Fast food poverty wages: a tax on everyone

In a few hours I’ll join in a series of protests, for December 4th will be the latest set of strikes by fast food workers. In around 150 cities at least some workers will walk off the job, joined with the low-wage workers in major international airports. The past 18 months has seen a dramatic change in the national discussion on wages. $15 an hour was viewed as a pipe dream. Yet with the election of Kshama Sawant in Seattle, running with $15 as her central policy goal, and an overwhelming majority of San Francisco voters voting in favor last month, things have changed. The debate in Washington about small, incremental increases that may not even keep pace with inflation has been overshadowed by the idea of radically higher wages that lift hundreds of thousands of people out of poverty.

These strikes will have the same conservative criticism, in particular that these companies cannot absorb higher prices, and your favorite items will see a sharp price increase.

I’ll break this down into the simplest form I know. Higher wages will increase item prices, but in a given industry that will hold true across the board. A hamburger costs an extra dollar, but all restaurants will face the same reality. This isn’t an issue for bottom-rung workers because they have more money to spend, and in fact their wages will usually increase by more than the prices do. Workers in Seattle will be going from about $9 to $15 plus inflation. Prices are not going up by two-thirds.

But won’t people just above the minimum wage have problems? No, because one of the fundamentals of the labor hierarchy is that wage hikes at the bottom echo throughout the system (PDF). If $10/hr workers go to $15, $14/hr workers in different jobs will go to $19, or something similar. Wage increases for the working poor are good for everyone.

The most crucial thing I want to get across is that we all pay for the current wage levels in fast food restaurants. Fast food workers received about $7 billion in government assistance because their wages fall below what is needed to survive. All taxpaying people in the United States subsidize these low wage policies. Unlike paying more for a burger after a higher wage law passes, this cost is not optional. We can choose not to eat at McDonalds (and really, why would you?) , but taxes are compulsory.

Almost all situations like this boil down to this: the economy is complicated. Groups like Heritage want to scare the public with the specter of high prices, but that ignores positive effects from higher wages, and current costs that we pay for low wages.

Finally, I want to speak out about the civil war among labor in this country. Many people look down at fast food workers. I understand that. But what happens to them will affect you- especially those in the lower echelons of the labor hierarchy. Strikes are inconvenient (oh lord, the BART transit strike in the Bay Area got tech workers into a frenzy), but there will never be an empowered working class unless the bottom has strength.

A world to win

Nathan Schneider, one of the first journalists to cover the Occupy Wall Street movement, has written a feature for Al Jazeera entitled “From occupation to reconstruction“. Anyone who has experience in Occupy knows the reaction from other people since the major encampments were dispersed. What happened to Occupy? It seems to have been a total failure.

Spanish indignados protest, Madrid.

The truth is more complex. Schneider, more than any other journalist I’ve seen, catalogs the evolution from 2011 to today. This is both internationally and in America, as Occupy was not the original spark. There were student strikes in Chile, an ongoing radical revolution in Spain, the crisis in Greece. Some protestors I met were led to believe that this was unique and special, it’s important when charting a global movement to avoid chauvinism.

Occupy was not shattered, it flowed into the thousand crucial issues that its participants cared about. Anyone who visited an encampment or went on a march knew that Occupy was big-tent in the extreme. Through the large actions, formerly unacquainted people met, formed workgroups, and it went from there. All the national media coverage about a $15/hr minimum wage comes in large part from the energy of Occupy. Before Kshama Sawant was a member of the Seattle City Council, she was a an Occupy organizer. What $15/hr is, fundamentally, is the working class playing offense. It’s putting the American economic system on the table. Beyond a system where the employer and the corporate politician says what they will allow, the last year has seen a shift towards workers saying what they need. Occupy was a key part in translating a key phrase bandied about- when something is “bad for the economy” it’s often just bad for people in power. The economy is a lot more than a few billionaires. Or at least it should be.

For a year or more I had an Occupy hangover. I missed the mass turnout, the radical direct democracy, the egalitarian nature of an encampment. There are new developments, evolutions of what started in September 2011, and they’re something to get excited about. It’s the real deal. And each tangible victory in 2014 makes every word chanted in 2011 mean something more.

