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Populism and the minimum wage increase

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“Why can’t we give good workers an extra dollar or two an hour?” a good guy commentator asks his audience in the midst of an argument over the federal government raising the minimum wage. “I don’t think one or two dollars, here and there, is going to hurt anyone.”

“But we don’t have to pay these good workers,” the informed audience member will reply. “Their employer does. I know you prefaced your argument by saying that good workers should be given a raise, but if the federal government mandates a raise in the minimum wage, won’t underperforming workers be given a raise too?”

“You’re splitting hairs,” this good guy commentator would probably say.

“You’re the one that said good workers,” the informed audience member should reply, “And if we’re limiting our argument to good workers, then research studies from economists at Florida State University and Miami University found that two-thirds of minimum wage earners received a bump in pay in their first twelve months on the job. And I would assume that those bumps in pay go out, primarily, to these good workers. So, if that study is to be believed, good workers should be able to find that bump in pay without federal intrusion into the market.”

If the good guy commentator has any debate skills, and he has solid conviction in his position, he’ll change the theme of the topic slightly. “Have you seen the corporate profit sheets of the corporation that owns Pizza Hut lately? I don’t think a dollar or two here and there, is going to break the bank for them.”

“Fair enough,” the informed audience member will reply, “But do you have any idea how the Pizza Hut corporation operates? According to the About.com franchise review of the Pizza Hut franchise, Pizza Hut brags that “80% of our stores are owned by independent franchise operators.”{1} When you suggest that Pizza Hut can afford it, are you speaking about the 20% of those corporate-owned establishments exclusively, or are you also referring to those privately owned establishments too? If you're even inadvertently including the privately owned, then I have to ask you if you have ever seen their profit sheets?”

Before entering into such arguments with such good guy commentators, you should preface all of your replies with various forms of: “You’re wonderful.” In the course of your argument, you’ll find that the actual plight of minimum wage workers is not their primary concern. It may be in their top five, as we cannot deny that they have some sympathy for these people, but it pales in comparison to their desire to appear sympathetic. As such, our next reply should go like this:

“You are wonderful Mr. Good Guy commentator, and I realize that when you select the Pizza Hut franchise you do so to give your listening audience a boogey man to hate in comparison to your sympathetic concerns, but when you’re looking to the corporation that owns Pizza Hut, one thing that is involved in those profit sheets are the franchise fees that a Mr. Johnson from Pocatello, Idaho pays to the corporation to own his individually owned Pizza Hut franchise. You’re also forgetting to account for all the expenses that Mr. Johnson has to pay, and everything that goes into him achieving such a slim margin of profit that he can barely afford to pay your minimum wage recipient. The point is that the corporation that owns Pizza Hut does not factor all of these individually owned franchise’s expenses into their total profit sheets, but raising the minimum wage would cut into Mr. Johnson’s.”

“I pay my employees well above the minimum,” the good guy commentator will then say to romanticize his position on the issue. “I probably pay them too much, but I think it’s worth it to keep good employees.” The good guy commentator may also inform you that at one point in their life, they painted houses to make a buck, and that that was basically minimum wage. They will then say something along the lines of, “And that wasn't a livable wage back then, and it isn’t now.”

“You are wonderful sir,” the informed audience member will reply, “And I realize that your humble beginnings put you in touch with some of the folks, but are we concentrating too much of this focus on those that receive the minimum hourly wage, and too little emphasis on the individual employers that pay them this wage? Aren’t most employers, that desperately seek “good workers”, already giving them these raises that you want the federal government to mandate? Again, I am forced to cite those research studies from economists at Florida State University and Miami University that found that two-thirds of minimum wage earners receive a bump in pay in their first twelve months on the job, and I’m going to, again, put forth the assertion that these bumps are performance based to the “good workers” you talk about in your populist plea.”

Most populists don’t care to have statistics, or research studies, in their argument. It’s not the purpose of their argument to discuss semantics. They simply want to receive a communal sigh at the end of their good intentions commentary. The only statistic that they’re truly concerned with comes from the polls that suggest that an overwhelming majority of Americans, across all political spectrums, support the idea of the federal government raising the minimum wage, as long as that mandate doesn’t affect overall job opportunities. The good guy commentators are also informed of the poll conducted by Reason-Rupe, in which a majority of Americans, 61%, stated that they don’t believe that raising the minimum wage will affect job opportunities.{2} These studies go back and forth on that debate, but most of the studies—that haven’t been refuted—state that raising the minimum wage does have a direct effect on overall opportunities in the market.

“The minimum wage should, at least, keep up with inflation,” a good guy commentator will then say to defeat all prior points. “If it had,” they will pose, “The minimum wage would already be up over $9.00 an hour.”

“Wonderful point, Mr. Good Guy commentator,” the gracious and respectful audience member will reply, “But a Forbes.com article quotes former Obama administration economist Betsey Stevenson saying, that that figure is based on the assumption that inflation always goes up.

