A Letter to the Editor

The following is a Letter to the Editor I submitted in response to an article featured on the Inforum website. I do realize that this isn’t funny, but it is important. Please read the original, my response, and tell me your opinion. As a manager in the service/retail industry, most of my employees earn wages that afford little luxury, often falling short of making ends meet. I believe that the act of spreading information and increasing awareness of this issue is the only way to bring about change, thereby increasing their job satisfaction and overall quality of life. Please share this, especially if you live in the FM area, if you think people deserve good wages for good work.

 

In Paul Campbell’s opinion column from April 21, he takes aim at the increase in minimum wage for Minnesota and the debate on it nationally. Unfortunately, Mr. Campbell’s arguments miss the mark, and instead, repeat tired political party lines.

First off, Mr. Campbell cannot even take credit for this affront to the world of print media, as it suspiciously parallels a much better article by James Sherk featured on The Heritage Foundation’s website. Mr. Campbell does at least make it his own by providing his hackneyed opinion throughout the piece. Since it was featured, read, shared, and likely discussed in my community, I will refute it all the same.

Mr. Campbell begins laying out his arguments with a misunderstanding of the meaning of words, claiming, “In order to redistribute wealth, you must first take from someone who has it, and use force if necessary.” Increasing wages is, by definition, not wealth redistribution. According to the Stanford Encyclopedia of Philosophy, it is “The social mechanism, such as a change in tax laws, monetary policies, or tort law, that engenders the redistribution of goods among these subjects.” Increasing the minimum wage does not take money from businesses, but requires them to pay fair wages for fair work. His reference to using force is deplorable, and an unacceptable attempt to scare readers away from the opposing view.

From here, Mr. Campbell takes another misstep by stating, “The minimum wage comes down to simple economics. When you raise the price of something, the demand for it goes down. Therefore, when you raise the price of labor by raising the minimum wage, the demand for labor goes down.” While this is true in terms of goods and services, it’s more complicated when you’re looking at labor.

A business’ labor needs are dictated by demand for the product or service offered and the business’ other options to manufacture a product or provide a service. An increase in the cost of labor at a factory, for example, could result in an increase in automation, assuming that automation became more cost effective than employee cost at that point.

However, this doesn’t provide reasoning for Mr. Campbell’s claim, “That means a restaurant owner who employs 10 people and worriedly stares at a slim profit margin as it is would have to pass those costs on to his or her employees or customers, or sometimes both. That means letting employees go or raising prices.” The example Mr. Campbell gives is that of a restaurant, not a factory where work can be automated or outsourced. He is, of course, forced to give this example since factories are largely unionized, and outsourced work deserves its own conversation, entirely.

In the scenario given, the restaurant owner’s decision to have 10 people employed is not a function of cost, but in order to effectively staff the restaurant. Eliminating employees due to cost in this scenario would mean that the owner either: 1) Was over-staffed, a poor business decision in its own right, or 2) The business will no longer be able to provide the same level of service it had before, and will lose sales.

The other option in this scenario is that the owner would raise prices. This is a potential option for the business owner, but Mr. Campbell gives no information about the increase. This is because, to maintain the same profit margin pre-wage increase, the new cost for the customer would be pennies on the dollar. Let’s do some math:

Assume the owner is paying his employees $7.25 (which is probably too high, since they’re tip earning) and increases everyone’s wage to $10.10 (again, likely not the case). That is a difference of $2.85, per employee, per hour. In this scenario, we’re not given any specifics of this restaurant, so I’ll use average numbers from the café I manage, which has close to the same number of staff.

In a typical business day, my café will require around 25 payroll hours. Payroll hours are the sum total of hours each employee works. The increase in payroll cost per average day then is $181.25 to $252.50, an increase of $71.25 a day.

On average, I sell about 90 things (coffee, pastries, sandwiches, etc.) an hour. Let’s put the average cost at $2.00. That means, on average, $180 of revenue comes into my café per hour, resulting in revenue of around $2,160 a day.

Daily revenue of $2,160 and daily payroll cost of $181.25 means that each hour an employee works needs to generate $11.92. What would the daily revenue need to be to maintain that number? $2,341.25, resulting in an average cost of about $2.17 per item sold.

Mr. Campbell really must have the poor in mind when he worries about such miniscule price differences. Of course, this is only considering the margins a small business faces. Large businesses operating at greater scale would see even less significant price differences. I wish I could say that this were the end of the problems in the arguments presented to us, but far from it.

Mr. Campbell goes on to cite the Congressional Budget Office’s claim that the wage increase would result in the loss of 500,000 jobs, a startling statistic if we ignore the fallacies within it.

First, job loss does not necessarily mean an increase of unemployment. Since we are talking about low earning jobs, it’s no secret that many of these people work more than one. In fact, in 2010 the U.S. census found that 7.6 million Americans work more than one job. A wage increase for low-wage earners would mean that people wouldn’t need to work more than one job. Conversely, it makes sense for a business to employ one full-time employee instead of multiple part-time employees due to insurance, training, and other costs that come along with maintaining a larger staff.

Second, this is the worst-case scenario presented by the CBO. To see the far more likely scenarios, read the letter over 600 economists have signed at the Economic Policy Institute. It discusses how an increase in wages results in more money flowing into the economy, less dependence on government programs, better outlooks for families and children, and other aspects of the American Dream.

