Raise the U.S. Minimum Wage – Now!
By Shlomo Maital
Have you wondered, why low-paid American workers, who lost well-paying jobs in manufacturing to Asia and instead got low-paying jobs in services, like fast foods, have been so passive under exploitation and poverty?
No longer. A spontaneous group of fast food workers has organized, using social networks, and have mounted demonstrations in major cities. Many earn minimum wage, which in some places is $7.50 an hour. That means you get $30 a week for a 40 hour work week, or $120 a month — $14,400 a year. Nobody can survive on that.
Is that what they are worth? Is that commensurate, as economists say, with the value of the marginal product of their labor? I doubt it, given Macdonald’s fat profits.
But wait! If you raise the minimum wage, you will cause more unemployment and hardship, because the higher the price of something, the less is the demand. Right?
Here is what Zeynep Ton writes in Fortune (he’s an adjunct associate professor of operations management at the MIT Sloan School of Management and the author of The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits).
I studied four retail chains that manage (to pay workers more than minimum wages); Costco, Trader Joe’s, QuikTrip (a U.S. chain of convenience stores with gas stations), and Mercadona (Spain’s largest supermarket chain). They offer their employees much better jobs than their competitors, all the while keeping their prices low and performing well in all the ways that matter to any business. They have high productivity, great customer service, healthy growth, and excellent returns to their investors. They compete head-on with companies that spend far less on their employees, and they win.
Zeynet Ton notes: “Nearly one fifth of American workers work in retail and fast food, and they have bad jobs. They earn poverty-level wages, have unpredictable schedules that make it hard to hold on to a second job, and have few opportunities for success and growth. These are not just people who are uneducated or unskilled. In 2010 more than a third of all working adults with jobs that did not pay a living wage had at least some college education or a degree.”
It’s simple. To boost a flagging economy, put more income into the hands of those who need it; they spend it, creating demand, more jobs, and by Keynes’ multiplier effect, economic growth.
Does this sound more logical than the European no-brain austerity program? And, if nothing else, more fair?