You have asserted without a cite that an employee who is paid $10/hr actually creates $20/hr of “value.” That is not the proper metric. Assuming a Wal-Mart employee actually produces $20/hr of “value,” most, if not all of that value is because of the business model that Wal-Mart has already set up. If John Doe, employee of Wal-Mart creates $20/hr of value for Wal-Mart within its existing business model, that does not mean that John Doe, entrepreneur, would likewise create $20/hr of value. Wal-Mart should be entitled to benefit from that wildly successful business model.
Your post admits (due to the fact that “there are many candidates for the job so the employer can pay less”) that Wal-Mart is paying the adjusted for minimum wage market wage. The value that that employee brings to the marketplace is $10/hr. Nothing underhanded there.
Certainly Wal-Mart “can afford it.” Nobody said otherwise. Likewise a small business owner who would take home $50k/yr can similarly take home $35k/yr due to an inflated minimum wage. The argument is that the business owner should not have to bear the burden of the employee’s partial poverty simply because he engages in a fair labor contract at a market wage. This burden should be on society as a whole, if society chooses to enact social welfare to alleviate poverty.
So these employees have been sandbagging out of a silent protest against low wages? That is almost textbook unfair bargaining and a breach of the employment contract. No wonder those people only can garner near minimum wage. They deserve to be fired.
Wal-Mart is paying the agreed upon wage, and the employee implicitly agreed to honest hard work. When I hire employees, should I give them options of one wage where they do their best and another lower wage where they have the option to half-ass it?
You don’t seem to understand the notion of creating value. First, $20 is an example - none of us knows the productivity of the average WalMart employee - however we can be pretty sure it is higher than what he is being paid.
Value is what is put into a product. My wife used to be in a factory where a guy put a chunk of bacon in a can of beans. That can was worth more than without the bacon, so he added value. Most people work within the context of existing jobs. If they replaced him with a machine, that machine would be adding value also. No one is going to buy a machine which adds less value than its depreciation, maintenance and overhead. And the machine is not going to be an entrepreneur.
If creating a company from scratch is the only way of adding value in your book, few CEOs add any value either.
Obviously wages depend on the market. The point, which you again missed, is that the value added by an employee does not directly depend on the wages. And that the value added by WalMart employees did not go up when their wages did - and since WalMart, not being stupid, is still getting more value from them than they are paying, the value would not have been negative even if the wages had been raised a year before.
I’d contend that a boss who cannot structure a job to get way more than the MW worth of value from it has big problems. Either there is no market (a fast food employee standing around for 90% of her shift is not adding much value) or the employees are not motivated, or the enterprise is inefficient. And driving out these companies to be replaced by more efficient ones is better for the economy as a whole.
If an employer is benefiting by being able to pay less than subsistence wages, why make it up from the pockets of other employers who don’t? We could do it by bumping up the tax rate for these people, but something tells me you’d be against that. The owner is not bearing the burden of poverty - the owner is creating the poverty.
And of course the market prices often are not set with equal power on both ends of the negotiation. When there were 20 applicants per job, the process was hardly equal. Unions tend to equalize power, which is why so many employers hate them.
There was nothing organized. I don’t know if you have ever been a manager, but a manager quickly finds out that if you treat employees like shit they put in no more than the minimal effort. I shop at Costco and I’ve never seen a Costco employee moving at anything less than top speed. They get treated well.
It is not MW workers, it is human nature. The company I just retired from had a policy of giving wages to only a fraction of people. (Wages are a tad more than MW - starting salaries are in the 6 figures.) After two years of this they discovered that people were tending to come late and leave early. What a shock. Managers who can’t figure this out tend to lose people, and the best first, of course.
If you have reasonable performance review policies, you do exactly this. If an employee who works hard can reliably expect a raise there is incentive for doing so. On the other hand if an employee who works hard is told that there is no money, so she gets exactly as much as the employee goofing off, what do you expect her to do?
There are lots of cheap rewards also. But companies who treat hard workers exactly the same as slackers should expect all employees to tend to being slackers.
The worker’s output or “value” to the business bears no relation to his market wage. As you noted, the value one gets from an employee has to do with how efficiently he or she is put to work. If I have a poor business model and only get $2/hr out of a $10/hr employee, or alternatively I have a great business model and get $50/hr out of the same employee, it has no bearing on what I should pay the employee. In any event, I think we are talking past each other. Yes, a $10/hr worker, if used properly, should be creating more than $10/hr in value.
