I hear this all the time, but I don’t find it convincing. What, exactly, is so difficult about running a small company?
The US Army has nine enlisted ranks and ten officer ranks (not including warrant officers.) I suppose those don’t track exactly with layers of management but there are certainly more than 10.
Most jobs are created by small companies that are growing into large or medium size companies. IF you have a large expense to a company right at certain thresholds, companies will try to structure themselves to avoid those thresholds. Thus fewer growing companies, and fewer jobs. Competition for workers is ultimately what drives wages up so fewer jobs will mean lower wages. This proposal would hurt those it is designed to help.
If you want the government to help those in low wage jobs why not send those who have low wage jobs a check every month. That has all the benefits of your proposal and none of the costs.
If you’ve never done it, then it’s the easiest job in the world. After all, all you do is sit around telling the real workers what to do.
If you have done it (I have, but not successfully) then it’s brutal. You have to know a little about everything, including a lot of things that have nothing to do with what your company is manufacturing/selling. And of course anything that goes wrong - especially the stuff that goes wrong at 3AM - is ultimately your fault.
I could easily be wrong on that part. I was never in the armed forces. Perhaps someone who has can dive in and either bail me out or bury me completely. I did find this organization diagram on the US army’s official web site. It lists both the organization level and the typical rank of the commander of each unit. According to that chart, there are nine levels of organization from squad to theater level.
I’d be interested in seeing the highest salaries in a company be pegged to the lowest in some fashion, such that for the highest to increase their income, the income at the bottom would have to increase also.
This sounds like “companies will be deliberately less successful than they might otherwise be because otherwise the Gummint will make them do something.” I suspect I’m misreading. I can believe that a few petulant libertarians will act like that, but I think most business owners, regardless of the size of the business, would rather be more successful than less.
(I’m not in business, but I assume the humans behind most corporate decisions don’t want to pay the workers less as an end in itself, they just want to pay the owners more.)
Have you ever managed employees? It’s hard. Have you ever had a good manager?
I could be 300% as good at my job as I am now (and I think I’m pretty good at my job), and I still couldn’t do my boss’s job half as well as he does because it’s a completely different skill set. Granted, I have a good boss, and I know that there are many bad bosses out there. But the idea that 10 or so 10% increases in ability are going to take you from entry level worker to successful CEO is absurd.
Instead of increasing the minimum wage, the earned income tax credit should be raised. It will reach more people that need it, and not necessarily cause the rise in prices, that a minimum wage increase would likely cause.
I think the core idea of tying minimum wage to business size is a reasonable one. It’s “working” for lots of other laws in the US. Most of our existing laws relate to number of employees rather than revenue (such as the 50-employee healthcare mandate), but revenue could be another substitute.
One issue I see is that there are ways around it. For example, instead of Big Corp hiring 100 janitors directly as employees, they could spin off those employees to “Janitorial Services Inc.” and then have a service contract with this new “independent company” to provide cleaning for $900,000 a year. Thus, JSI’s revenue is at the lowest level and BC isn’t paying employees to clean.
We’re seeing that happen to some extent with the health care mandate, where employees are reduced below thirty hours (and thus not required to be covered) or companies outsource functions to reduce their employee count below 50. The law adds up all employees under “common control” (i.e. if you own five companies, then all employees are added up to see if all five companies must provide health care), but outsourcing services can often be done without common control.
In China, the minimum wage varies by region. In the US, that would mean that the rate would be higher in Manhattan than in a small town in the Midwest. This makes sense.
The article is pretty clear that they are not examining effects on unemployment -
It also doesn’t mention how an increase in minimum wage causes this ripple effect, only an assertion of correlation.
Regards,
Shodan
The problem with that approach is that it is the “10M - 50M” dollar businesses whose profitability models depend on low wages. These include McDonalds, as well as big-box stores with fast food restaurants inside.
I’ve done some calculations, and found a weeks worth of meals from the grocery store for an individual could easily average a cost of $5-10 per meal, with some economies of scale for families. You will note that a fast food meal often costs $5-10 - they are trying to lure some of their employee’s wages back, and capture the lunch break of other minimum wage workers.
Raise the wages, and suddenly people can afford to eat better food! This costs the business not only the higher wages, but also the “recapture” of those wages from employees buying lunch internally.
I do believe that minimum wages should be higher; however a lot of a people will loose money because of this. The entire economy would change, and not necessarily for the better. There are risks and consequences for such and act.
nm
nm - already stated.
