Republicans oppose raising the minimum wage because they claim that it will cost jobs. Despite the fact that there is plenty of evidence of the opposite. After all, if working-class people earn more money, they spend it. If rich people make more money, they send it to offshore tax havens!
But here’s something interesting. An article in The Atlantic points out that companies that pay higher wages actually survived the last recession far better than those that pay minimum wage. It sounds counter-intuitive, but if you think about it, it isn’t really.
For example, consider QuikTrip, a chain of combination convenience stores and gas stations. That’s a job that practically screams minimum wage. But while the average cashier in the US makes just over $20,000 a year, QuickTrip pays their entry-level employees $40,000 a year plus benefits! How did that work out? During the recession, while most low-cost retailers were shutting down stores and laying off employees, QuikTrip was was expanding to new locations and hiring more workers.
Or consider Trader Joes and Costco Wholesale, which are both companies known for their low low prices. But both of them pay wages far above average. Why? Because when a company pays workers a decent wage, they are rewarded with lower turnover. That in turn lowers training costs, increases efficiency, and increases sales. At QuikTrip, sales per square foot are 50% higher than the average convenience store chain. And when your employees are happier they do their jobs better, and that naturally translates into happier, more loyal customers.
When financial times are tough, too many companies make the mistake of trying to save money by cutting back on employees. That’s what happened to Borders and Circuit City. Both companies responded to the recession by cutting staff — and both ultimately went bankrupt.
What’s really ironic about this is that many of these same companies that are trying to save money by cutting workers salaries and benefits are simultaneously raising how much they pay their top executives. They think that they have to pay top dollar for a CEO in order to do better as a company.
The evidence shows that they have it completely backward.
9 Comments
Good!, then let the free market work. The companies that pay less will go out of business. No need to force them to stay in business.
Firstly, I do not disagree with raising the minimum wage in theory, but in practice I believe it is not necessarily the best solution. By that I mean I agree with many applications of a minimum wage increase for workers who are filling positions like the ones you describe, ie. full time or 30hr plus positions. However, I do not believe that a 16 yr old with no skills applying for their first job to work 10-15 hrs a week falls into the same category. I am aware that if that exception is implemented then some unsavory employers will bypass more qualified employees at higher wages for the newbies at lower wages. So I’m not sure what the best recipe should be.
The other point I’d like to make is that while raising the minimum wage for those with jobs might not be a bad idea, it does not help those without jobs at all. In fact it may ultimately make it less likely they will find a job. And lastly, we don’t necessarily need more service oriented jobs, we do need manufacturing and building and other career oriented jobs. A career at QuickTrip et al, is not how I’d want to start or try to raise a family.
On the “If rich people make more money, they send it to offshore tax havens” proclamation you stated, I was reading about a new Billionaires club headed by Warren Buffet and Bill Gates that is growing in membership and shows great promise contrary to your statement. It’s called the giving pledge and basically, there are 2 rules for entry into the club. 1. you must be worth at minimum 1 billion dollars and 2. you must pledge to give away at least 1/2 of your wealth. Currently there are 127 members who have collectively pledged to give away over a half TRILLION dollars.
So maybe IK you need to start a Millionaires club…
Apples and oranges. This article is comparing a gas station, a wholesale retailer, and a grocery store, with an electronics big box and a bookstore. Vastly different business sectors. People don’t stop buying gas or bulk food during a recession (in fact, they buy more of the latter), but home theaters and book collections are quick victims.
Circuit City went defunct in 2009 (barely into the start of the recession), but it had been in long decline before then for a variety of reasons. For starters, Circuit City underestimated the importance of cheap entry-level goods, such as CDs. CDs at Circuit City were around $17-18 while Best Buy capped them at $12. Advantage to Best Buy because they managed to get people in the door. While browsing CDs, that person might go on to buy a new speaker set (which actually cost $50 less over at Circuit City, but I didn’t know that because their CDs were too damn expensive!).
