When Workers Come Together

[_ajax18]

As a business owner yourself, you can figure it out.

Has Kevin ever owned a business in the US? What are the minimum wage laws in Brazil?

[_cinepro]

As a business owner yourself, you can figure it out.

Has Kevin ever owned a business in the US? What are the minimum wage laws in Brazil?

It's the same principle.

That's what I can't figure out about the minimum wage. The effects are so easy to predict and see once you get beyond the most simplistic level of "if we make employers pay workers more, than workers will make more money" thinking.

Look at it this way. Suppose I own a high-end DJ business for weddings. Over many years, I've built up a reputation, and have some very high-end equipment, and charge premium prices (~$200/hr). But there is the constant annoyance of lower-priced weekend warriors with cheaper equipment undercutting me and taking some jobs.

So what if I wanted to eliminate this annoyance? I've got two legal ways to do it. The first is to create the need for a DJ license from the city, and then to control the supply of those licenses to make it difficult (or expensive) for newcomers.

But here's another thing I can do. What if I can get a law passed that says that no DJ service can bill for less than $200/hr? I would call it the "DJ Living Wage", since all mobile DJs deserve to make enough to feed their families. And this isn't about me, because I already make that much. I'm being generous, because this is about helping those poor DJs making $50/hr.

What would the effect of this law be? Would it hurt or help the low-ball DJ services?

Your initial thought might be that it would help. How could it not? Well, here is what would happen.

First, many, many brides can't afford $200/hr for DJs. So they would have to find an alternative (ipod over loudspeakers etc.) The number of weddings with DJs would decrease. And for those who can afford $200/hr, will they go to the low-ball DJ with bad equipment, poor music selection, and no reputation? Or will they go with the high-end companies?

Sure, there may be some people who see the $200/hr minimum rate and try to get into the business, but now it will be much harder. They'll have to invest in high quality equipment, and find other ways to convince people to give them a shot against the experienced companies that have a reputation. Some will succeed, but many will fail.

So the law that was sold as something that would help those poor DJs make a "living wage" has actually totally screwed them, to the benefit of the more established and experienced companies.

That is exactly what is happening with the minimum wage today. And think about this: if Walmart or other huge companies support the minimum wage hike, could one of the reasons be that it helps eliminate a threat to their company in having a small competitor start up because they can't start a company without the economies of scale enjoyed by Walmart and other companies? They are in effect stifling the chance of competition.

Just look at the assumptions that are being made in order to justify a minimum wage, and the way the unions are manipulating the system to their benefit. Why is it beneficial to a Union to pay their members less than minimum wage? Think about the DJ scenario and it will be easy to figure out. It certainly isn't to benefit the workers.

[_canpakes]

First, many, many brides can't afford $200/hr for DJs. So they would have to find an alternative (ipod over loudspeakers etc.) The number of weddings with DJs would decrease. And for those who can afford $200/hr, will they go to the low-ball DJ with bad equipment, poor music selection, and no reputation? Or will they go with the high-end companies?

Oh, no! This is a terrible situation.

Even though this explanation has nothing to do with increasing the minimum wage (as you are using a minimum billing amount for comparison), it's clear that it would be disastrous to allow the market to innovate after allowing folks at the bottom to earn more, with one horrifying outcome possibly being that some folks might actually earn enough in wages to improve their skills or invest in equipment in order to start, say, a DJ business. ; )

[_ajax18]

with one horrifying outcome possibly being that some folks might actually earn enough in wages to improve their skills or invest in equipment in order to start, say, a DJ business. ; )

I've tried saving for that purpose for years now. It doesn't work that way. You either borrow the money and start the business or you resign yourself to eternal employment. People spend what they earn. You really don't have much choice about it, especially if you're married.

[_Kevin Graham]

I'm still not sure what you think a minimum wage is going to do to help things.

This thread had nothing to do with the minimum wage. You're usually not one to miss obvious points so I can only imagine you did this on purpose.

