Wage laws decide how the costs of supporting labor are allocated. In Ending the Minimum-Wage Subsidy, Barry Ritholtz uses McDonald's in his example of how minimum wage laws are tools for wealth transfer and argues that currently the transfer is going the wrong way. Businesses are benefitting from paying inadequate hourly wages, and the shortfall is being subsidized by the taxpayer in the form of food stamps, Medicaid, housing assistance and welfare.
Two connected actions need to be taken: raising the minimum wage and ending the minimum wage subsidy. Raising the minimum shifts the burden of paying sufficient wages (or compensating for insufficient wages) from the taxpayer to employers.
Ritholtz shows that raising the minimum wage will not force businesses out of business. In Making the Economy Work for the Many, Not the Few, Step #1: RAISE THE MINIMUM WAGE, Robert Reich also makes the case that a higher minimum wage will return money to the people, increase demand for goods and services, and lead to more jobs. Mish Shedlock takes the other side in LA to Gradually Hike Minimum Wage to $15 by 2020; Already Weak Growth Prospects Just Got Worse.
Some thoughts:
When it comes it dividing a pie that is too small between labor and struggling small business owners, there is no satisfactory answer.
But when we are discussing multi-billion dollar, profitable corporations, with big, some would say over-sized pies, such as Walmart — there is no justification for taxpayers to be subsiding their labor costs. Walmart is an easy case: profits are not being properly allocated between owners and workers. Current wage laws are transferring wealth in the wrong direction and hurting the overall economy.
The six Waltons on Forbes’ list of wealthiest Americans have a net worth of $144.7 billion. This fiscal year three Waltons—Rob, Jim, and Alice (and the various entities that they control)—will receive an estimated $3.1 billion in Walmart dividends from their majority stake in the company.
The Waltons aren’t just the face of the 1%; they’re the face of the 0.000001%. The Waltons have more wealth than 42% of American families combined. (From Meet the Family)
[Lousiana picture source: The Walmart Heirs Are Worth More Than Everyone in Your City Combined]
Ending the Minimum-Wage Subsidy
By Barry Ritholtz
This week, Los Angeles became the third major West Coast city and the biggest in the U.S. to agree to raise the minimum wage to $15 an hour, an increase that will go into effect by 2020. Los Angeles follows Seattle, which will require employers with 500 workers or more to pay $15 by 2017. San Francisco will require the $15 hourly minimum by 2018.
The Seattle increase in particular has caused all sorts of analytical errors from people who should know better. Seattle Magazine ran one article with the headline “Why Are So Many Restaurants Closing Lately?,” which cited the wage increase as among the reasons. This was quite surprising, given the lack of any notable rise in restaurant closings, which are running at about the same pace as before the minimum wage increase. Even more telling, permits for new restaurants are rising. The data overwhelmingly disproves the assertion that the minimum wage increase is leading to restaurant closings — or is discouraging people from opening new ones.
That was only the most obvious error, but the rest of the blessedly data-free article was equally innumerate. This is an attribute of the modern news media: Instead of original reporting, there is a regurgitation of prior tweets, posts, anecdotes and second- and third-hand sources. Anyone could have easily looked up the actual numbers on restaurant closing and permits, as one of my colleagues did last month. The details can be found in “A Pizza Place Closes in Seattle,” and “Jobless in Seattle? Not Yet, Anyway” (See Part I and Part II.)
[My emphasis.]
That McDonald's and McDonald's franchise owners should pay their full-time employees enough to keep them off food stamps and welfare would seem to be a morally obvious conclusion. But as Ritholtz writes, "Right now, the wealth transfer goes in the wrong direction: from taxpayers to the owners of fast-food outlets. In effect, the public helps restaurants and other lower-wage employers save on labor costs. As I see it, the cost of a full-time employee (someone working 30 hours or more a week) should be borne by the employer."
Robert Reich also challenges the assertion that raising the minimum wage will put people out of work in MAKING THE ECONONY WORK FOR THE MANY, NOT THE FEW. STEP #1: RAISE THE MINIMUM WAGE:
A basic moral principle that most Americans agree on is no one who works full time should be in poverty, nor should their family.
Yet over time we’ve seen significant growth in the “working poor” – people working full time, sometimes even 60 or more hours each week, but at such low wages that they remain impoverished.
What to do?
One step is to raise the minimum wage to $15 an hour. This is winnable. A powerful movement is fighting for $15 an hour and they’re winning new laws in cities and states, and forcing companies to raise wages.
If the minimum wage in 1968 had simply kept up with inflation it would be more than $10 today. If it also kept up with the added productivity of American workers since then, it would be more than $21 an hour.
Some opponents say minimum wage workers are teenagers seeking some extra pocket money.
Wrong. Half are 35 or older, and many are key breadwinners for their families.
And don’t believe scaremongers who say a $15 minimum will cause employers to cut employment.
More money in people’s pockets means more demand for goods and services, which means more jobs not fewer jobs.
Studies also show that when the minimum is raised more people are brought into the pool of potential employees, giving employers more choice of whom to hire. This reduces turnover and helps employers save money.
Finally, employers who don’t pay enough to lift their employees out of poverty are indirectly subsidized by the rest of us – who are paying billions each year in food stamps, Medicaid, housing assistance, and welfare, to make up the difference.
The minimum wage should be raised to $15 an hour. It’s the least that a decent society should require.
