The journey from there to here
Of Course you wouldn't...that's why socialism sucks!
Published on May 5, 2007 By Gideon MacLeish In Current Events

A conversation has been ongoing on another thread about wages. The accusation is that the poor in America are suffering horribly. The proposed solution is massively increasing the minimum wage.

I was asked to live on $10,000 a year because that's what the poor make working full time. Let me answer that first: NO. One, I have worked hard to get where I am, and two, you don't find families for the most part working minimum wage jobs. The people working minimum wage jobs are for the most part high school students and young adults.

Now, I'm going to get into a little bit of remedial economics here and point out that what you make is in proportion to the amount of wealth you create. Brad's tried to drive this point home countless times, and I am going to repeat it here. Want more money, create more wealth. If your current boss doesn't reward you with increased pay, it will not be long before you find someone who will. Good employees are a commodity, and employers pay for that commodity.

The reason burger flippers don't make much money is because a burger has limited value. And to keep customers buying burgers, the company has to create a perceived value by keeping their margins as thin as possible to maintain a respectabe profit. Regardless of what some people will tell you about the rich not paying taxes, don't believe it. There are property taxes to be paid, sales taxes to be paid, franchise fees,  the list goes on and on. Not to mention unemployment and worker's compensation insurance, which cover even the minimum wage employees. The truth is, fast food places don't make a large margin on most of their burgers. That's why they push "value meals" to sell high margin items like soft drinks and fries.

Now, if you're going to increase the wages of the employees that work at these burger joints, you must increase the cost of the food. This means losing customers, as a certain percentage of customers will decide it's not worth it every time you implement a price increase. The charm of fast food is its convenience. It is horribly unhealthy, and it's not even reasonably priced when you can make a sandwich and put it in a ziploc bag for much less. As the price of fast food climbs, it becomes less convenient.

Because of the decreased volume, the business owner would be forced to increase prices further. At a certain point, consumers will stop buying, realizing they can purchase food cheaper at the supermarket. The entire fast food industry could be gutted by the endless cycle of increasing wages.

Business have tried other strategies to avoid price increases. Ever notice a gallon jug of bleach is getting harder to find? Or that McDonald's hamburgers are edging closer to the size of White Castle sliders without the taste? (The patties, for those keeping score at home, are 1/10th of a pound meaning a smidge over an ounce and a half. Clara Peller was ahead of her time). Ultimately to increase wages they will need to massively increase prices to the consumer.

There is a way to increase your earnings potential, and that is to increase your value to your employer. Personally, I haven't made minimum wage in a primary job since 1993, and I've done it without a college degree. The job I currently perform is one that many people can't perform; the certs I hold aren't much, but they do give me an edge over Joe Schmoe off the street. But raising the minimum wage increases not only doesn't help the people it targets, it hurts businesses, and more importantly, it hurts people in skilled labor positions.

 


Comments
on May 05, 2007
I buy $10.00 burgers in truck stops all the time. Damn rip-off places.
on May 06, 2007
haha....we had some (White Castle) last week while visiting my mom and dad in Ohio....man, those things are so good.
on May 06, 2007
I've never heard of White Castle. Must be an up north thing.
on May 06, 2007
They're really tiny, really mushy, totally tasty, and only $0.47 each.


Then for my ten bucks I could get twenty-one of 'em! Anyway, I googled "White Castle" and the closest thing in Texas is a line of their frozen foods. That sounds...yeech.
on May 06, 2007

What % of McDonald's costs are labor? What % of McDonald's labor are at minimum wage?

What libertarians usually forget is that we have a mixed economy. Living wages and the like are a natural result of some of our zoning choices.

Market forces work fine at a macro level but can totally tank at the micro level. Consider the increasingly more common situation where people live in a very afluent area with very high property taxes and property values. As a result, the people who work in the little drug stores and grocery stores and laundry mats and other little retail outlets have to commute in, often significant distances.

In some places, especially on the East coast, commuting 30 miles isn't an option. If the people weren't paid a living wage based on local laws, they simply couldn't work those low skilled jobs that are high in demand still.

The libertarian says, no problem, market forces will force the business owner to pay their employees more. But in real life, the average owner of a new business in one of these affluent areas isn't some sort of master economist and has no expectation of having to pay $10 an hour for someone to work a cash register. By the time he figures it out, he's gone out of business from not being able to find work or not having a stable labor force.