You're saying that employers were reducing the number of low-skilled workers and not paying them more (or much more), so now we will increase the cost of those low-skilled workers by more than 50%, and that will make things better?

My anecdote was simply to show that American corporations are constantly, constantly looking for ways to make their workers do more work for less money. It had nothing to do with minimum wage. You asked for evidence that corporations are raking in huge profits and not sharing it with their employees, and I provided.

As a business owner yourself, you can figure it out. If the government came to you and told you that the wages of your employees was going to increase by more than 50% over the next five years, what would you do? Would you do the math, figure out if you had that much profit, and then say "Well, it looks like our profit is going to be reduced by XXXX amount of dollars over the next five years and onward?"

Businesses don't operate in a vacuum, they're constantly competing with one another. So one way to look at it is that the effect of company X paying employees less than company Y is that it stands to benefit more because it will then have more money from its profits to invest back into the business. The minimum wage kinda evens the playing field in that regard, except in cases where small businesses are competing with large corporations like Target or Walmart. But these are already lost battles than have nothing to do with pay for domestic employees.

Let me ask you this. Why do you think a majority of business owners supported an increase in the minimum wage to $12?

And if you didn't have the profit, would you say "Well, it looks like we're going to have to raise prices XXXX amount" and automatically assume that your sales volume would remain the same (because customers are not sensitive to price changes?)

Depending on the industry, it may improve as higher pay comes with the benefit of better performance. Think of the collapse of Circuit City around the turn of the century. They stopped paying their professional sales people commissions and instead decided to cut corners and do what Best Buy was doing. What happened as a result was that sales plummeted and they eventually went under. I know, because I used to work there and I made 68k my first year selling computers. I left the company just before this happened, but a few years later my old coworkers contacted me to tell me they were quitting because they had their income slashed in half when the company decided to do away with sales commissions. Besides, isn't this the basic logic for paying CEOs outrageous amounts of money? The more you pay them the more money they're going to make for the company?

Instead of looking at a study that argues for a hypothetical outcome based on what employers might do because they have a bunch of profits, why not look at the actual studies that have been done about the actual effects:

But your source doesn't provide any studies discussing this. Again, you're still stuck on the minimum wage which we already beat to death in previous threads. For a study discussing what we're actually talking about (companies benefiting by paying employees a wage commensurate with rise in corporate profits) try this out:

How Paying Employees More Can Make You More Profitable

It seems like simple math: The more you pay your employees, the lower your profits.

How then, to explain companies such as Costco? Costco pays higher wages than any other warehouse company; a 2006 study by Wayne Cascio, a professor of management at the University of Colorado, Denver, found that its wages are 40 percent higher than those of Sam's Club. Yet Costco is still profitable. Bill Durling, the head of corporate communications for Sam's Club, says the study is "likely outdated" and points out that unlike Costco, Sam's Club has stores in many rural locations.

Costco is not the only one to pay generously and still show a healthy profit: Trader Joe's, Spanish supermarket chain Marcadona, and the convenience store company QuikTrip all follow a similar pattern. To some extent, they all compete on price.

This is the dilemma that fascinated Zeynep Ton, an adjunct associate professor at Massachusetts Institute of Technology's Sloan School of Management and author of the recently published The Good Jobs Strategy. After years of research, she determined that the answer lies partly in how management looks at their employees: Are workers mostly costs that detract from profitability, or are they engines that drive revenue growth? Ton's research suggests, counterintuitively, that companies such as Costco are more profitable precisely because of relatively high employee wages--not in spite of them.

"This is not a hypothetical thing," says Ton. "And it's so much better for everybody."

Aetna’s CEO Proves You Can Prioritize People And Still Earn A Huge Profit

After reading French economist Thomas Piketty’s blockbuster book on income inequality, he actually raised the minimum wage at his health insurance giant to $16 an hour. He promised to pay his employees up to $300 a year in extra cash just for getting plenty of sleep.

