In January during his State of the Union Message, President Obama called for a rise in the federal minimum wage from the current $7.25 per hour to a new rate of $9.00 per hour. As a percentage increase, most working folks would be euphoric over a 24% increase. Think about it, though, with a 24% increase this person would now earn, as a full time employee, about $18,720 a year—no doubt without vacation pay and without healthcare benefits. Furthermore, if this person was supporting a family, this person would still earn nearly 24% less than the current federal poverty line for a family of four of $23,050 per year.
Of course Republicans immediately denounced this proposal, claiming that raising the minimum wage would hurt and not help the poor, because employers would cut back labor and reduce hours. Really! These jobs are service jobs, and they are labor intensive, and it’s not likely that say McDonalds, though I am sure some enterprising student in robotics might disagree, is going to be able to satisfactorily replace the person that says ‘can I take your order, please’.
On August 30 (USA Today) ”Workers at McDonald’s and other fast-food chains conducted strikes and walkouts in nearly 60 cities Thursday, hoping for super-size wage hikes that for many would boost their hourly pay to $15 from the current federal minimum $7.25.” The rallies that were held in about 60 cities throughout the United States, Reuters called “the largest protest of an almost year-long campaign to raise service sector wages.” “The bottom line is we are doing this to let the corporations know we want $15 an hour, better working conditions — and we want to be treated fairly, ” said the Rev. W.J. Rideout III of Detroit’s All God’s People Church.
Not surprisingly, the Republican mouthpieces were out in full force. During Mark Levin’s August 30 radio show he claimed “McDonalds in under attack.” Old Rushmo had this to say the same day: “It is not a legitimate protest, it is a protest by the left—a rent a mob type of thing, in order to advance the leftist agenda with Obamacare.” Let us not forget the WSJ’s Steve Moore who on Sept 1 told Fox News “to say goodbye to the $1.00 menu items at Wendy’s, McDonalds, and BurgerKing…a rise in minimum wage will lead to higher prices…the unemployment rate would go up…the last time [we had a rise in the minimum wage] we saw an increase in the unemployment rate of teenagers and unskilled workers…and it can destroy their jobs…a machine could ask you if you want fries.” I guess he knows that robotics student!
The Houston Courier today; “The cost of every product includes the cost a business has in making that product,” says Kevin Price, host of “Price of Business” on Business Talk 1110 KTEK . Price is also a guest on national media including Fox Business and Fox News. Price feels that businesses will work around the minimum wage — “entrepreneurs are entrepreneurial in all their activities,” he says. “When forced, they’ll make accommodations” and often the people the government wants to help most are adversely affected by increased prices and a cut-back in their hours.
I am not sure what the Republican apoplexy is all about, because workers are part of the free-market, which is the holy grail of their economics. If the workers prevail through organization and negotiation, and burgers become $4 instead of $2, then you would think the Right would happily either pay the new price, or stop eating burgers. In either case they should embrace the market working.
That being said, there is discussion about the amount of the increase from $7.25 to $15/hr, a more than 100% increase. There is significant evidence that a sustained and consistent increase in the minimum wage does not effect the unemployment rate, and will not ultimately hurt those the policy is trying to help. An increase, however, to $15/hr might hurt those it is trying to help.
In a blog post a few months back, Economist Jared Bernstein writes “Richard Freeman, the godfather of labor economics, once told me that one reason minimum wage increases don’t have the job loss effects their opponents predict is because the political process disallows increases that would be large enough to trigger such effects.” Bernstein points out the move to $9.hr discussed by the president has significant historical data to support this increase: “it’s also the case that federal increases dating back to the 1950s are surprisingly log-linear meaning that the wage floor has generally been increased by the similar nominal amounts in percentage terms (changes in natural logs approximate percent changes).
Economist Dr. Frank J Lysy, Ph.D. and former member of the World Bank Group—Chief Economist and Director of the Economics and Policy Group of the Multilateral Investment Guarantee Agency (MIGA) in his blog March 6, 2013 “The Impact of Increasing the Minimum Wage on Unemployment: No Evidence of Harm” takes a look at the research and concludes that a there is no evidence of harm with consistent and rising minimum wage.
In a recent interview on CNBC with Jared Bernstein, Larry Kudlow says of the strike: “People don’t normally see fast-food restaurants as end-all, be-all jobs. These jobs are temporary in nature, geared more toward those in high school, or to help students get through college. Therefore, a one or two dollar increase could help, but some form of specialized trade training as vocational training or community college studies would provide more of a long-term benefit to the average worker…the market is all about the employers and employees coming together, evaluating skills, evaluating supply and demand and deciding among themselves what the right value proposition is. If we enact a higher minimum wage, it will hurt entrepreneurs, and hurt the very low-wage and unskilled workers it’s meant to protect when the jobs go to higher-skilled workers, I pads and robots. Kudlow also knows that robotics student too!
Bernstein responded to Kudlow: “I looked at the numbers before I came over here, and if you look at the population of people who earn less than ten bucks an hour, and that’s who we’re talking about, 88% of them are adults; 44% of them have at least some college education; half actually brings home half of their family’s earnings, so I think the image that you have in your head of a teenager at an entry-level job doesn’t apply to the folks on the street today.”
In fact in a recent post on Occupy Democrats, Fox News interviewed Boloco CEO John Pepper, who has a chain of 22 burrito shops told FOX Business host Stuart Varney that his company manages to pay entry-level workers between $9.50 to $11 an hour, and a number, which he hopes to increase in the near future. Some of his wage earning employees already make up to $17 an hour. While Right-wingers like Varney are obsessed with keeping labor costs down and sucking the most productivity out of workers as possible, this CEO says that paying employees a humane and living wage pays off with a more productive staff and improved attracting and retaining of talented workers who can inspire loyalty in customers. “It’s a lot easier to keep wages down than it is to find better practices, bolder practices, more efficient practices, which come through training,” says Pepper. “We’re constantly looking for practices and ways to bring wages up.”
Consider, in a post shortly after the president’s State of the Union call for an increase in the minimum wage the Huffington Post wrote: ”The minimum wage should have reached $21.72 an hour in 2012 if it kept up with increases in worker productivity, according to a March study by the Center for Economic and Policy Research. While advancements in technology have increased the amount of goods and services that can be produced in a set amount of time, wages have remained relatively flat, the study points out. Even if the minimum wage kept up with inflation since it peaked in real value in the late 1960s, low-wage workers should be earning a minimum of $10.52 an hour, according to the study” and they would still have incomes below the poverty level.
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