And Borders suffered the same fate as many bookstores: plummeting demand (due to free delivery and wider selection from Amazon) coupled with a lack of business innovation (nothing to compete with the Kindle…again Amazon). In my view, Barnes & Noble only survived because they very aggressively moved to the online world, setting up a nice site at bn.com (borders.com was horribly unusable) and developing the Nook to compete with the Kindle. That is, B&N survived (though they are in gradual decline) by imitating the more successful Amazon, while Borders clung to an outdated business model.
So I agree that QuikTrip, Costco, and Trader Joe’s are great and treat their employees well. Kudos to them for their success and I wish more businesses follow suit. But I don’t buy the premise that the economic downturn or low employee morale were really to blame for the deaths of Circuit City and Borders. To my knowledge, Circuit City and Best Buy employees were treated about equally, as were Barnes & Noble and Borders employees. I think the article would have been more compelling if the Atlantic could have found a more direct comparison.
“I do not believe that a 16 yr old with no skills applying for their first job to work 10-15 hrs a week falls into the same category…” Then why hire a 16 year old? If the work is the same, pay the same. If the kid can’t do the work, don’t hire them. Perhaps a solution would be to have an apprenticeship class of wages. Employers can hire 16- and 17-year-olds as apprentices at a slightly reduced wage, while capping the percentage of work hours that can be fulfilled by apprentices. The goal is to give the teens an opportunity to learn from more experienced workers (so they’re getting more than just pay), not giving rationally self-interested employers a convenient means of exploiting cheap labor.
“The other point I’d like to make is that while raising the minimum wage for those with jobs might not be a bad idea, it does not help those without jobs at all. In fact it may ultimately make it less likely they will find a job.” True. But there is plenty of economic analysis that shows raising wages will stimulate the economy and create jobs. The number of employees a company hires is determined, first and foremost, by the demand for the company’s goods and/or services.
“And lastly, we don’t necessarily need more service oriented jobs, we do need manufacturing and building and other career oriented jobs.” Absolutely agree without qualification.
“…I was reading about a new Billionaires club headed by Warren Buffet and Bill Gates…” who happen to be outspoken in favor of raising the minimum wage and tend to favor progressive policies. I can tell you several names not in that club: David Koch, Charles Koch, Sheldon Adelson, Christy/Jim/Alice/Robson Walton, Rupert Murdoch, … Basically, the signers of that pledge tend to be those who speak out in favor of the social contract and advocate for minimum wage increases. Those who tend to profit from cheap minimum wage labor and don’t give a damn about their workers…well, you’re not going to find them on that list.
Link to latest analysis by Bureau of Labor Statistics on minimum wage earners.
http://www.bls.gov/cps/minwage2013.pdf
Interesting assessment by Pew Research Center
http://www.pewresearch.org/fact-tank/2014/09/08/who-makes-minimum-wage/
There IS an “apprenticeship” class of wages. It’s called, “apprenticeship,” and it requires a commitment by employers to provide apprenticeship training to go along with the commitment by apprentices TO training.
Too many businesses, unfortunately, oppose the labor unions that formerly co-sponsored apprenticeship training along with employers who were willing to partner with unions for their mutual benefit. Many of the same businesses, ironically, have no problem poaching trained people from companies who ARE committed to apprenticeship training… making it more and more difficult for the companies committed to this costly training to continue as good sponsors.
good article to read was nice
Something being ignored in talking about the 16 year old hire, is that many are helping their families by working and not necessarily saving up for a new car or some other teen “necessity”.
Apprenticeship is often call internship and too frequently is not paid at all! The idea of apprenticeship is a good one and dates to the middle ages and the guilds now called unions. The problem with a fast food apprenticeship is that there needs to be a skills test to exit the apprenticeship and become a journeyman. Now that cash registers use pictograms and the typical clerk can’t figure out how to make change, I don’t know what that skill set would be.