Tuesday, August 6, 2013

#LaRevolucion: Kiss the Dollar Menu Goodbye, and America Right Along With It.

File Under: Slave to the Wage

I listen to people, especially to people with whom I have personally connected. Therefore, when friends, associates, and acquaintances of mine lambast low-skill workers, who want an increase from the Federal Minimum Wage to a more liveable wage, as being unambitious and lazy, I took note. This is especially confounding when this criticism comes from individuals who at one point in their lives sailed in the same boat. I need to see if their is any merit to either side of this discussion.

What We Agree Upon

The Federal Minimum Wage is currently $7.25 per hour for most types of hourly workers.  In some localities this minimum is higher, up to $3.00 more in fact.  Minimum wage jobs are usually low-skill, entry level jobs designed to be occupied temporarily by young, inexperienced workers before moving on (ideally) to bigger and better things. However, what we are seeing is that this supposed teens-first-job type of job is turning into a dead-end job and thus a career for more and more people. In reality, the age of the average foodservice worker is currently 29, half a decade beyond college-age and a full decade beyond the teenage years.

Businesses Are Not Charities

Businesses are not charities and even charitable organizations have to be profitable.  Economists believe minimum wage standards and higher wages will lead to higher unemployment because corporations will respond by: downsizing, reducing plans for expansion, and raising prices.  More expensive products will become less in demand and you get a self-fulfilling loop of socioeconomic nastiness.  Additionally, these positions are designed for their turnover. Better wages would decrease turnover (also increasing unemployment) and cause deleterious effects (to everyone but the workers and consumer) we will get into in a short while.

Nobody Forces You To Work There

Why do not these "low-skill" workers get more skills, and in turn better wages or jobs?  To the teenager getting ready to graduate high school back in 1978, McDonald's might have been a great first job.  Today, however, working through college on minimum wage is a bit harder than you think considering the cost of tuition has increased 1,120 percent over what it was 30 years prior.  In case you are wondering, no, the minimum wage has not increased anywhere even remotely close to that amount.  But, the cost of living (which includes things like food, clothing, shelter, transportation, education, and healthcare) has done its darndest to keep in line.  In Washington, D.C., our nation's capital, the current minimum wage is $5.43/hr below the living wage.  Unless two and four-year colleges are going to start handing out free certificates and degrees, increasing your skills on minimum wage is going to take some "Machine Gun" Kelly / Bernie Madoff-esque accounting and budgeting.

What's really ridiculous is that the competition for low-skill jobs has increased so much those seeking to fill these positions have started looking for candidates with college degrees in some instances, further squeezing out the people who need to be working there in the first place.  As you can see, in a world where: financing education is astronomical, individuals with degrees fight teenagers for jobs, the cost of living has outpaced earnings, American jobs are shipped off to foreign lands, illegal labor devalues American workers, manufacturing jobs are becoming extinct, schools no longer teach practical skills, and unionization is an antiquated notion ...people are, in actuality, sort of forced to work where they can work, with little hope of advancement.

"Inner City Pressure" by Flight of The Conchords from Flight of The Conchords released 2008 on Sub Pop

The Dreaded Evil Socialist Living Wage

Let's crunch some numbers.

Roughly 8% of the United State's population work in the foodservice industry.  Not all of them are low-skill, minimum wage employs (less than 10%), but for the sake of this discussion let's assume they are to keep things simple.  So far we have about 2,368,720 full-time employees making about $15,080 a year.  Again, that number will not be 100% representative because some make more than minimum wage.
  • Foodservice workers: 2,368,720 foodservice workers
  • Annual wages: $35,720,297,600 in annual wages
  • Non-wage labor costs: $4,429,316,902.40
Every year some nearly 40% of all food and hospitality service workers voluntarily terminate (quit), while some nearly 20% are involuntarily terminated (fired).  That is a turnover rate of about 60% annually for the industry as a whole.  According to Lisa with WyckWyre, an online HR service provider for the restaurant industry, some segments of the foodservice industry, like fast food restaurants, exceed 100% turnover rates, meaning they lose all the workers they had the year before and some of the ones they hired this year.  For jobs making less than $30,000 per year turnover costs about 16% of the terminated workers salary to cover for and replace the missing worker.  It is probably a safe assumption to say that most people leaving the foodservice industry are making less than $30,000 per year.
  • Cost of annual turnover to foodservice industry: $5,715,247,616
  • Total real labor cost: $45,864,862,118.40
What would it cost the foodservice industry to raise the hourly wage of their workers from the Federal Minimum Wage of $7.25 per hour to the Washington, D.C. living wage of $13.68 per hour for a single adult?  Let us find out.  Keep in mind that not every worker makes $7.25 per hour so the gap that needs to be covered is actually less than represented.  Also for the sake of this exercise let us assume that increasing the wage of these workers will bring turnover down to the level of similar paying jobs, such as those in the public sector.
  • D.C. living wage: $13.68
  • Annual wages: $67,400,506,368
  • Non-wage labor costs: $8,357,662,789.632
  • Rate of turnover: 4%
  • Cost of annual turnover: $2,696,020,254.72
  • Savings via turnover reduction: $3,019,227,361.28
  • Total real labor cost: $78,454,189,412.35
  • Final cost of wage increase: $32,589,327,293.95

$32,589,327,293.95 !? Oh, the humanity!