 

Socialist Alternative meeting in Oakland, Saturday (June 28)

If you’re curious about the Socialist Alternative (SA) movement that got Kshama Sawant elected to the Seattle City Council and won an important (if flawed) $15/hr minimum wage proposal there, there will be a meeting at 3pm at the Downtown Oakland Library on Saturday, June 28th (event information here). There will be three speakers, notably Ty Moore, who came close to winning a seat on the Minneapolis City Council last year. Both Sawant and Moore have won significant labor support and their popular campaigns work to push groups often affiliated with the Democratic Party towards more radical policy solutions.

Previously I’ve written in support of Sawant, Moore, and the big-picture goal of Socialist Alternative. Even though I have some ideological differences with the organization (I consider myself a non-Marxist socialist, SA is Trotskyist), its policy goals are crucial to the long-term health of American democracy and the general welfare of common people. The creation of a popular mass movement in Seattle, and lesser but substantial results in places like Minneapolis, give credence to the idea that if it can work there, it can work in the San Francisco Bay Area and elsewhere. There is a base of political progressivism that can be turned towards radical policy solutions, in the face of serious issues with affordable housing, transportation, and medical care.

If you’re interested and have the time, check it out. I’ve been waiting for an event like this in my area, so if you’re in the SF Bay metro area, it may be a potential place to learn and network with activists. My summer right now isn’t that busy, so I’m hoping to get involved.

Turning the tide: the fight for a $15 minimum wage

Income growth distribution. Source: http://news.good.is/beg-borrow-steal/econographic#%21/2
Income growth distribution. Source: http://news.good.is/beg-borrow-steal/econographic#%21/2

There is a war going on in the Pacific Northwest. It has garnered some national attention, and cities across the country will be influenced by the result. Which side wins, and whether they get most of what they initially wanted, will ripple across the nation.

Seattle is debating a $15 minimum wage.

This is an extraordinary fight, because it was linked to an extraordinary campaign. Kshama Sawant, a member of Socialist Alternative, defeated a sixteen-year Democratic incumbent to win a seat on the Seattle City Council. I’ve written about Sawant several times (here was my pitch prior to the election), and her success is one of the biggest events in the American left since the McGovern campaign. The whole campaign was tightly bound around a single campaign promise- a $15/hr minimum wage.

Her victory, against the grain of traditional Seattle politics, indicated that popular sentiment was on the side of her campaign and the organization she helped found, 15 Now. Seattle is joined by San Francisco in pushing for a ballot initiative. The engine is Seattle though, with over a year of constant campaigning. Pressure has given the proposal wide political acceptance, even among business-friendly Democrats.

The split between worker productivity and worker wage increase
The split between worker productivity and worker wage increase

The argument is straightforward. Since the end of World War II-era price controls, worker productivity has increased substantially, but since the Nixon Administration is no longer matched by increases in wages. This era has also been one of sharply rising costs- education, healthcare, rent. I’ve drawn a grasp with permanent markers to give you the result. No, seriously:

A simplified graph of wages vs. costs since 1970
A simplified graph of wages vs. costs since 1970

The minimum wage isn’t tied to inflation, so it buys far less than in decades past. Increasingly, those that make minimum wage (or close to it) no longer have a living wage. They can’t afford to raise their kids, or live anywhere near where they work. Thus they rely on two things- credit and welfare. There are plenty of people working crazy hours yet still in the economic strata to require welfare to make basic ends meet. Without a strong wage, the taxpayers are footing the bill for underpaid workers.

There are two broad concerns at play in Seattle. The first is about the minimum wage as a whole- that it kills business, competitively, leads to unemployment. I tackled these broad issues last August here. I found there to be a lack of solid evidence that the minimum wage is a great harm to society- people often say that it is, but they’re relying on the standard (typically called ‘neoclassical’) model, which actually isn’t that accurate. We’ll return to that thought.

The second are the specifics of the wage increase. Basically, who has to increase to $15 and by when? Originally the idea was an increase from all businesses immediately. The version that’s being filed and will probably get voted on soon has a three-year lead-in for small businesses and nonprofits. $11, then $13, then $15.

