Why Raising Minimum Wages Does More Harm Than Good
On Friday, Salon reported Breaking: Massive Black Friday strike and arrests planned, as workers defy Wal-Mart.
Defying the nation’s top employer and a business model that defines the new U.S. economy, Wal-Mart employees and allies will try to oust shopping headlines with strike stories, and throw a retail giant off its heels on what should be its happiest day of the year. By day’s end, organizers expect 1,500 total protests in cities ranging from Los Angeles, Calif., to Wasilla, Alaska, including arrests in nine cities: Seacaucus, New Jersey; Alexandria, Virginia; Dallas; Minneapolis; Chicago; Seattle; and Ontario, San Leandro, and Sacramento, California.
On December 1, the New York Times reported Wage Strikes Planned at Fast-Food Outlets.
Seeking to increase pressure on McDonald’s, Wendy’s and other fast-food restaurants, organizers of a movement demanding a $15-an-hour wage for fast-food workers say they will sponsor one-day strikes in 100 cities on Thursday and protest activities in 100 additional cities.
The movement, which includes the groups Fast Food Forward and Fight for 15, is part of a growing union-backed effort by low-paid workers — including many Walmart workers and workers for federal contractors — that seeks to focus attention on what the groups say are inadequate wages.
The fast-food effort is backed by the Service Employees International Union and is also demanding that restaurants allow workers to unionize without the threat of retaliation.
Officials with the National Restaurant Association have said the one-day strikes are publicity stunts. They warn that increasing pay to $15 an hour when the federal minimum wage is $7.25 would cause restaurants to rely more on automation and hire fewer workers.
On Aug. 29, fast-food strikes took place in more than 50 cities. This week’s expanded protests will be joined by numerous community, faith and student groups, including USAction and United Students against Sweatshops.
Fight For 15
Inquiring minds are investigating the Fight for 15 website. Here is a snip.
Stand with striking Chicago fast food and retail workers!
We, hundreds of fast food and retail workers, went on strike at 30 stores in the Loop and the Magnificent Mile to demand $15 an hour and the right to form a union without retaliation. Employers like McDonalds, Whole Foods, and Sears are raking in enormous profits while workers like us, mostly adults with families, don’t get paid enough to cover basic needs like food, rent, health care and transportation.
We are risking our jobs as we continue to stand up and say ENOUGH. And we need everyone who supports us to join us. It’s time to give every worker a chance to survive and thrive – and strengthen Chicago’s economy.
Applicants a Mile Long
Whenever Wal-Mart opens up a store it gets tens of thousands of applicants for a couple hundred openings. People want the jobs.
Here’s the deal. If you don’t like the job, then don’t take it.
It really is as simple as that.
Should Companies Pay Workers More?
The economic illiterates think companies should be forced to pay $15 per hour. Is it even possible?
Let’s do the math.
Wikipedia reports Wal-Mart is the largest retailer in the world as well as the biggest private employer in the world with over two million employees.
In its last annual report, for the 12 months ending January 31, 2013, Wal-Mart had $16.999 billion in net income.
That sounds like a lot of money, and it is, but not as much as you might think. I do not have a breakdown in headcounts, pay scales, or number of part-time employees, but let’s assume that half of the 2 million workers make $8 an hour (75 cents above above minimum wage) and work 30 hours a week.
$15 an hour would be an increase of $7 per hour. $7 multiplied by 30 hours per week, multiplied by 52 weeks a year, multiplied by 1 million workers is $10.92 billion, well over half Wal-Mart’s profit.
There would also be a large number of full-time employees making above $10 per hour but less than $15 per hour.
Bump up those employees to $15 per hour and the company would not even be profitable at $15 per hour minimum. Moreover, sales would plunge at Wal-Mart, as would sales at McDonald’s and Wendy’s.
The pressure to automate would be great, and marginal stores would surely close. Yet, prices across the board would soar, and so would yields on US Treasuries (and of course interest on the national debt would skyrocket).
Then, how long would it take to discover that $15 was not a “living wage”? Less than a year?
Wal-Mart a Savior or a Pariah?
The idea that raising the minimum wage to $15 would fix anything is ridiculous.
I am not totally unsympathetic to the plight of those struggling, but I am totally unsympathetic about minimum wages because the problem is the Fed, not minimum wage laws.
Cheap money coupled with rising minimum wages encourages investment into automation as opposed to hiring of individuals. Cheap money also drives up costs of goods and services.
And given that cheap money primarily benefits those with first access to it (the banks and the already wealthy), it is not surprising that people are struggling.
Rather than protest Wal-Mart (a company that does the world a service by providing over 2 million direct jobs and millions more indirect ones), people ought to be protesting the Fed.
About the Author: Mike Shedlock is the editor of the top-rated global economics blog Mish’s Global Economic Trend Analysis, offering insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education.