[QUOTE=Voyager]
If an employer is benefiting by being able to pay less than subsistence wages, why make it up from the pockets of other employers who don’t? We could do it by bumping up the tax rate for these people, but something tells me you’d be against that. The owner is not bearing the burden of poverty - the owner is creating the poverty.
And of course the market prices often are not set with equal power on both ends of the negotiation. When there were 20 applicants per job, the process was hardly equal. Unions tend to equalize power, which is why so many employers hate them.
[/QUOTE]
By entering into an employment contract with an employee, I did not agree to take he or she on as my ward. He or she is free to work elsewhere if my rate of pay is not sufficient. But as you concede, the employee is unable to make a “living wage” on the free market, whether from me, Wal-Mart, or wherever. That employee’s partial poverty is not my fault, nor should it become my responsibility just because I hire him or her. If anything, I am alleviating most of the poverty; why should I be on the hook for the rest?
You say I would be “benefiting by being able to pay less than subsistence wages.” First, we would have to quibble over the definition of subsistence. The poorest Americans live lifestyles that kings could only dream of a couple of hundred years ago. Whatever definition we use for subsistence will be highly subjective and probably include things that could be considered luxuries.
Notwithstanding that, when has it ever been a requirement that an employment contract be of a nature that it must, no matter the worth of the employee, fulfill an arbitrary standard of living for that employee? When did I agree to take the employee on as a ward? There are thousands of jobs that due to their nature, will never pay living wages on the market, and no matter what, those jobs will not provide for a modern standard of living.
I simply fail to see how an employer, no matter how small or how unprofitable himself, should have to bear that burden of support.
You mentioned the Costco model in passing. I don’t begrudge that type of structure at all, and I largely practice it in my small business. Because of its wage policies, Costco probably gets the best damn cashiers, janitors, and stock boys around. But there are limits to that. Let’s take the janitor. How much would you pay for a clean store? Better stated, how much do you have to pay for a clean store?
If there is a particular market wage whereby you can get a clean store, paying someone above that amount is simple charity. But otherwise I agree with Costco. One might think that a stock boy is just a commodity, a cog in a wheel, but if you get one who really cares about his or her job, then he helps your company by noticing things in short supply or sees when items are mispriced.
In any event, the Costco model shouldn’t be required by law.
I trust you have never done performance review, or you wouldn’t utter nonsense like value coming from employer efficiency only. Some, yes, but some employees bring lots more value in the same business model. And many business models are flexible enough to succeed or fail based on the quality of employees. A classic study found a 10X difference in programming ability across people. (I’ve seen this.) How do you think the same business model used by two companies would compare if the first hired the lower 10% (since they are cheap) and the second hired the upper 10%?
Contracts do not give infinite power. For instance, in California I am not allowed to sign a contract with a non-compete clause that would prevent me from finding employment in my field. We as a society do not allow people to sign employment contracts that cause them to spend their time for inadequate compensation. What is the alternative? Either the gap is picked up by the government, in which case as I said those not benefiting from the employee’s efforts are subsidizing the employer, or the employee starves or becomes homeless.
An employer is part of society - if the employer does not want to do his share and line his pockets instead, tough. If the employer can’t make a business work paying MW, tough. He has a bad model.
This argument is and has always been garbage. I grew up in the '50s, and I assure you that my life was just fine without DVDs, smartphones and Facebook. In fact life back then was in many ways better, since people did not live in constant fear of falling behind. (I’m a middle class white man - there are plenty of people who did not have it that good, I understand that. We are much better in terms of rights, but not in terms of economics.) 50 years from now we’ll probably have intelligent agents cleaning our houses and doing our crap work. I hope you are not feeling too impoverished because of this.
Well, yes, it is called the minimum wage. It did a better job fulfilling needs of employees before we let inflation eat away its value. No one has to hire someone who cannot provide MW value, which is why we have welfare. But if you do hire someone, there is a floor.
Clearly you don’t like $15 an hour. I’m guessing you don’t like $10. Is $5 too high? $2? You could probably find some people to work for those wages with the promise of a raise some day. If you don’t believe that, checkout unpaid internships.
