On August 2, 2013, Venessa Wong writes on BloombergBusinessweek.com:
Even McDonald’s (MCD) own hypothetical household budget (pdf) for its restaurant employees seems to suggest it’s difficult, at best, for many in its low-wage workforce to make ends meet. And all this week thousands of fast-food workers at many of the biggest U.S. restaurant chains have staged short-term walkouts in seven cities: New York, Chicago, St. Louis, Detroit, Milwaukee, Kansas City, Mo., and Flint, Mich. The workers are demanding a pay raise to $15 an hour, compared with current average wages across the industry that are closer to the federal minimum wage of $7.25. President Obama has proposed raising the lowest wages to $9 an hour, which would be a 24 percent jump over the minimum wage.
Food-service workers are among the lowest paid in the country. Here’s whatPayscale.com data, based on about 3,000 employee surveys, show about how much workers are making at the country’s 10 biggest fast-food chains compared with workers in other fields. Not all the chains listed here are facing protests this week—they are instead being highlighted for the size of their workforces:
So how much could restaurant chains stand to increase their wages before profits evaporate? It’s a complicated question. Based on years of research, some economists are now advocating a minimum wage of $10.50 (PDF), which they claim would increase a chain’s costs by only 2.7 percent. Roughly half of food-service workers currently make less than that proposed $10.50 rate, so not everyone would be affected. The companies could make up the difference through a combination of price increases—say, a nickel more for a burger—reduced turnover, productivity gains, and “a slightly more equal distribution of companies’ total revenues,” which is a nice way of saying the highest-paid employees would see their incomes increase more slowly, explains Jeannette Wicks-Lim, an economist at the University of Massachusetts Amherst and one of the signees of the petition.
Here’s a rough look at how fast-food financials break down. There are two kinds of restaurants: those run by the company, and those run by independent franchisees who set their own wages and pay royalties to the company (at many chains, most locations are franchised). Together, company-owned and franchise McDonald’s locations last year contributed $3.9 billion in economic value added, a measure of profit that subtracts for taxes and the cost of capital, according to Craig Sterling, managing director and global head of equity research at evaDimensions. Burger King’s (BKW) economic profit was $61 million by this EVA metric.
The other result not addressed is the greater employment of robotics and super-automation to save labor costs.
While I am not opposed to the concept of a “minimum wage,” economic productivity is a bigger part of the story. Those arguing its support basically argue that labor is producing more value today, but working people aren’t seeing any of the gains. Who has walked away with the proceeds from all that productivity?
A January report from Oxfam noted, “The richest one percent has increased its income by 60 percent in the last 20 years.” It further argued that the 2012 net income of the world’s top 100 billionaires—a haul of $240 billion—would be four times the amount needed to eliminate extreme poverty internationally.
These arguments fail to point out the income source for the richest one percent is not their labor but their dividend income derived from their ownership of productive capital assets––the non-human factor of production.
To maximize profit and thus dividend income, the purposeful function of business, companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by non-human physical productive capital’s ever increasing role.
This is the reality of business in the global setting where lowest cost production is necessary to be competitive.
Yet, the government continues to discharge its responsibility for the health and prosperity of the economy through coerced trickle-down; in other words, through redistribution achieved by the rigging of labor prices, including the minimum wage, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed. Employment should practically start at the time one enters the economic world as a labor worker, to become increasingly a capital owner, whose capital contributes to the work load, and at some point to retire as a labor worker and continue to participate in production and to earn income as a capital owner until the day you die.
It doesn’t make any difference what’s going on in the scientific world or the business world or the industrial world, we still believe full employment and a minimum wage will solve our income distribution problems. This is what major political figures have always maintained.
Binary economist Louis Kelso, whose books should be read by ALL conventional economists, the media and political figures, was quoted as saying, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”
The best way to protect American citizens from this spiraling disaster that will continue to undercut American workers, destroy jobs and devalue the worth of labor in the United States is to implement policies to create an OWNERSHIP SOCIETY, whereby EVERY American is extended the right to acquire productive capital with the self-financing earnings of productive capital––the physical wealth-creating assets of corporation, e.g., machines, super-automation, robotics, digital computerization operations, etc. Currently non-property-owning Americans are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively miniscule, as are their dividend payments compared to the top 10 percent of capital owners.
What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need the dividend earning it produces.
This will address the fact that productive capital is becoming more productive and increasingly responsible for the production of society’s products and services, not labor, whose relative input is constantly being diminished by the substitution of the non-human factor of production.
As Kelso asserted: “The problem with conventional financing techniques is that they address only the productive power of enterprise and the enhancement of the earning power of the rich minority. Sustaining or increasing the earning power of the majority of consumers who are dependent entirely upon the earnings of their labor, or upon welfare, is left to government or governmentally assisted redistribution of income and to chance.”
See my article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html
Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html. And also “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html
Also see the article entitled “The Solution To America’s Economic Decline” at http://www.nationofchange.org/solution-america-s-economic-decline-1367588690 and “Education Is Critical To Our Future Societal Development” at http://www.nationofchange.org/education-critical-our-future-societal-development-1373556479. And also “Achieving The Green Economy” at http://www.nationofchange.org/achieving-green-economy-1373980790. Also see it complete with the footnotes at http://foreconomicjustice.org/?p=9082.
Also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624