But he certainly gets paid like a top-brass executive. Last year, Aetna bumped Bertolini’s compensation to $17.3 million — higher stock options and awards bumped this from the $15.1 million in 2014, according to a proxy statement filed with the U.S. Securities and Exchange Commission on Friday. Bertolini earned a base salary of about $1 million, with a bonus of $1.84 million.

“In 2015, Aetna had record operating earnings and record operating revenues, and the company’s total return to shareholders was 23 percent,” company spokesman T.J. Crawford told The Huffington Post by email. “Mark continues to be a recognized thought leader for his efforts to transform the health care system and on important social policy issues.”

From Forbes: Why Companies That Pay Above the Minimum Wage Come Out Ahead

I studied four retail chains that manage to do this: Costco, Trader Joe’s, QuikTrip (a U.S. chain of convenience stores with gas stations), and Mercadona (Spain’s largest supermarket chain). They offer their employees much better jobs than their competitors, all the while keeping their prices low and performing well in all the ways that matter to any business. They have high productivity, great customer service, healthy growth, and excellent returns to their investors. They compete head-on with companies that spend far less on their employees, and they win.

When I analyzed these four companies, I found that despite all their differences, they had one element in common: They all make a set of smart choices that allow them to achieve the combination of good jobs, low prices, and great results. These companies all follow what I call the good jobs strategy. It has two components.

First, these companies consider their workforce not as a cost to be minimized but as a strategic asset. They invest in their employees with the expectation that they will get even more back in terms of labor productivity, customer service, cost-cutting, innovation, and flexibility during difficult times. Most businesses consider their high-level managers and skilled professionals to be strategic assets. But these companies see their front-line people that way, too.

From Entrepreneur Magazine: Should You Raise Your Employees' Pay?

Worker morale is important to your business’s success.

In some businesses, employee morale can make or break a company. For example, retail customer-service workers who don’t smile or act pleasantly to customers can drive down sales to a point where a business goes under. If employee morale is a key success factor for your business, then paying efficiency wages makes sense. Higher wages boost employee satisfaction, and that higher morale translates into the kind of smile-and-act-pleasant-to-others behavior to which customers respond positively.

Employee turnover is costly.

Businesses that spend a lot of time on recruiting and training and that have a steep employee learning curve need to keep turnover down to control costs. If that’s the situation with your business, then paying efficiency wages can help. If you pay workers more than your competitors, they won’t be very likely to quit and take a job down the street.

From Business Insider: Sorry, But There's No 'Law Of Capitalism' That You Have To Pay Employees As Little As Possible

One reason the U.S. economy is still weak is that big American companies are "maximizing profits" instead of investing in their people and future projects.

This behavior is contributing to record income inequality in the country and starving the primary engine of U.S. economic growth — the vast American middle class — of purchasing power. (See charts below).

If average Americans don't get paid living wages, they can't spend much money buying products and services. And when average Americans can't buy products and services, companies that sell products and services can't grow. So the profit obsession of America's big companies is, ironically, hurting their ability to grow.

One solution is for big companies to pay their people more — to share more of the vast wealth that they create with the people who create it.

[_canpakes]

with one horrifying outcome possibly being that some folks might actually earn enough in wages to improve their skills or invest in equipment in order to start, say, a DJ business. ; )

I've tried saving for that purpose for years now. It doesn't work that way. You either borrow the money and start the business or you resign yourself to eternal employment. People spend what they earn. You really don't have much choice about it, especially if you're married.

I'm hitched, am about to have a second child, and am still making payments towards the house at a rate that will cut the life of the loan in half, while simultaneously saving about 10 percent of income for our 'golden years'. I do not earn anything close to 6 figures, either.

It doesn't leave much to work with but it can be done.