Technically, that’s already true in the US. We have a federal minimum that sets a nation-wide standard, but many (most?) states have their own minimums that are substantially higher. Some cities also have their own minimums. The states may also change some of the other rules about minimum wage, like the way Washington state requires that waitstaff be paid tips on top of minimum. We can’t use tips to get them back up to the minimum.
In the UK, probably to some lesser degree in the US, we often pay in-work benefits to those whose earned incomes fall below a certain threshold.
The rules are extremely complex due to the need to determine what is actually a low income because there is a need to be seen to treat those with higher unavoidable expenditure - such as large families, or disabled workers etc and to treat them proportionately fairly.
The problem is this, if an employer chooses to pay such low wages that most of their workers are entitled to in-work benefits, this pretty much amounts to a Government subsidy to bad employers, and this is to the detriment of both tax payers and tax paying companies who do pay adequate wages.
We have come up with the concept over here in the UK of both a minimum wage - legally enforceable and usually inadequate - especially in high cost residence areas such as London.
The next concept that is promoted and has gained some acceptance among many companies is that of the ‘living wage’. This is a semi formal agreement which is voluntary and is not legally enforceable. It is higher than the National minimum but you won’t be living it high on the hog - seems to me the level is about right to provide an incentive to workers to live tolerably but give enough incentive to develop and work harder.
There are many problems in relation to differentials, after all a highly skilled tradesperson needs to believe that all the hard work of training and learning will make a genuine difference to their income and that they would be better off than those with fewer or much lesser skills and knowledge. That’s why you have to be very careful in where you set the level of minimum wages.
but…
It really cannot be right that employers are seeking a competitive edge by paying only just enough to survive on minimum wages and leaving it up to the Nation to pick up the tab and make up the difference.
So despite all the problems, the reality is that we cannot rely on employer decency and goodwill to reward their staff adequately, the bad employer will always be undercut by a worse one, especially in a recession such as we are in - despite what our current administration would have you believe.
The problem about setting minimum wage based on company finances is way difficult, accountants make it their stock in trade to reduce company taxation liabilities, and the vast majority of it is perfectly legal. I just cannot see how you would reach into the books of a company and determine the state of finance and keep it up to date.
There is a way, but its not acceptable, because such a level of scrutiny would be a long way in the direction of a command economy,
Even though I am a strong trade unionist, I really would not want the state to have that much direct oversight - far far too dangerous, plus a costly bureaucratic nightmare - it would not allow small companies to do what they do best, which is to react quickly to market opportunities.
In short to the OP, you need to rethink how you would set a fair lower wage level, company finance inspections are not the way to do it.
Why? What’s the point of doing that? The only thing I can think of is that it’s a semi-punitive measure meant to stick it to bigger companies by forcing them to pay higher wages than companies that are smaller, and ostensibly can’t pay as much.
But flip it around and it becomes horribly unfair to the workers, in that their pay depends on the success of who they work for, not where they work, how well they do at that job, etc…
And in a sense, this stacks the deck toward larger companies in terms of job talent- people will want to work for the bigger companies and not for smaller companies because they pay’s better for the exact same job. I mean, why would you go work for a McDonalds’ franchisee as a burger-flipper at $8.50/hr if you could go work for a McDonald’s company-owned store for $10? Only the people who can’t hack it or who can’t find a job with a big company will want to work for the smaller companies.
Note that the “handicapped” exception refers to “sheltered workshops” and other opportunities of that kind and always requires specific permission from the government. An employer can’t just up and say, hey, Bill in Accounting lost a leg in the war, now we can pay him less than minimum wage.
Lets say I run a company that had a revenue of $9.5M in 2014 and I have the supply chain lined up to pump out an extra $1M worth of product in 2015. Under the system you described, the decision to use that extra throughput isn’t automatic – I’d have to do a cost/benefit analysis on whether or not it’s worth the additional labor cost to secure that revenue. Should I perform that analysis and decide against expanding, society just lost the demand for labor needed to secure that extra $1M in revenue.
It even already exists, the Earned Income Tax Credit. The benefit being that it helps poor **households. ** Not everyone in a minimum wage job is necessarily part of a household that is poor. Casdave brings up a good point that there’s some balance between finding an optimal balance between that subsidy and what the minimum wage is since both ways have inefficiencies.
Did I say that this particular article mentions unemployment? And are you saying that conservatives do not give increasing unemployment as an argument against the minimum wage?
Is there a fight among conservatives along the line of
Increases Unemployment!
No Effect!
that I don’t know about?