On August 4, 2015, David Lazarus writes in the Los Angeles Times:
Business leaders have every right to voice concerns about a $15-an-hour minimum wage. Anything that could cut into profits is a legitimate worry for companies.
But the spectacle of millionaire CEOs opposing a living wage for their workers serves only to highlight the obscene income gap between those at the top and everyone else whose contributions help keep the corporate wheels turning.
Sally Smith, chief executive of the restaurant chain Buffalo Wild Wings, said last week that a $15 minimum hourly wage would hurt teens seeking their first paying job. Restaurants, she said, would favor people with more experience.
Buffalo Wild Wings has two outlets in Los Angeles, which has approved raising the minimum wage to $15 over the next five years, and one in Pasadena.
Smith received compensation worth $4 million last year, making her one of the 10 highest-paid CEOs in the restaurant industry, according to the financial website the Motley Fool.
Maybe it’s a bit of a cheap shot to cite Smith’s pay in the same breath as presenting her thoughts on the minimum-wage issue. Because she’s right: A $15-an-hour wage could prompt employers to favor more experienced workers over newcomers.
But that doesn’t mitigate the perversity of someone in the top 0.5% income bracket actively trying to prevent her underlings from making enough to afford a one-room apartment and put food on the table.
Smith’s comments came just a week after Dunkin’ Donuts’ CEO, Nigel Travis, was quoted as saying that a $15 minimum hourly wage for fast-food workers is “absolutely outrageous.”
His compensation more than doubled last year to $10.2 million.
Christopher Faricy, an assistant professor of political science at Syracuse University, told me it’s reasonable to set minimum wages at different levels in different parts of the country. But for CEOs making gobs of money, he said, “fighting against a living wage comes across as heartless.”
Earnings have been largely stagnant for working stiffs. Wages and salaries rose a record-low 0.2% in the second quarter, the Labor Department said Friday, making the first quarter’s 0.7% growth seem meteoric by comparison.
The typical CEO, on the other hand, made more than 300 times as much as ordinary workers last year, according to a recent report from the Economic Policy Institute.
It found that each of the heads of the largest U.S. companies was pulling down an average $16.3 million, which represented a more than 54% pay hike since the end of the financial crisis in 2009.
Since 1978, inflation-adjusted CEO pay has climbed — wait for it — nearly 1,000%, the report found. Wages for ordinary workers, meanwhile, rose just 11% over the same period.
The consulting firm Deloitte reported last year that the average German CEO made 147 times what the typical worker made, the average British CEO’s pay was 84 times greater than workers’, and Japanese CEOs scraped by with just 67 times what underlings earned.
The average American worker was paid $36,134 last year, according to the Bureau of Labor Statistics.
I reached out to both Buffalo Wild Wings and Dunkin’ Donuts to see whether they wanted to walk back their boss’ remarks or address how anyone could live on current minimum wages in pricey places like L.A.
A spokeswoman for Buffalo Wild Wings said Smith’s comments “were about the unintended consequences on youth employment” and that “she did not discuss how workers in costly places like L.A. could get by on current wages.”
A spokeswoman for Dunkin’ said Travis supports “reasonable increases to the minimum wage at the state and local level.” But she said Dunkin’ Donuts is against “unfairly” targeting fast-food chains for higher wages, even though these are where many minimum-wage workers are employed.
The reality is that opponents of a higher minimum wage are being shortsighted. They forget that Henry Ford famously boosted his workers’ pay in 1914 because he wanted them to afford his cars and he didn’t want them leaving for better jobs.
They also overlook that, adjusted for inflation, the federal minimum wage peaked in 1968 at $8.54 an hour (in 2014 dollars), according to Pew Research. Since it was last raised in 2009 to the current $7.25 per hour, the federal minimum has lost about 8.1% of its purchasing power because of higher cost-of-living expenses.
In other words, minimum-wage workers are making less now than they did nearly half a century ago
“We have mounting evidence that raising the minimum wage won’t increase unemployment,” said Linda Rosenstock, dean emeritus of UCLA’s Fielding School of Public Health. “If anything, it will create benefits for employers.”