I would imagine that for a lot of younger, unmarried folks that following this sort of financial path might be a little easier than for the married folks. But they have to at least have a chance to not start out in perpetual debt prompted by market and employment conditions set up in part by the folks with the most capital and assets, acting on the premise that there's never a reason to raise the minimum wage.

[_MeDotOrg]

Kevin, your political knowledge is quite extensive, so if you (or someone else) has mentioned this before, my apologies.

When I hear right wingers proclaim Saul Alinsky's Organizing Principles as the modern day Das Kapital, this might be the equivalent document on the right:

The Powell Memo.

In the fall of 1972, the venerable National Association of Manufacturers (NAM) made a surprising announcement: It planned to move its main offices from New York to Washington, D.C. As its chief, Burt Raynes, observed:

We have been in New York since before the turn of the century, because we regarded this city as the center of business and industry. But the thing that affects business most today is government. The interrelationship of business with business is no longer so important as the interrelationship of business with government. In the last several years, that has become very apparent to us.

To be more precise, what had become very apparent to the business community was that it was getting its clock cleaned. Used to having broad sway, employers faced a series of surprising defeats in the 1960s and early 1970s. As we have seen, these defeats continued unabated when Richard Nixon won the White House. Despite electoral setbacks, the liberalism of the Great Society had surprising political momentum. “From 1969 to 1972,” as the political scientist David Vogel summarizes in one of the best books on the political role of business, “virtually the entire American business community experienced a series of political setbacks without parallel in the postwar period.” In particular, Washington undertook a vast expansion of its regulatory power, introducing tough and extensive restrictions and requirements on business in areas from the environment to occupational safety to consumer protection.[2]

In corporate circles, this pronounced and sustained shift was met with disbelief and then alarm. By 1971, future Supreme Court justice Lewis Powell felt compelled to assert, in a memo that was to help galvanize business circles, that the “American economic system is under broad attack.” This attack, Powell maintained, required mobilization for political combat: “Business must learn the lesson . . . that political power is necessary; that such power must be assiduously cultivated; and that when necessary, it must be used aggressively and with determination—without embarrassment and without the reluctance which has been so characteristic of American business.” Moreover, Powell stressed, the critical ingredient for success would be organization: “Strength lies in organization, in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.

=============

Businessmen of the World, Unite!

The organizational counterattack of business in the 1970s was swift and sweeping — a domestic version of Shock and Awe. The number of corporations with public affairs offices in Washington grew from 100 in 1968 to over 500 in 1978. In 1971, only 175 firms had registered lobbyists in Washington, but by 1982, nearly 2,500 did. The number of corporate PACs increased from under 300 in 1976 to over 1,200 by the middle of 1980.[5] On every dimension of corporate political activity, the numbers reveal a dramatic, rapid mobilization of business resources in the mid-1970s.

What the numbers alone cannot show is something of potentially even greater significance: Employers learned how to work together to achieve shared political goals. As members of coalitions, firms could mobilize more proactively and on a much broader front. Corporate leaders became advocates not just for the narrow interests of their firms but also for the shared interests of business as a whole.

Ironically, this new capacity was in part an unexpected gift of Great Society liberalism. One of the distinctive features of the big expansion of government authority in the ’60s and early ’70s was that it created new forms of regulation that simultaneously affected many industries. Previously, the airlines might have lobbied the Civil Aeronautics Board, the steel companies might have focused on restricting foreign competitors, the energy producers might have gained special tax breaks from a favorite congressman. Now companies across a wide range of sectors faced a common threat: increasingly powerful regulatory agencies overseeing their treatment of the environment, workers, and consumers. Individual firms had little chance of fending off such broad initiatives on their own; to craft an appropriately broad political defense, they needed organization.

