It’s Time to Make the Minimum Wage a Living Wage
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There are two-parent families in America with each parent working two jobs and barely making ends meet. That is just not right! Meanwhile, the corporate owners and executives take home huge salaries. We do not want the government in the taxation and redistribution business — paying for giveaway programs. If we require all employers to pay a living wage, there will be no need to cap executive salaries. We also need to do a better job of taxing the wealthy to pay for infrastructure and public service jobs; and, again, all jobs must pay a living wage. If we do not pay outrageous salaries and bonuses to the already wealthy, then we will not have to tax them to get it back to redistribute it. The executives will still get more money than they can ever spend. The resulting living wage jobs will reduce the need for social safety net programs.
Major retailers pay low wages and consequently their employees are eligible for social safety net programs like Welfare and AFDC. That money comes from taxpayers — mostly the middle class. The minimum wage should be a living wage, and adjusted as necessary to maintain its value. Anyone who works a forty-hour week should be able to earn enough to pay the bills for a family of three (Mom, Dad, and one child). When challenged about the issue, the retailers say that if they pay their employees higher wages, they will have to raise their prices. WRONG! They could make up for the wage increases by paying their executives, owners, and shareholders less. Even if they increase prices to pay a living wage, the average consumer will break even. We will pay a little more for the product, but save on taxes because the employees have less need for social safety net programs.
“We all do better when we all do better.”
Paul Wellstone — MN Senator
In today’s global economy, employers have foreign low wage countries that they can use to force their US employees to work for less money. The question is not ‘Can we get people to work for less?’ The question is ‘Should we?’ The current economic system allows (actually encourages) management to pay their workers as little as they can to get the work done. At the same time, the management team pays obscene salaries to the executives. According to CNBC, the top five most highly paid CEOs in the US and their annual salaries (not accumulated wealth — annual salaries) are:[1]
· Marc Lore, Walmart U.S. E-commerce — $236,896,191 (Just to put that in perspective, that is about $450 per minute — or $27,000 per hour, 24 hours per day, 365 days a year. If you calculated the salary over a 60 hour workweek, it would be even more outrageous(about $76,000 per hour). Meanwhile, Walmart’s average salary (not minimum) for a full-time retail employee is $13.60 per hour — only paying for time on the clock. )
§ Lore makes $27,000 per hour (24 hours a day). The employee makes $28,288 per year (Total). If you use his 60 hour per week rate, he makes as much in an hour as the average employee earns in about three years.
· Tim Cook, Apple — $150,036,907
· Sundar Pichai, Google — $106,502,419
· Elon Musk, Tesla — $99,744,920
· Ginni Rometty, IBM — $96,764,750
Those numbers are their salaries — not including bonuses. There are literally dozens, if not hundreds, of top executives who could and would gladly step into those top jobs for half of the current compensation. In fact, if you told each of the current CEOs that their salaries were going to be halved, odds are that none of them would quit. So why is it that they pay people on the low end as little as possible, while not applying the same standard to the people at the top? Because the people with the power at the top are making the decisions, and they can get away with it; and the politicians who have the power to pass regulations to control the problem serve the wealthy, not the working class.
Remember the section, “Capitalism That Works”, earlier in the book? We are among the countries that have chosen to skew the distribution of corporate revenue away from the workers and towards the owners and executives. We can also choose to favor the workers or provide a more balanced sharing. It takes political will and pressure from the voters to make the politicians have that will.
In America’s booming economy, companies are making good profits, the company owners are making huge salaries, and shareholders are seeing their share values rising. Meanwhile, the hard-working employees’ wage increases are barely keeping up with inflation — if they are at all. Despite their conscientious hard work, the employees’ wages are stagnating while the cost of living is rising. Income inequality is a major cause of poverty in America. If fixing poverty is not enough reason to pay a living wage, then consider the evidence that paying a living wage is good for business and the country. Countless articles make this point. Some of the benefits include:
· Employees are happier, more productive, and loyal to the company.
· Employees remain with the company longer, becoming more productive.
· Employees are less likely to shirk if they value their job more.
· Better pay results in better job applicants. (Higher IQ, better personalities, more productive, and more highly motivated.)
· Reduced customer churn — more customer loyalty.
· Higher revenue per customer.
· Greater profit margins.
· Reduced need for social safety-net programs.
· Greater buying power for each employee creates additional jobs for others.
· Reduced turnover saves training costs (estimated at $4,000 per employee in many industries).
· Fewer disciplinary problems.
· Reduced supervisory costs.