In terms of a debate, the place I’ve found with the most content dedicated to the issue is The Stranger, Seattle’s sweary alternative newspaper. They strongly endorsed Sawant (dedicating an issue to making a case for her), but they’ve been releasing editorials in pairs- one advocating for an exception, one against. Currently, four pieces on the minimum wage are in the “most commented” section on the front page.

This is a bitter fight. Big businesses (especially those for which most of their staff make under $15) are fighting tooth and nail- and sometimes use small businesses as a front to advance their own interests. There is clear evidence in leaked documents. This is nothing new, but it’s important to pay attention.

While not anything close to an expert, I’ve taken enough college economics to have a decent grasp of minimum wage mechanics, as one of the basic aspects of the labor market. There has been quite a lot of misleading statements- and one would assume that if San Francisco and Seattle ultimately succeed, they will pop up again and again as the fight moves to other areas.

A number thrown out in the debate is 60%- the increase from the current state minimum wage of $9.19 to $15. Often the proposal is said to be a “60% increase in labor costs.” That’s not even close to true. What’s important to know is that essentially no business pays every worker minimum wage. If they did, it’d be 60%, but if people are making $10.50 or $12.75, it’s a lot less than that. Also there are plenty of workers who make over $15 in a given enterprise who won’t see any increase- at least directly.

$15/hr protestor in New York City. Peter Foley/EPA
$15/hr protestor in New York City. Peter Foley/EPA

Another issue is distorting costs. While labor costs are important, they sit alongside the cost of land, rent, licenses, legal and financial assistance, and of course whatever a business sells. The best read of The Stranger editorials is this one by bar owner Andrew Friedman. He got an overwhelming pushback by commenters, including several who work for a small business. As an accountant stated, if their firm raised all employees to $15 it would be a 4.33% increase in costs. There’s a big difference between 60% and 4.33%. While all cost hikes will affect total costs, labor is not all of a businesses’ costs.

A proposal has been made to include “total compensation”. A series of essays go back and forth starting here. What’s wrong with $15/hr total compensation? Well, a few things. It allows the employer to include (and overvalue) other non-wage benefits. Given the rapid rise in health care costs, this could easily eat into the actual wage earned until there is no rise at all. And it gives employers a great amount of power- they figure out the costs, they determine what total compensation is. You can’t make a good argument for wage theft because the wage has no solid meaning anymore. It’s just part of the total compensation soup.

The reality is simple. Large corporations, that employ a huge amount of minimum wage workers, are skating thanks to government subsidy of their business (sweetheart tax deals, plus tax loopholes) and government subsidy of their workers. The end result is incredible US corporate profits. A move towards a $15/hr minimum wage is recognizing that there is no disaster for American corporations if labor starts closing the gap between what it produces and what it is ultimately paid. It’ll throw a wrench into the economic idea that profits must constantly rise and increase- the system where shareholder concerns are much more pressing than labor concerns. But that sort of escalating system also causes destructive market bubbles, so maybe it needs a wake-up call.

Source: http://qz.com/192725/what-another-record-year-of-corporate-profits-means-for-the-us-economy/
Source: http://qz.com/192725/what-another-record-year-of-corporate-profits-means-for-the-us-economy/

I’m tired of people making hackneyed economic arguments that don’t have a solid foundation beneath them. The dangers of a high minimum wage are a meme, perhaps exacerbated by the fact that most introductory economics courses are strongly slanted to that conclusion. As I pointed out in a rebuke of Alex Berezow’s ill-suited attack on Sawant, many journalists and pundits don’t cite anything more complicated than N. Gregory Mankiw- often just leaving it at ‘common sense’.

Serious discussion is due for the minimum wage. Each month brings new depressing confirmations- income inequality is soaring, it’s reversing decades of gains by the middle class, people are getting wrecked by increased costs and don’t have the money to save, invest, and eventually retire. When a movement emerges that actually offers a potential solution, efforts must be made to understand it from their perspective. US journalism tends to start from the perspective of how a new policy will affect corporations.

Perhaps they should think of how the lack of a new policy current affects workers and families.