Business was galvanized by more than perceived government overreach. It was also responding to the growing economic challenges it faced. Organization-building began even before the economy soured in the early 1970s, but the tumultuous economy of that decade — battered by two major oil shocks, which pushed up inflation and dragged down growth — created panic in corporate sectors as well as growing dissatisfaction among voters. The 1970s was not the economic wasteland that retrospective accounts often suggest. The economy actually grew more quickly overall (after adjusting for inflation) during the 1970s than during the 1980s.[6] But against the backdrop of the roaring 1960s, the economic turbulence was a rude jolt that strengthened the case of business leaders that a new governing approach was needed.

I originally read about this in The Right Nation a very balanced book (George Will wrote a jacket blurb) about the history of conservative Republicans from the days when Bill Buckley and Barry Goldwater were crying in the wilderness. A really good book for helping to understanding the rise of the modern conservative movement in the United States.

[_cinepro]

Even though this explanation has nothing to do with increasing the minimum wage (as you are using a minimum billing amount for comparison), it's clear that it would be disastrous to allow the market to innovate after allowing folks at the bottom to earn more, with one horrifying outcome possibly being that some folks might actually earn enough in wages to improve their skills or invest in equipment in order to start, say, a DJ business. ; )

The wage a person charges is their "billing amount" to the employer.

As I said, there will be some winners (people who are able to keep their jobs, and benefit from the higher wages). No one argues that. The problem is when we ignore the losers (the people who can't find jobs now because the minimum wage has raised the price floor above their potential value to employers).

[_Quasimodo]

The wage a person charges is their "billing amount" to the employer.

As I said, there will be some winners (people who are able to keep their jobs, and benefit from the higher wages). No one argues that. The problem is when we ignore the losers (the people who can't find jobs now because the minimum wage has raised the price floor above their potential value to employers).

I don't see how that matters. Employers need to hire as many workers as are required to accomplish their business goals. If a small business needs ten workers to operate efficiently, they will have ten workers regardless of the minimum wage.

The minimum wage only sets a base for wages and an even playing field for all potential employees. Employers will still choose the best potential employees just as they did with a lower minimum wage.

[_Kevin Graham]

As I said, there will be some winners (people who are able to keep their jobs, and benefit from the higher wages). No one argues that. The problem is when we ignore the losers (the people who can't find jobs now because the minimum wage has raised the price floor above their potential value to employers).

Our company has an entire section of copackers. They stand around all day doing some of the most monotonous things, I could never imagine having to do what they do and I doubt anyone could pay me enough to do it. There are roughly 300-400 of them all together. Just to give you an idea, one job in that area of the distribution center involves counting the number of pieces of candy that go into a particular box. They are almost all black/Hispanic and they all make something like a dollar over the minimum wage.

They come in to work every day looking depressed and miserable, knowing exactly what kind of day they have before them. Most of them are women just trying to support their kids. Part of their misery has to do with the nature of their jobs, but also the fact that they're not getting paid enough. Could we afford to pay them more? Absolutely. Our company sells a candy display to big box stores for anywhere between $1,500 and $4,000, and these folks making lower wages build hundreds of them in just a couple of days. There isn't an M&M or Twix on this side of the planet that hasn't gone through our facility. In fact, the copacking area represents the largest portion of our company's profits. The irony here is that something like 72% of the profits come from the copacking area whereas the rest comes from the other side of the building, where the (majority Caucasian) warehouse workers make $19-35/hr.

So you're telling me that if the government made us pay the copackers $12/hr, that they would all be unemployed within a few months? I can't think of a single example of this happening because of a wage increase. The company is already picking from the bottom of the barrel in terms of qualified employees, and the turnover ratio is ridiculous. By increasing wages, this doesn't miraculously create a new pool of more qualified employees willing to work a crappy job. And to be honest, I really don't think more educated people would be more qualified for a job like this anyway. It would be like saying, "If I pay my lettuce picker $30/hr instead of $10/hr then I might as well hire people who are more like to be making that kind of money already because they're more qualified." Uh, no. Most people with any kind of indoor job would be far less qualified to pick lettuce than the folks who are already doing it. They do it because we wont, and we won't because of what it entails, not because it doesn't pay more.