At this point, Mr. Campbell provides another shockingly meaningless statistic. He tells us that only 2.8% of the population makes the minimum wage. This seems to say that people are, in reality, much better off than Obama would have us believe. Again, his argument makes no sense when you actually look at it.

First, employees receive raises. If an employee makes $7.30 instead of $7.25, they are no longer earning a minimum wage and aren’t included in this statistic. Are they earning a living wage? The point of raising the minimum wage isn’t to help only those earning the minimum, but all people that make up the working-poor class.

Second, he presumes that, since around 50% of that 2.8% (which we already know to be irrelevant) are between 16-24, and 64% work part-time, that they must be students working summer jobs. Perhaps Mr. Campbell should turn off his Leave it to Beaver episodes and take a look at the real world.

Sure, some of that number does represent high-school kids, earning a little money as purely disposable income. This isn’t a bad thing by the way, it gets recycled back into local economies. More to the point, I employ several people in that age-range that are not in school, don’t live with their parents, and are supporting themselves. Please, keep your Mitt Romney, “borrow money from Mom or Dad,” comments to yourself, because that obviously isn’t the answer here. These are working young people that depend on their paychecks just as much as anyone else does.

Once Mr. Campbell has finished “analyzing” the part of the statistic he wants to look at, he then fails to make the next logical step that 50% of these people are then NOT students, working part-time jobs. No, these are people working, trying to provide any income that they can for themselves and their families. Remember the earlier statistic about 7.6 million people working more than one job?

Now, Mr. Campbell takes a strange turn, saying, “Eventually, employees refuse to work for such little pay, and employers are forced to increase it. That’s the way it should be. The market essentially eliminates the minimum wage and sets one based on supply, demand and the cost of living.”

He seems to be talking about a labor force striking or taking other collective action to demand a pay increase. What, exactly, does Mr. Campbell think is happening in America? Are we to believe that a member of the media was unaware of the Occupy Movement, the fast-food workers striking in New York and dozens of other cities, and countless citizen outcries for this? I also find it hard to believe that someone who believes that minimum wage jobs are, “where they learn the practicalities of work and value of earning a dollar,” would support such efforts.

He then claims that the free-market eliminates the need for a minimum wage, which is so far from the truth, I had to make sure I hadn’t misread it. If the free-market ensured fair wages, there wouldn’t have been a Labor Movement, we wouldn’t have Unions, and we never would have had a minimum wage in the first place. Why does Mr. Campbell think these things exist? Also, if the minimum wage had kept up with the cost of living (inflation), the minimum wage would already be $10.86, according to the Bureau of Labor and Statistics Consumer Price Index. So why does he claim these things?

We’re nearing the end, and Mr. Campbell rolls out the party talking points, arguing that reducing government regulation will magically result in higher wages. If you believe this, please re-read my previous paragraph because my fingers are getting too tired to reiterate it.

Finally, we reach the thrux of the piece. Mr. Campbell asks, “So what’s the point of raising the minimum wage?” He asserts that this is all political posturing, simply trying to win votes. I assert that this is our workforce, regardless of age or station in life, getting fair treatment. I believe that some people genuinely do have the interest of the common good in mind. I do agree with one thing though, Mr. Campbell, let’s think bigger.

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5 thoughts on “A Letter to the Editor

  1. You asked for opinions so I think I’m going to give mine, though it’s longer than I would usually put in a comment:
    This is great, and good to hear from the perspective of someone with real experience with minimum wage workers.
    Re: raising prices, isn’t one of the potential problems that raising wages across the board = raising prices across the board = real wages (how much your wages can buy) doesn’t change all that much? From your piece, I agree, I don’t think it can make a huge difference when we’re talking about an extra 17 cents for a muffin, and there’s research showing that wealthy Americans save a disproportionate amount of their wealth, which is actually worse for the economy…but do you think that could minimize the good done by raising the minimum wage?

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    • Thanks for the comment, Jessica!

      I have heard the argument that raising the minimum wage would cause all wages to increase, as well as prices to go up, essentially negating any positive effects. This argument is often coupled to a reference to a country with runaway inflation, where goods are measured in millions, instead of tens or hundreds of currency units. That argument misses a few points though:

      1) the US has effective monetary policy to prevent such things from occurring
      2) raising the minimum wage doesn’t mean higher wages for all, but really only influences wages around the poverty line. Middle and upper class wages are unaffected.
      3) the wage increase is greater than the increased cost of goods, since the cost is spread over a large area

      Ultimately, raising the minimum wage isn’t a cure for poverty, not by a long shot. However, countries with high levels of income disparity are far worse off than countries with less. Raising the minimum wage is simply one piece of a very complicated puzzle.

      Raise the Minimum Wage
      is a part of the National Employment Law Project, and while clearly representing a specific agenda, has some great resources and statistics on the issue.

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      • thanks for the thoughtful reply! yeah, i’ve been reading some and it is a little baffling how so much can be known about income inequality and yet the political discourse is still the way it is. i’m not an expert obviously…just feel powerless sometimes about it i guess.

        Like

  2. Pingback: A Modest Proposal – Thinking Turtle

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