A minimum wage has become an important economic parameter, and, more significantly, a measure of the degree to which a given society views the importance of equality of opportunity. Developed countries either define one with the intent of insuring all workers can earn a wage that ensures some quality of life, or they allow representatives of labor to negotiate wages with representatives of employers. Each society makes its own decision on how to address this issue. That is an important point to recognize, because it is a social decision to be made, not one based on economic theories. And the decision each country makes seem to have little effect on the economic strength of that country.
For generations in the United States, a wealthy elite has been propagating, through think tanks, media, and captured academics with contrived economic theories, the myth that unfettered markets will price labor at its appropriate value. The reality is that labor will be priced as low as society allows it to be priced. The intention of this plutocratic offensive is to convince the population that the wealthy are meritorious and deserve their remuneration. Sometimes left implicit, but often stated explicitly, is the associated conclusion that low-wage workers deserve their minimum wage jobs.
Thomas Piketty has performed the most extensive study of the evolution of income and wealth in Capital in the Twenty-First Century. On the subject of wages he concludes:
“….the main problem with the theory of marginal productivity is quite simply that it fails to explain the diversity of wage distributions we observe in different countries at different times. In order to understand the dynamics of wage inequality, we must introduce other factors, such as the institutions and rules that govern the operation of the labor market in each society. To an even greater extent than other markets, the labor market is not a mathematical abstraction whose workings are entirely determined by natural and immutable mechanisms and implacable technological forces: it is a social construct based on specific rules and compromises.”
The fast-food industry is dominated by a few large corporations that have many jobs to offer. Given that the work is not highly skilled, there is always a supply of labor. Historically, when operating in that situation, corporations have driven wages as low as possible to increase profits.
“….if a small group of employers occupies a monopsony position in a local labor market (meaning they are virtually the only source of employment….), they will probably try to exploit their advantage by lowering wages as much as possible, possibly even below the marginal productivity of the workers. Under such conditions, imposing a minimum wage may not only be just but also efficient, in the sense that the increase in wages may move the economy closer to the competitive equilibrium and increase the level of employment. This theoretical model, based on imperfect competition, is the clearest justification for the existence of a minimum wage: the goal is to make sure that no employer can exploit his competitive advantage beyond a certain limit.”
Piketty references a study which indicates that the minimum wage in the United States had fallen so low that raising it would not cause unemployment, but, in fact, could cause an increase in employment.
The minimum wage has become the floor to which all wages fall unless workers possess some economic leverage or happen to encounter an enlightened business operation. If the minimum wage does not change over time, then, no matter what occurs in the economy, the lowest paid workers will see no improvement. If the minimum wage is raised, then a large number of workers are directly affected, and an even larger number affected indirectly. Powerful interests in our country argue that raising the minimum wage will be harmful to the workers involved because some will lose their jobs. When they lose that argument, they often claim that an increase is not worth the trouble because so few are affected. This claim is specious. All hourly workers rate their salary against the minimum wage and see the separation between their wage and the minimum as an indication of their greater economic value. If the minimum wage was raised to $15, this would initiate a large wave of pay increases throughout the economy.
When fast-food workers demand higher wages for themselves, they are forcing us to consider—or reconsider—what kind of society we want to be. Let us view their situation in that context.
William Finnegan provides us with a look at what life is like for a fast-food worker in an article titled Dignity that appeared in The New Yorker. He builds his essay around the life of a McDonald’s employee, Arisleyda Tapia who came to New York City after working as a nurse in the Dominican Republic. The minimum wage in New York City is $8. After eight years on the job she has worked her salary all the way up to $8.35. Tapia also has a child to support. In fact, she is quite representative of the typical fast-food worker.
“The fast-food giants have seemed clumsy, and wrong-footed by the surge of protest. Their traditional defense of miserable pay—that most of their employees are young, part time, just working for gas money, really—has grown threadbare. Most of their employees today are adults—median age twenty-eight. More than a quarter have children. Particularly since the onset of the global recession of 2009, McJobs are often the only jobs available. And seventy per cent of fast-food workers are indeed part time, working fewer than forty hours a week.”
What exactly is the reason that fast-food employers choose to force their people to work less than forty hours per week? Finnegan does not say. Clearly, having to pay overtime would not be desirable, but why limit employees to thirty or thirty-five hours; and why have a system in which the hourly allocation is unknown from week-to-week? A worker’s hours can be cut for any reason or for no reason. One might begin to believe that this procedure is intended to keep the workers weak and demoralized. Perhaps this is one reason Finnegan chose the title Dignity for his essay. The workers want a higher minimum wage in order to earn more money; they want union representation in order to gain some respect.