That's a fairly steep bill to foot just so a bunch of lazy, ambitionless burger-flippers and coffee-pourers can live comfortably ...right?  Wrong.  It is no paltry sum, for sure.  However, when you take into consideration that just ten of the highest paid CEOs in the industry make a combined $766,450,849 in salary, it is hardly unjustified.  Even if we could get the CEOs to take a compensation reduction, to help ease the burden, it will fall to the consumer to pay the piper so these bums can afford to live.  Darn socialism. So, what is the damage to the American consumer?  Sadly, not as much as they would have you believe.
  • America's projected fast food bill for 2013: $200 billion ...with a "B," per year.
  • Added cost of the wage increase to America: 16.3%

What the heck?  I thought this was supposed to break the economy?  That is not even a quarter on the dollar.  What gives, why do we not go ahead and do this for goodness sake?

Republocrats Are Greedy and Stupid, and They Think You Are Too

If the CEOs and other shareholders can get America to pay 16.3% more for the filth they peddle, they most certainly are not going to pass the added profit off to their employees.  And, remember those other consequences of less turnover, yeah, that is bad for business.  One of the reasons it is so hard for foodservice workers to unionize, is because nobody sticks around long enough to join up.  Low wages keep the workers docile and pliant, as they can ill-afford to go long without employment like higher-salaried members of unions in other industries.  Moreover, the longer you keep someone employed the higher your cost will be for unemployment insurance, workers compensation risk, healthcare costs, and any promised retirement benefits.  If you are a McDonald's executive you want to turn-em-and-burn-em, send them packing to your buddy at Walmart, who will send them to his buddy at Burger King, who will send them to his buddy at Seven Eleven.  But it is not just financial, it is political too, which is still financial in the end.

"Money" by Pink Floyd from The Dark Side of the Moon released 1973 on Capitol

The right might not want to share the wealth, but the left does not want to lose the voter base - the source of their wealth and power.  If a Washington, D.C. household of two adults and two children had both parents working full-time for $13.68 per hour they would not only smoke the living wage of $24.95 per hour, but they would obliterate the poverty wage of $10.60 per hour.  Seeing as living wage covers everything including food and healthcare that means no more dependence on food stamps, Medicaid, or Obamacare.  And no more dependence on the left.  One or both parents could go back to school and get an education to get a better job, save money, send their children to private school, go on vacation (Eeek Gads!), plan a retirement (No Medicare Part B *frown*), and god-forbid - open a business and hire some unemployed low-skill workers.  Now we all know what happens when you become educated and wealthy: you become conservative.  If you are no longer impoverished, left-leaning ideologies begin to look very unappealing.  That is why the president proposed that paltry $9.00 minimum wage.  A piddly one or two dollar wage increase is easily offset by cost savings in reduced turnover when added to free/low-cost incentives like flexible scheduling.  Such a wage would no doubt help many American families scrape along and they could be forever grateful to the left for throwing them some table scraps, but that wage would do absolutely jack for most Americans - like those in D.C. - who would still be living in poverty trembling in fear every time the left says the right is trying to take away their food stamps to build more tanks.


The right is callous, greedy, and douchey, but the left is down-right sinister.  The left is going to bark and cry wolf in an attempt to make the right look bad.  The right will rise to the task and oblige them with plenty of anti-middle class rhetoric-by-numbers.  And so the dance goes.  The right keeps their cash and do not have to rub elbows with the nouveau riche at the country club, and the left gets to keep their stranglehold on blue collar America, lording over their empire of kickbacks and political favors.  We can allow Congress, the corporations, and the banks to play games with our country like this is one giant game of Monopoly.  We can deride the man or the woman who got our order wrong at the drive-thru.  And we can twiddle our thumbs as the American Dream becomes the American Nightmare.  Meanwhile, $7.25 per hour still will not be a living wage, no matter how you slice it.

"Slave to the Wage" by Placebo from Black Market Music released 2000 on Hut

[1] http://www.huffingtonpost.com/2013/08/04/economic-mobility-minimum-wage_n_3704799.html
[2] http://www.cbsnews.com/8301-505125_162-57552899/how-much-does-it-cost-companies-to-lose-employees/
[3] http://www.americanprogress.org/issues/labor/report/2012/11/16/44464/there-are-significant-business-costs-to-replacing-employees/
[4] http://www.mybudget360.com/food-service-sector-us-economy-top-employment-sector-growth-economic-recovery/
[5] http://illinoispolicy.org/news/article.asp?ArticleSource=4117
[6] http://livingwage.mit.edu/places/1100150000
[7] http://now.msn.com/americans-spent-dollar200-billion-last-year-on-fast-food-and-beer-alone
[8] http://www.mcdonalds.com/us/en/food/meal_bundles/dollar_menu.html
[9] http://www.huffingtonpost.com/2012/08/15/cost-of-college-degree-increase-12-fold-1120-percent-bloomberg_n_1783700.html
[10] http://www2.qsrmagazine.com/articles/features/118/bottom_line-1.phtml
[11] http://www.wyckwyre.com/
[12] http://www.bls.gov/oes/current/oes353021.htm
[13] http://www.statista.com/statistics/196614/revenue-of-the-us-fast-food-restaurant-industry-since-2002/

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