Inflation rates can both rise and fall, which means a minimum wage that truly kept up with inflation since its inception in 1938 would only be $4.12 today—not the current $7.25,” she admits.{3}

The good guy commentator's goal is to characterize all Mr. Johnsons, that own individual franchises, as mean Mr. Johnsons. They do so in the manner the Scooby Doo cartoon did before they unmasked the monster, but good guy commentators prefer to leave that mask on the mean Mr. Johnsons during the course of your discussion on the matter, to lead the audience to the populist notion that it’s more about the monster, the Pizza Hut franchise, because that’s a huge corporate monster we can get all lathered up about and love the good guy commentator for tackling.

In the real world, however, the individual owners of Pizza Hut franchises are so desperate for good employees that they’re willing to pay them whatever they can to try to keep them for as long as possible. They’re willing to pay her whatever she’s worth, and more importantly what the market dictates. If they’re not able to pay them that dollar above the market, they know that their prized employee will eventually leave them, and she will go to the place that is more able to pay them more for being a good worker.

Sean Davis, at The Federalist, points out that not only is the idea of the federal government raising the minimum wage an attempt to obfuscate all of the real issues in the federal government, but it’s also a non-issue when looked at from the proper perspective.

It’s a non-issue, Sean Davis writes— citing the 2012 offerings from the Bureau of Labor and Statistics (BLS) — because a mere 1.5 million hourly workers, or 1%, of the 155 million workers of the U.S. population actually makes the minimum wage. He further states that 31% percent of that 1% are between sixteen and nineteen years old, and 55% are under twenty-five years of age.

If the 2012 numbers from the Pew Research analysis of U.S. Census Bureau data are to be believed, then a record number, 56%, of those young people between the ages of 18-24, still live at home with mom and dad.{4} If these numbers hold true in 2014, it can justifiably be stated that the majority of those making minimum wage are not counting on minimum wage to be a “livable wage” in the manner our good guy commentator, powerful politicians, and their spokesmen, define as a livable wage, but a supplementary income to supplement their supplementary lifestyles.

Davis also cites those BLS stats that state that of the 1% making the documented minimum wage, 51.6% receive bonuses, tips, and commissions that take them over the minimum wage. “25.5% of that 1% are in sales positions in which commissions and bonuses are paid out; and 26.1% of that 1% are in service and food related positions where tips are paid out to employees.” He also cites BLS stats that state that, “51.5 percent of U.S. workers earning the federal minimum wage – roughly 800,000 out of the 1.5 million — worked an average of 29 hours or less each week.”{5} So, a majority of these good workers are also part-time.

In essence, the good guy, populist commentator gets huge points for being wonderful by simply addressing this issue, but when one truly whittles down the percentages of those that are “stuck” making the minimum wage, with no end in sight, the good guy, populist commentator is actually talking about a miniscule portion of the population. Particularly, when he adds to his populist position by stating that, “There should probably be a set aside for teenagers.” He gets to be all things to all people with such an approach, and he would probably try to nuke your statistical, research attack on his position by stating that “If so few actually make the minimum wage, why shouldn’t we lift it since apparently so few employers pay it?

“Wait a second,” the informed audience member would be forced to ask at this point, “If you agree that when all the stats are sorted through, raising the minimum wage actually affects a miniscule portion of the population, especially when we set teenagers aside, why are we changing federal law that will, in one way or another, affect the entire population? Why don’t we start a nationwide campaign that encourages those relatively few “good adult workers” that are “stuck” making the minimum wage to leave their employers and find better work, and a better wage? I realize that may sound like a simplistic approach, but isn’t it a better idea than overhauling our entire system?”

Sean Davis proposes that the whole reason we’re talking about this can be broken down to a J.P. Morgan quote:

Every man has two reasons for everything he does: a good reason and the real reason.”

The good reason, as proposed by our good guy commentator, is to give the good, adult workers a little extra spending cash. “The real reason,” Davis proposes that big name politicians have started this national conversation to increase the minimum wage, “Is to trigger union contract talks, restrict the ability of businesses to hire low-skill workers who might gladly work for lower wages in order to gain experience, and thus keep union members from facing competition from workers who might threaten union jobs. The real reason is to pay back the labor unions who helped re-elect the president in the form of higher wages.”

It's difficult to know if these good guy commentators are uninformed on the totality of issues such as these, based on the fact that their position in life has allowed them to focus on the macroeconomics concerns, without knowing the microeconomic concerns that many small employers face in America today, or if their short-sightedness is based on the best of intentions for the folks. You can bet, however, that this particular good guy commentator will choose a viewer email, on the day after your debate is aired on his program, to show that only the radical fringe of his viewers agree with your position. It doesn't matter if he received thousands of emails that rationally opposed his position, with stats and research, your position will be denigrated on his show by an exaggerated take on the position that shows that not only was he was he more sensible on this issue, but that he's actually a pretty good guy that cares about the folks.

{1}http://franchises.about.com/od/pizza/fr/pizza-hut.htm

{2}http://reason.com/poll/2014/01/28/72-percent-favor-raising-minimum-wage-bu

{3}http://www.forbes.com/sites/realspin/2013/04/17/the-record-is-clear-minimum-wage-hikes-destroy-jobs/

{4}http://www.pewsocialtrends.org/2013/08/01/a-rising-share-of-young-adults-live-in-their-parents-home/

{5}http://thefederalist.com/2014/01/28/11-facts-about-the-minimum-wage-that-president-obama-forgot-to-mention-during-the-state-of-the-union/

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