For example, she said, a living wage improves employee morale, which in turn boosts productivity and reduces costly turnover.
Rosenstock said recent research has shown that low pay can take a toll on workers’ health by forcing them to hold multiple jobs or perform double shifts, and to not seek medical treatment when needed. This can result in higher absenteeism.
“Raising the minimum wage can address that,” she said.
Millionaire CEOs need to take their focus off the next quarterly earnings statement and acknowledge that paying workers a living wage is good for long-term business. It makes for better, harder-working employees.
It also makes for more consumer spending because people have more cash in their pockets.
If I was in the chicken wings or doughnuts business, I’d think that’s something worth supporting.
http://www.latimes.com/business/la-fi-lazarus-20150804-column.html
This article by David Lazarus is a bit deceptive because when discussing CEO income he identified it as “compensation worth” without distinguishing salaries from stock OWNERSHIP worth. But when comparing labor worker income, it is ONLY based on wages/salaries earned.
Unfortunately, I think that most Americans will not appreciate the wording distinctions because most Americans can ONLY relate to earning wages or salaries from working a job. They are virtually oblivious to the income potential underlying OWNERSHIP of stock in successful American business corporations.
Nor does Lazarus EVEN address the fact that when costs increase, producers have to raise prices. The problem is that raising wages increases a business’s fixed costs. There are no two ways about it. If there are 100 man-hours of minimum wage work to be done, and the minimum wage is $15, the cost of having that work done is $1,500, no ifs, ands, or buts. A business may shift hours around from more expensive workers to less expensive or more efficient workers, or find a robot to take the place of the human workers, but in the short run, as a rule, an increase in wages from $10 to $15 per hour is going to increase the cost of labor by 50%, or (in this example) from $1,000 to $1,500 for 100 man-hours of work.
Lazarus and other minimum wage advocates want to prove that raising the minimum wage has no adverse effects, only benefits. Others, opposed to increases in wages with no corresponding increase in worker productivity, are equally adept at proving that there are only adverse effects.
Raising wages increases the fixed cost of doing business. If you need 100 man-hours to get X units of production, then a 50 percent increase in fixed costs makes the company less competitive with companies that did not increase wages . . . say companies, in China, for example, which might already be getting X units of production out of 50 man-hours at a cost of 75¢ per hour.
Plus, everything else being equal, suppose the economy has a downturn and the company desn’t sell X units of production. The company only sells two-thirds of X. That’s two-thirds the revenue with which to cover fixed costs, including the increase in wages, formerly at two-thirds the current level. Don’t have the money? There’s an easy solution: it’s called “bankruptcy.”
It should be evident that, everything else being equal and no adverse effects, an increase in wages at best results in the worker breaking even. When costs increase, producers have to raise prices, or go out of business by not making enough profit. These costs thereby get passed on to the consumer . . . who is the worker, causing him or her to pay more for the same thing.
The real solution to the wage trap is to turn workers into OWNERS, so that they can produce with both their labor and the productive capital assets of corporations they OWN. This also entitles them to a share of profits commensurate with their respective OWNERSHIP stakes. If workers (or anyone else) purchases shares in a company and pays for them with FUTURE profits (dividends), widespread ownership can be accomplished without taking one cent out of existing savings, or reducing take-home pay by a single dime.
Under the proposed Capital Homestead Act, the estimate is that the economy would turn around in approximately 18 to 24 months, reaching REAL full employment within 3 to 5 years. Assuming that the typical capital credit acquisition loan was paid off in 9 to 10 years or less, there would be massive infusions of new demand entering the economy almost from the inception of a program. This would greatly increase profits, and — assuming a reasonable share of those profits (after operational costs) were distributed in a profit-sharing program the result would be further increase demand in the economy.
It thus makes sense to stop demanding increases in fixed wages, and start advocating for broadened personal wealth-creating, income-producing capital OWNERSHIP — and profit sharing. Let’s move to an OWNERSHIP CULTURE and a FUTURE economy that can support general affluence for EVERY child, woman, and man wherein everybody benefits and no one is harmed.