· People with a sense of financial stability show less signs of stress and act less compulsively or improperly.
· Reduced stress leads to healthier (and therefore more productive) employees.
· Fewer conflicts between employer and employees.
· Better reputation with customers (Costco vs Walmart)
These effects interact so that the whole is greater than the sum of its parts. We have heard the contrary idea many times: “Industries must pay workers a minimum wage to keep their prices low and profits high.” The argument goes that if companies are required to pay employees more, there will be fewer jobs available or prices will have to go up. Is that true?
“A 2016 National Employment Law Project study[2] looked at job growth trends every time the federal minimum wage increased (since it was first established in 1938). It found no correlation between federal minimum wage increases and lower employment levels.
Instead, the data suggests that employment actually increased about 68% of the time in the year after a minimum wage increase. This improvement is because when companies increase wages, workers spend their additional earnings, increasing demand. This demand increases business, creating jobs and innovation.[3]
Companies that treat and pay their employees well consider their workforce not as a cost to be minimized but as a strategic asset to be valued and managed. With this attitude, they invest in their employees and are usually rewarded with improved productivity and profitability.
One of the barriers to companies making investments in their employees is the time delay between making the investment and the results from that investment hitting the bottom line. Business leaders must emphasize sustainability over profit maximization within everything they create. They must balance the need for profit with the need to create a business that can survive for the long term. Paying a living wage is a critical part of that sustainability strategy. For a better understanding of ways to balance short and long-term activities, read “6 Practical Steps to Balance Short Term and Long Term[4]”.
One common concern regarding raising the minimum wage to a living wage is that it will drive up costs to the consumer. It’s true, but it’s negligible. “… estimates suggest that a minimum wage of $15 per hour would only lead to a 4 percent hike in prices[5], raising the cost of a cup of coffee at Dunkin’ Donuts from around $2 to $2.08. The effects on prices and profits would be minimal because increased costs can be offset by increased productivity due to greater effort, lower turnover (which can save employers $4,700 per employee[6]), and higher sales.”
The living wage is more than just what happens at the bottom of the scale. It also applies to the middle-income earners. From the early 1900s up into the 1970s, increases in productivity resulted in increases in workers’ pay.
“But that doesn’t happen anymore. Real wages have declined for most Americans, despite huge gains in productivity over the last several decades. Look at this chart based on research from the Economic Policy Institute[7], which shows this problem clearly.
Productivity Growth vs. Income Growth
What is going on here?
It’s not that computers are destroying our jobs, or that we have moved jobs overseas.
As you can see, back in Henry Ford’s days and decades after, productivity — a measure of how efficient we are at producing goods and services — and income gains moved hand in hand.”
Then, something happened. As the Economic Policy Institute States:
“From 1973 to 2016, net productivity rose 73.7 percent, while the hourly pay essentially stagnated — increasing only 12.5 percent over 43 years… This means although Americans are working more productively than ever, the fruits of their labors have primarily accrued to those at the top and to corporate profits, especially in recent years.”[8]
These major increases in productivity created enormous increases in wealth, but due to income inequality that wealth was not evenly distributed. Meanwhile, the cost of most consumer goods has risen significantly. When compared in terms of spending power, the average worker has lost ground, while the owners, executives, and shareholders have become very wealthy. Tell your representatives to look at how regulated capitalism is working well in countries around the world where they pay workers more, and push them to make the minimum wage a living wage. If the minimum wage was a living wage, poverty would be reduced.
This is an excerpt from my book on Poverty — part 15
(Written but not published. If you want a MS Word free copy, let me know.)
[1] https://www.cnbc.com/2017/05/11/highest-paid-ceos-in-america.html
[2] http://www.nelp.org/content/uploads/NELP-Data-Brief-Raise-Wages-Kill-Jobs-No-Correlation.pdf
[3] http://www.upworthy.com/5-successful-corporations-show-what-can-happen-when-employees-are-paid-a-living-wage
[4] http://www.thegreenabacus.com/6-practical-steps-to-balance-short-term-and-long-term/
[5] http://www.peri.umass.edu/fileadmin/pdf/research_brief/PERI_fast_food_wages.pdf
[6] http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_351-400/WP373.pdf
[7] https://www.epi.org/productivity-pay-gap/
[8]https://orders.cloudsna.com/chain?cid=MKT342135&eid=MKT343196&step=start&hpmv=2&mp_distinct_id=1608444bc68353-0fb0e4da596a8b-b7a103e-144000-1608444bc69449#AST74018