If I’m buying food, a clean store is rather important. The question is, how much do you pay to ensure that the people working for that pay are motivated and efficient, and to be able to get new people if some leave or need to get fired because they are not motivated or efficient. The cost of turnover is often mentioned, but I think it is harder to measure than the costs of higher salaries, and so gets short shrift.
So, since you run a business, do you do performance reviews? Is every person you interview who is qualified identical? Do some of your employees do a better job than others?
Clearly there is a point of diminishing returns for salaries (though the CEOs of big companies don’t think so.) But you seem to agree about how employees getting screwed are not going to be motivated. So that’s good.
Without going into the moral argument, I also think this is currently garbage because it is largely impossible to cut back on expenses to live like you were in the 50s*. There are regulations for how many people can live in an apartment, and houses are more expensive per capita per income than they were. (Plus, one personal beef that I have is there are fewer off-the-air TV stations, and they are harder to get, than there were in case you didn’t want to pay for cable or internet.)
So there is a large minimum income people need just to survive. Just because this lets them survive better than people before doesn’t mean it is possible to live a subsistence life for less money.
*Barring weird cases like owning a fully-connected cabin on one acre on a back road far from anywhere, which has too little land to sell for a lot of money but is paid off and has low taxes. (I mention fully-connected because the utilities will still cost some money a month, and there may be regulations prohibiting you from going without some source of water and electricity.)
In any case arguments that poor people should be overjoyed because they can get cable don’t take into account that satisfaction often depends on how other people are doing. You pay someone $20 an hour, and he may feel he’s doing well. Tell him everyone else in the office is making $40 an hour, and he is going to feel screwed.
I think it’s possible that the optimum (for some measure of economic and political optimum) minimum wage policy is a minimum wage that slowly falls in real terms over time.
I think it’s unlikely that the optimum minimum wage policy is a minimum wage that happens to decay at the same rate as general inflation for many years until it’s finally sufficiently low that there’s political pressure to bring it back up again.
Unless you think that the optimal minimum wage will be lower in the future in real terms (I don’t think I’ve heard anyone pro-minimum wage make that argument. If anything, a “living wage” is likely to be higher in the future since we as a society will be richer), then “revisit the issue later” just means that people suffer with a sub-optimum minimum wage until there’s sufficient political pressure to fix things.
All this is from the perspective that the minimum wage is a good thing. Which I don’t really agree with. But if we’re going to have one, we should do it in a sensible manner.
They are. They get that difference of $20 in value from $10 in wages. They get $10 for another’s labor. In reality, they are probably making more like $30 an hour off of an employee (net of $20), but I don’t know their exact model, so it’s hard to say. Personally, I call employees money catchers. The more you have, the more money you catch.
The cost to wal-mart is $10 an hour. If the employee is not bringing in substantially more than that in value, then their business model is broken.
The burden is on society as a whole. If minimum wage goes up, and I find myself needing to pay my employees more, I am comforted by the fact that so do my competitors. If I need to raise my prices, so do they, in order to comply with the law.
I once had a job that paid MW. They also told me that they had a policy of not giving raises.
I didn’t work very hard. I worked hard enough to not get fired, but I certainly could have worked alot harder. It wasn’t worth busting my ass for their meager scraps.
Wal-mart is paying the wage that they can get away with, and the employee is agreeing to have a job and not be homeless or hungry. Not entirely a fair bargaining position.
But, do you really hire employees, and not give them a development plan? Do you not give them milestones and goals to reach, skills to acquire that would result in higher compensation? Or do you do like many employers, and consider them to be fungible and disposable?
When I give my employees a raise, I notice an immediate improvement in their productivity. You may complain about morale. You may think that employees should just take their pay and be grateful that you let them survive another week, but morale is a very real thing. Employees who feel respected and valued respect and value their jobs, their employers, and their co-workers. If you give an employee the absolute minimum that you are required to give them, do you really think that they will give you more than the absolute minimum required to keep their job?
As far as your two wage scenario, do you pay the same for all services all the time? Do you expect to pay the same at mcdonalds as you pay at “The Le
Cuisine Kitchen”? Do you really expect the same quality? Why would it be any different with people?