It is often claimed that higher wages would cause an unacceptable increase in prices. Actually, an outfit like McDonald’s, with its vast supply chains and food factories is little affected by the labor costs of the workers in it outlets. Finnegan disposes of that concern with this insight:
“The fast-food chains insist that if they were to pay their employees more they would have to raise menu prices. Their wages are “competitive.” But in Denmark McDonald’s workers over the age of eighteen earn more than twenty dollars an hour—they are also unionized—and the price of a Big Mac is only thirty-five cents more than it is in the United States.”
It is also pointed out that fast-food companies can pay reasonable wages, provide benefits, and be quite successful.
“The starting wage at In-N-Out Burger, which is based in Southern California, and has two hundred and ninety-five restaurants in California and the Southwest, is eleven dollars. Full-time workers receive a complete benefits package, including life insurance—and the burgers are cheap and good.”
McDonald’s has always tried to hide behind its franchisees, claiming that any regulation that would apply to it generally would cause undo harm to the small businessmen it deals with.
“The space between franchisees and a parent company is nowhere more opaque than at McDonald’s, where the price of admission is exceptionally high: applicants must show at least seven hundred and fifty thousand dollars of unborrowed money even to be considered for a franchise, and the investment costs go up from there. Very few franchisees fail to observe the code of omertà that governs their relationship with the corporation.”
The owner of the McDonald’s where Tapia works is named Bruce Colley.
“Colley owns twenty-nine McDonald’s franchises, including nineteen in Manhattan. He grew up in Westchester County, and graduated from the Trinity Pawling School and Cornell. When he joined the family business, in 1980, his father, Dean, owned more than a hundred McDonald’s franchises in the Northeast. Dean was master of foxhounds of the Golden’s Bridge (New York) Hounds. Bruce is a polo player. His net worth is not a matter of public record.”
It would be a mistake to view McDonald’s as a collection of mom-and-pop operations.
McDonald’s controversial practices may be coming to an end.
“In March, seven class-action lawsuits were filed against the company in three states—California, Michigan, and New York—alleging wage theft and other violations of labor law. In late July, the general counsel of the National Labor Relations Board ruled, in connection with another set of complaints, that McDonald’s is a “joint employer” with its franchisees. The corporation exercises, through its standard contract, the most elaborate possible control over virtually every aspect of its franchisees’ operations, and the pay and the treatment of workers are very largely determined by that control. Indeed, the lawsuits allege that the crew-scheduling software that McDonald’s franchisees are required to use leads directly to the cost-cutting practices that amount to wage theft.”
Finnegan also points out that the low-wage fast-food model extracts subsidies from taxpayers to support corporate profits.
“A recent study by researchers at the University of California-Berkeley and the University of Illinois at Urbana-Champaign found that fifty-two per cent of fast-food workers are on some form of public assistance.”
“The Berkeley-University of Illinois study, commissioned by Fast Food Forward, found that American fast-food workers receive almost seven billion dollars a year in public assistance. That’s a direct taxpayer subsidy, the activists argue, for the fast-food industry.”
The demonstrations by the fast-food workers are subsidized by S.E.I.U., and they are having effects. The union recognizes that that the fast-food workforce is approaching four million in number, and unions have to be involved somehow, even if the demand for a new minimum wage does not directly involve unionization.
“The modern American labor movement rose out of the struggle over the eight-hour day. Mary Kay Henry, the president of the Service Employees International Union, told me, ‘This fight for fifteen is growing way beyond fast food. It’s getting to be what the eight-hour day was in the twentieth century’.”
The increased focus on the shortcomings of the current national minimum wage has led a number of states and localities to boost their own requirements. Seattle is already moving forward with a plan to increase its minimum wage to $15 over the next few years.
“Mary Kay Henry told me that the S.E.I.U. is supporting the movement ‘because it helps our members.’ She said that ‘6.5 million workers have already had their wages increased owing to minimum-wage increases’ driven by fast-food activism.”
McDonald’s, and other corporations of that ilk, are among the troops of the plutocratic offensive, fighting against almost all social advances and against any expansion of workers’ rights.
“Sensitive to the beating that their brands are taking in the escalating confrontation with employees, the fast-food giants have been leaving the hardball response to their lobby, the National Restaurant Association. ‘The other N.R.A.,’ as it is known, is an enormous organization, with nearly half a million member businesses, but its strategic thinking seems to be dominated by the major chains. It has fought minimum-wage legislation, at every level of government, for decades. It has fought paid-sick-leave laws, the Affordable Care Act, worker-safety regulations, restrictions on the marketing of junk food to children, menu-labelling requirements, and a variety of public-health measures, such as limits on sugar, sodium, and trans fats.”
An issue and a cause have arisen that have sufficient public support that perhaps the plutocratic forces can be beaten back—at least this once. Supporting the drive for a higher minimum wage is, in effect, a vote in favor of a more equitable society.
Support the cause!