Sunday, April 05, 2009

Minimum Wage as an Economic Stimulus -- Part Two

With everyone's attention focused on the recession, another raise in the minimum wage is not even close to most radar screens. States with minimum wages laws insuring a higher hourly minimum than the federal minimum are facing increases triggered by the calendar or the Consumer Price Index, but nationally there is no conversation or legislative initiative of which I am aware to raise the national minimum.

This is unfortunate because one way to stimulate the economy without more tax dollars is to poke employers for better pay for those at the bottom of the economic pyramid. And it is a pyramid, you know. Lots more people at the bottom than the top. As Lincoln said, "The Lord must have loved the common man, because he made so many of them."

Any time increasing the minimum wage is mentioned we hear the same old arguments. It makes no difference if times are good or times are bad. This is a concept that a certain population is pre-conditioned to oppose any time, any where, under any conditions. In Washington state, which already has the highest state minimum in the country, the CPI has triggered yet another increase to "8.55 an hour. I can hear screaming all the way to Georgia.

"We've raised our prices to cover minimum wage and it's continued to hurt our sales," says Greg Luring, who owns 11 McDonald's restaurants employing roughly 500 workers in the Yakima Valley. "So it's a real challenge to look at all our areas to offset the increase of minimum wage. It's big dollars, big numbers."

Employers say the period of the consumer price index used to determine the increase doesn't cover plummeting prices the past several months.

"With the economy right now, things are pretty tight," says Terry Gresswell, compliance officer with Kershaw Fruit & Cold Storage. "Our question ... is what happens in times of heavy recession, quasi-depression? Can minimum wage go down the next year? Certainly prices have gone down the last three months."

Minimum wage workers in the Yakima Valley are primarily found in the agriculture, food service and retail industries and account for anywhere between 3 percent and 8 percent of full-time jobs here, according to figures from the state Employment Security Department.

In Yakima County alone, the increase is expected to cost employers anywhere from $750,000 to roughly $1.5 million a quarter this year.

It's a cost that will reduce the overall number of minimum-wage jobs in the Valley, says Mike Morrisette, president and CEO of the Greater Yakima Chamber of Commerce.

"What our employers will have to do is cut back on hours to avoid laying anyone off," he says. "It retards the employment of young people who may need to work or may want to work to learn a trade or something."

Losing workers can hamper service, a strong selling point in the fast-food industry, Luring says.

"It's a real challenge for everyone, but we just keep chugging along, I guess," he said. "Just keep offering the best service that we can."

Etc., etc... We've heard it all before. But those who are opposed to the idea can't have it both ways. The unemployment figures are already in a dramatic decline with no end in sight until the end of the year at the soonest. Employees are already laying people off. The old job-loss argument doesn't hold water. Neither does the argument that lower market prices means that wages should go down, not up. Last time I checked, when prices are down, the way to make them go up is related more to supply and demand than production costs. Labor is a production cost, and all the cutting in the world won't compensate for a falling demand. As an old cafeteria guy, let me tell you about what self-service buffets can do to the cafeteria business, even if a la carte prices undercut the price points of meals at the food troughs. Cutting staff wages will not reverse market trends over which we have no control.

And at a time when laid-off, better paid bread winners are willing and able to do just about anything until they can find something better, increasing the minimum wage not only helps them keep from going further into the hole, but makes it less likely that they will leave for the next place that offers them ten cents more. Why? because even with a legally mandated minimum for employers that meet certain volume and staffing minimums, jobs will always be available for LESS than whatever the minimum happens to be. How else do ice cream and donut franchises employ kids for less than the minimum? As individually owned businesses with volumes under the defined amount, they are free to pay whatever THAT "labor market" will bear.

The reason for this post today is that I'm getting some traffic from an excellent website that picked up one of my posts last year. A local minimum wage initiative in New Jersey moved Brock Haussamen, professor emeritus in English at Raritan Valley Community College in North Branch, New Jersey, to compile what is becoming one of the best information sites on the Web regarding the subject, The Minimum Wage: Information, Opinion, Research.

My previous post is among a growing list of links at Professor Houssamen's site at The Minimum Wage and Economic Stimulus.

This morning's message to the world from Hoots' little corner springs from my usual urge to move the Overton Window (Check my profile) any chance I get. I have something in common with Mr. Wilkins Micawber that in the darkest of times our fortunes will eventually turn up;

Addendum, April 7:

Via a NY Times link I came across a very scholarly (meaning dry) paper, The Effect of Minimum Wages on Immigrants’ Employment and Earnings (pdf) dated May, 2008. This forty-plus page document includes a raft of tables and charts with the latest data regarding the impact of the minimum wage in America.

One interesting conclusion is that among states which have minimum wages above the federal minimum, there is a measurable difference in the number and skill levels of the foreign-born populations. The higher the minimum wage, the better-educated and more skilled the foreign-born population. Stated differently, if you want to reduce the number of immigrants where you live, then push your representatives to pass a state law increasing the state minimum wage to be and remain higher than the federal minimum.

Americans tend to forget that getting a better job frequently involves moving to a better job instead of waiting for the job market to furnish the opportunity where you live. I have observed this for forty years in a labor intensive industry. Jefferson's line from the Declaration of Independence is absolutely true: Mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the form to which they are accustomed. In the case of getting a better job, that means that sometimes you simply have to relocate to find a better one.

Immigrants have been doing this since the beginning of history, but my experience is that many are not uncomfortable enough to take action. So I suppose one unintended consequence of higher state minimum wages might be the retention and encouragement of an indolent native-born population.

1 comment:

Delaware Job Hunters said...

This article makes me think of this quote, "Seasonal unemployment was found to be a state which does not have much employment, for example, rural areas."

But there are career experts who conduct seminars giving concrete advice about the needed skills to compete in today's competitive job market.