As far as indexing goes, both as an ex-employee, and as a current owner, I’d welcome it. As an employee, I would know that when my costs of living go up next year, like they do every year, even if my employer doesn’t feel like compensating my for my labor, I will still be able to maintain my current standard of living, rather than needing to make cuts to my life, even though I am working just as much and hard as before. As an employer (who’s lowest paid employee is over $11 an hour anyway), having MW going up a couple percent every year is much easier to adjust to than having to make larger adjustments every several years or once a decade.
As far as MW being a major driver in inflation… That’s beyond ridiculous. Prices go up. They pretty much always have. Inflation has almost always been positive. Increasing MW is a reaction to inflation, not a cause.
Now, to employers who don’t think they can afford a higher minimum wage. Close your business. Right now. You don’t have what it takes. That’s okay, not everyone does. It’s hard work, and requires sacrifice. If you would rather take a $50k draw this year, than to only take $35k and let the rest to build equity in your business, you are not a successful entrepreneur. If you can’t see how to pay someone at least minimum wage for a job, then don’t hire them, do the job yourself.
So when I say the % of the adult population that is actually working is at historic lows, see for yourself, it is right there.
Also I see Bernie Sanders was in NH this past weekend and talking about the “real” unemployment rate being at least twice the published rate. Wow me agreeing with an avoid socialist, strange days indeed Mama.
I’m not getting your argument at all. An indexed MW will let it stay constant in terms of purchasing power (more or less) without political effort. There is clearly some chance that politics will not allow it to grow until it is really out of line with reality - and then many workers have suffered decaying purchasing power, which hurts consumption, which hurts the economy? How is this a good thing unless your only metric is corporate profits. (Which does not seem to be the case for you.)
If there is a real need to raise the MW above inflation, that can still be done, but as others have said the shock to the economy will be lower if it had been indexed rather than if it is not.
The funny thing is that if your employer gave you a 5% raise you’d probably have worked 10% harder or more. The fact of the raise is more important than the amount unless the amount is an insult.
Your boss probably thought he was being a hard-headed tough capitalist. And if he even noticed that you and everyone else was slacking off, he probably thought it justified his cheapness.
eh, he also shorted hours and stole from employees (put them on the register, and have them make-up any “shorts” from their own wallet), and treated the customers like shit.
Because of work ethic, I worked my ass off to increase our sales, which we did. He then decided to cut labor to make even more money. Sales dropped in a day, as we couldn’t keep up with shorter staffing. Morale dropped faster.
I always say, schedule for the sales you want, not for the sales you have. If you schedule only for the sales you have, then you will never be able to make the sales you want.
You do realize that 59.7 is higher than other numbers, like 58.5, or even 59.3, so it’s not really a historically low number, in fact, it is higher than the past few years, so there’s that.
Then there’s the fact that if you go back as little as 30 years, which is a generation, but is still within history, you also see numbers that are lower. If you had gone back to 1980, for instance, you would have seen numbers as low as 57.1.
Even if 59.7 was a low number, it’s not that far down from the historical maximum in the late 90’s early 2000’s of 64.7. In fact, this came not long after a minimum wage hike.
Then there’s the fact that you are looking at all adults, rather than the 25-65 that Ruken used, so it’s kind of hard to get good numbers, as many are either in school or retired, and probably shouldn’t count towards unemployment numbers, as those are usually based on people that would like to be in the labor force.
Short term cash flow issues, combined with poor management. If they don’t equal more money, why does anyone hire anyone?
You assume that I was told that, and that this is a disservice. What you do not understand is that while fairness is not an inherent quality of life, it is in fact an indicator of a better society.
Whoever told you that working towards living in a poorer society for short term personal gains would work out for you in the long run didn’t do you any favors. (Of course, why would they?)
You are correct, I cannot tell if you do not understand things, or if you simply dismiss them. Just as you made the assumption that someone told me that life was fair, I made the assumption that you didn’t realize that people working together can do better than people fighting each other.
And sure, that’s a good question. What is a better society? What are better outcomes? I don’t know what’s always best, but making life more fair to more people does seem to me to be one of the useful functions of social progress.
Do you have a different goal in mind? Or is it specifically that you wish for life to be less fair? Do you think that if things are unbalanced enough, you will reap the reward? Do you just know that you will never get very far in life, and want to make sure that there continue to be those below you? What is your goal in life? What type of environment do you wish to live in? What type of legacy do you wish to leave?