemicals as part of their jobs.
And more importantly, teachers and other corporate workers may start at about $15/hour, but they top out at about three times that. There are workers at Seatac who have been there over 20 years who earn less today than they did in the 80s.
Take your 2013 earnings. If your boss told you in 2043 you would be earning less real dollars, despite inflation, what would you tell him to do? I imagine it would be something along the lines of jump in a lake, die in a fire, or just wait until you find out where he lives.
Burger flippers should (and will) make an amount relative to the value that
they create by their labor. If the job they are doing creates more value than
that of a teacher then so be it. Conversely, if it does not then so be it in
that case as well. If a burger flipper does not provide enough value to justify
a $15/hr wage, how long do you think that they will have their job? How many
burgers does he have to flip per hour to create enough value to justify $15/hr.
With this higher wage he will either have to begin flipping and selling a whole
lot more burgers per hour, or Mr. Burger Shop Owner will have to increase
prices, or, his hours worked can be slashed, or, said burger flipper can be let go. It can only be one of these choices. The business who employs him still has to be sustainable or else all
are out of the job and the consumer has one less burger choice.
Worker at/near $15 will not demand higher wages:
The big libertarian misunderstanding here is that workers have the power to demand the wages they want, need or deserve. A corporation’s job is to maximize profits. Period. They will never pay workers a penny more than they think they can get away with.
In some cases that is minimum wage. In other cases, if you’re an in-demand employee, they’ll decide the very least they’re willing to pay to keep you from going to the competition. Sometimes the gamble doesn’t work out, but it’s part of doing business. If nobody leaves, we’re obviously paying too much.
Much like how businesses charge the very most they can get away with, businesses also pay the very least they can get away with. Short of having a union in place, the supply and demand of the market largely handles it.
In the very first sentence here this author has just described the entire flaw in the minimum wage demand. Workers and their employer or other potential employers should be the ones settling their wages, not government. He says they have this power but seemed to forget about it when he was talking about the woes of the airport worker. If the airport workers felt they were not getting enough pay they can take that up with their employer or look for a different employer. To say that a corporation’s job is to maximize profit is to only tell half the story. Why do they want to maximize profits? Who benefits from profits? Everybody involved, that’s who! You see, corporations also have an incentive to not give profits up to taxes so they reinvest their profits into expansion, or to hire new employees, or to provide cleaner, safer, more productive, and overall better working environments, creating new products, and providing wage increases to those who provide the extra value which allows the whole thing to exist and grow. They will pay more than they think they can get away with as is seen whenever people complain about fatcat CEO’s making too much money. They could have paid lower wages to someone else. The fact is employers pay wages to get value. If they feel that they get the best value by paying more they will pay more. They will not pay more, however, for less value.
So you might ask how does an airplane re-fueler create value? By not being the guy who is careless when working with expensive and dangerous fuel, by showing up on time and being dependable, by working harder and faster than the other guys, by not wasting time because time is money. Look at the guys who get fired for they provide a perfect example of what not to do. Do the opposite of that. Be a leader and motivate others. We could go on and on but the point is, be a good employee. Be the type of person that they want more of. That is value. That is an employee who protects profits from being lost to accident or waste. That person gets more done in less time thereby increasing productivity. That is the “in-demand” employee who gets raises and an opportunity to take on extra responsibility, a chance to provide even more value and make even higher wages as he works up the ladder.
These blanket statements that businesses only pay the least that they can get away with and charge the most that they can get away with are simply not true. Just like consumers, businesses pay for value. When they think they get more value they will pay more. And just as workers want to earn as much money as they can, so do businesses, and because their earnings come from the sales of their goods and services they need to charge as much as the market will bear relative to the value provided by their goods or services to the purchaser in the sale. But when a business looks to capture additional market share they often do sell for far below what they could sell for.
He mocks the argument "Why not raise the minimum to $100 per hour:
This point comes up endlessly when discussing minimum wage. It’s a way of throwing ones arms up in the air and saying “it’s so silly, let’s not do anying.” Well we have to do something.
The national minimum wage is $7.25, higher in some states. This rate only effects about 3% of the US work force according to the BLS. Raising it a nickel wouldn’t hurt anyone, but it would put money in the pockets of those who have the very least in hand.
If we raised the minimum wage to $100/hr, it would take about 90% of American workers and put them all on the same plane. That would be a catastrophic event. It would force virtually every business to close shop, and send our entire economy into a tailspin with Zimbabwe-like inflation.
But raising the minimum wage slightly, and only bit by bit, place by place… yeah, that just doesn’t happen.
This point is not a matter of saying “it’s so silly, let’s not do anything.” This argument says that if your theory is true that these higher wages are good for prosperity then why stop at $15/hr? Why not go to $100/hr or more? Why limit the prosperity you’re going to get from this higher wage? The truth is that because higher wages don’t equal higher prosperity. Prosperity is the net effect of productivity in the market place. Increased efficiency, new resources, new methods, etc. lead to new innovations and lower prices. Lower prices increase purchasing power and therefore purchases. The more positive productivity we have, the more prosperous we are. So how does raising wages create this effect? If you can prove it does and you really believe it to be true then why not argue for $100/hr wages?
To say that raising the rates a nickel wouldn’t hurt anyone depends on your definition of pain. Granted a nickel probably isn’t going to cause a lot of pain but this argument is not about a nickel increase. The fact remains that the money comes from somewhere, and the extent of the pain is directly tied to the extent of the increase, which is precisely why the author, in the next paragraph, says that raising the wage to $100/hr would be a catastrophic event. So he again refutes his own argument. The idea fails because any increase is painful to some extent and to the extent of a $90/hr increase it would be painful to the extent of catastrophic. On that point he is correct.
The main thing readers should take from Brian K. White's article is in the very last sentence. He says that done slowly, bit-by-bit, place by place they can achieve what they want and that is how progressives do everything. Slowly, bit-by-bit they move in their direction, ever so careful not to try for too much at once as they may expose themselves. Keep a watchful eye and don't be taken in by fallacies such as those suggested by Mr White.
