Tuesday, July 30, 2013

Living Wage: The Concept

Any discussion of the "living wage" is fraught with emotional response. 
Mad dog has to admit his own bias here: His grandfather was a member of the International Ladies Garment Workers Union and fought for better wages and working conditions as a basic human right.
On the other hand, Mad Dog once ran a small business with two employees and his margin was very tight and salaries which got out of hand could easily have sunk that ship; salaries constituted  the highest cost of running that business. 

To Mad Dog's mind there is a significant difference between the Mom and Pop store which hires one or two employees and which operates on a tight margin and is vulnerable to a variety of market vicissitudes and a corporation like McDonald's, Walmart or Wendy's, which generates large numbers in terms of gross revenues and the main question becomes: Who has a right to divide up the distribution of these large incomes, and to what end?

Most of the arguments Mad Dog has seen in support the living wage strike him as irrelevant and immaterial: They center on the hardships low wages cause workers; they seek to evoke sympathy for workers in low skill jobs who have difficulty supporting families on low wages, which is not to say we ought not care about these people but we are still trying to focus on who is responsible for improving their lot--an employer or the government?

No, the issue which seems relevant  to Mad Dog is the question of what share of the reward for business done ought to belong to the employee? One side argues that the employer should seek to maximize the company's profit and to do this he needs to reduce his overhead ruthlessly, and wages paid are a substantial part of overhead. It is not the business owner's responsibility to be sure employees have a happy life--it is only his responsibility to be sure the company thrives. 
One may argue that happy employees ultimately benefit the company, so it is better for the bosses to pay more, but in the case of fast food restaurants, that assertion may well have been disproved over time and over many types of fast food franchise operations.  And, in any case, that's up to the bosses to discern.

The more relevant argument would be: If there is a "pie" of gross revenues, in any business, that pie would be impossible without labor. The worker sells his services to the employer, just as the meat supplier sells his raw material to the restaurant and the employee ought to be in a position to bargain for his services, just as the meat supplier is in a position to bargain for the price of his meat.  But under educated workers are typically in no position to bargain.  

The solution seems apparent: No living wage legislation is necessary as long as laws ensure the potential work force has the position to bargain, i.e., as long as unions are fostered by public policy.  

Laws ensure the local government gets its cut of the company's revenues, and laws ensure the federal government gets its cut. And the real estate people get their cut. And the accountants and the lawyers. Lots of people line up to get their cut, which the business owner understands is simply part of doing business.

But when it comes to his employees, the owners often seem to feel these are burdensome evil doers who are out to bankrupt him.

The corporations may argue that  increasing wages  will mean a loss of profits, but this simply means the distribution of monies will be shifted away from stockholders and toward employees, and there ought to be nothing immoral about that.

In fact, there may be social benefit to the shift of money from stock investors to workers. Mad Dog can imagine many benefits.

All the arguments from the bosses's side: Workers don't have to work for us, nobody is forcing them to work for us, if they don't like working in a city with low minimum wage, let them move out of town, etc, etc would be answered by a strong union. The union can say to the owners of businesses:  You don't have to hire any employees. That is your choice, but if you want to hire greeters for your store or if you want employees to flip hamburgers, well, then you have to deal with us. We'll make sure the employees get their cut of the gross income. Your net profit will be smaller, but try running a company without employees.


  1. Mad Dog,
    It would be impossible for me to agree with you more. Like the big players in healthcare, when it comes to industry, all the well heeled players make certain their interests are well looked out for. But who looks out for the interests of the low wage worker? Government, inconsistently, and unions. To say employees are a key player in the process is an understatement, they are the primary player, for as you say-try producing a product or providing a service without employees. But unskilled, poorly paid workers are only able to exert that power when they are united, which explains the concerted effort by the industrial powers that be, to systematically weaken organized labor over the past thirty years. And as you explained in your other blog, we, the taxpayers, pay the price for industry's failure to adequately compensate their workers, since who can make it on minimum wage alone. As a society we don't want people starving on the street corner, so we give the poor enough assistance so they can put a roof over their head and half starve in private..

    To add insult to injury, these retail and fast food workers not only get very little money -they get no respect. Also, did you happen to see the NYTimes article this week on the poor having a significantly shorter life span, not only because of factors like inadequate healthcare, but also due to the stress caused by a lifetime of poverty. Upward mobility is so limited these days many of these low wage workers and their offspring already have their fates set when they are born. Sure, there are super star outliers, but most of the folks getting up everyday to serve us a burger will always be struggling and living paycheck to paycheck, and there is a good chance that is what their kids will be doing as well...

    Well, Mad Dog, after thinking about our broken health care system and the poor treatment of our lowest wage earners I am, right now, a little discouraged. Guess I'll have to go to a quiet place and think happy thoughts-like what you'd see if you attached a camera to your dog....

  2. Maud,

    Yes, I saw the headline: Poor people die earlier in life. Now that's real news. And you have to do a study to know this? Try sitting in the office of any doctor for a week.
    I do see the excesses of union demands, but given the alternative, I can live with unions demanding the moon and having to settle for the reasonable.

    Mad Dog