Living wage laws and minimum wage laws are not there to protect unskilled stupid people. They are there to help ensure that there is a stable supply of local unskilled labor. If there's anyone to blame, it's stupid short-sighted mom and pop store owners.

Even with minimum wage laws, there are swaths of the United States, especially coastal areas, where residents have to drive 20 miles to get to a convenience store or a mall or anything because nothing can afford to open locally because the business owners are typically too stupid to figure out the supply/demand relationship on labor before their business tanks from not being able to find enough reliable, stable workers to keep their shops open consistently.

on May 07, 2007

Another falacy.  Working at minimum wage is a 40 hour a week job.  When I was first starting out, I had 2 or more jobs.  SO I was working 60-80 hyours per week. DId I like it?  Hell no, but then at minimum wage I was making a lot more than the old 2000 multiplier would suggest.

But again that is all ignored (along with the points Gid and Brad make) in the rush to artificially raise wages (which never works anyway - otherwise why do we have to keep doing it?).

You get what you are worth.  No more no less.  Raise the floor artificially, and the prices go up accordingly.  Or they are outsourced or mechanized.  I would rather work 80 hours at a minimum wage, than no hours at Minumum wage plus 50%.

on May 08, 2007

McDonald's labor is usually set at twenty percent. As to what percent of McDonald's workers are at minimum wage, it would be almost impossible to get those numbers because McDonald's franchises are independently owned and operated; however, empirical research leads me to believe they are very few, and they usually live in areas where the economy is depressed and any job, even one at minimum wage, is welcome.

But the McDonald's worker is not only a low skilled worker, they are a completely unskilled worker. If you pay a wage that is adequate to feed a family of four to an entry level McDonald's worker, you remove incentive for advancement. Why spend the time and money on college when you can make as much money without ever using your brain at the local burger joint?

on May 08, 2007

Even with minimum wage laws, there are swaths of the United States, especially coastal areas, where residents have to drive 20 miles to get to a convenience store or a mall or anything because nothing can afford to open locally because the business owners are typically too stupid to figure out the supply/demand relationship on labor before their business tanks from not being able to find enough reliable, stable workers to keep their shops open consistently.

Actually, a lot of times it has a LOT to do with crime rate. Why can you not find a good burger joint in the inner city? SIMPLE: Because as soon as they open their doors, some gang banging thug's at the other end of the counter demanding the day's take. Insurances CANNOT underwrite that kind of risk; if they did, insurance rates would go up for everyone to pay for it.

You want jobs in the inner city? You want business in the inner city? The answer's simple: Take the thugs, put them in prison for LIFE (meaning life, not 20 years), and clean up the streets. Proven gang affiliation is a life sentence. ONLY when the risk is reduced will businesses relocate there and bring jobs.

on May 09, 2007
Heh, ok, so this doesn't address the original content of the article, but pizza places won't deliver to my parent's apt after 5 pm.

And they want me to stay with them with my babies.
on May 10, 2007
Turns out they're going to be moving. Yay.

The apt management said they had 24 hrs to get rid of their dog or they would come snatch him and take him to the Humane Society, so they're outta there. Just in time.

LOL@ Rent-a-Rott.

Btw, I will shoot you an email as soon as I get the dates down. I know when I'll be in Texas, but not when I'll be where in TX.
on May 10, 2007
That's what I thought. Mom called bawling (Dad was on his way home from work), scared they were going to just come in and snatch him. I told her they couldn't do that and to not let them have him if they came in.

The management insists that it's legal to do that, but it doesn't sound right to me. I said they could evict them, but not steal their dog. I mean, you can't come snatch a child.

It's kinda stupid to me. They didn't pay the pet deposit (don't ask me why), so yeah, the mgt should have problem with them, but instead of saying pay the deposit or be evicted, they left a notice saying that they had 24 hours to get rid of the dog or they would come take him to the Humane Society.

Mom loves that dog like nobody's business, so she was *very* upset.

Heh, and Mom and Dad are probably their best tenants as far as not causing problems and paying promptly (4 years straight). Idiots.

I will let them know about this, although I am so glad they're moving.

on May 10, 2007
I will pass that on.

Mom has a flight tomorrow night to go back to stay with my grandparents until Dad gets another place squared away for them to move.

Mom's too scared to leave Tinker by himself in the meantime.