Having already lost the local debate on the minimum wage in general, and on $15 in particular, the business interests on Mayor Ed Murray’s Income Inequality Advisory Committee have largely adopted a strategy of attempting to redefine the meaning of the word “wage” itself. The restaurant industry has long pined for a “tip credit” (or “tip penalty” from the perspective of workers) in which tips are counted towards meeting the minimum wage. But that wouldn’t lower the labor costs of businesses that rely on non-tipped employees, and so a strong push is being made to adopt the more sweeping notion of “total compensation.”
I’ll delve more deeply into the tip penalty debate in a subsequent post, but for the moment I want to focus on total compensation, which in addition to tips, would count the cost of providing health insurance, sick leave, vacation leave, 401K matches, and other non-cash benefits toward the employer’s requirement to pay a minimum $15 an hour wage. And to better understand the impact of adopting a $15 an hour total compensation minimum wage, it is useful to start with a real-life example:
Let’s say you are a dishwasher working full-time at a midrange Seattle restaurant, earning $10.50 an hour plus $3 an hour in pooled or shared tips. You’re taking home the equivalent of $13.50 an hour, plus benefits. I guess there are worse jobs, but it’s hardly a living wage.
Now let’s say we pass a $15 total compensation minimum wage.
Based on the monthly price I’ve been quoted for COBRA, minus my share of the premium that had been deducted from my paychecks, I can estimate that I had cost The Stranger about $1.60 an hour for our so-so medical and dental coverage—let’s assume that’s typical for a restaurant. Then there’s a shift meal, with a retail price of $12.00, or another $1.50 an hour over the course of an 8 hour shift. Add two weeks vacation for another $0.40 an hour. Paid sick leave, that’s another $0.20 an hour still. I’m sure there are other benefits I’m missing, but this is more than enough to make my point. That’s already $3.70 an hour in benefits just there.
So… $10.50 an hour in wages, plus $3 an hour in tips, plus $3.70 an hour in benefits, and after our wonderful new $15 minimum wage ordinance passes, you’ll magically be making $17.20 an hour! That’s great! Except your take-home pay won’t increase a penny. In fact, some unscrupulous employers may seize this as an opportunity to actually lower wages. Hooray for total compensation!
Of course, not all employers are going to be dicks about it. But in this imbalanced labor market, some will. Wage and tip theft are already rampant. So if you don’t think that some employers are going to be eager to creatively use a $15 total compensation minimum wage as an opportunity to cut labor costs, then you don’t know fuck about capitalism. (Or human nature.)
But wait—it gets even worse.
Your $15 minimum wage would be indexed to inflation, but the cost of one of your biggest benefits—health insurance—will inflate at many times that rate. Health care inflation is currently at a historic low of about 6.5 percent, but the Consumer Price Index is only expected to rise about 1.75 percent during 2014. That means that the costs of your benefits will rise significantly faster than the putative minimum wage, pushing the effective wage floor ever lower in inflation adjusted dollars over time. For example, after five years at the inflation rates above, the official minimum wage would rise about 9 percent to $16.36 an hour, while the cost of your dishwasher benefits will have gone up about 21 percent to $4.48 an hour, bringing your official total hourly compensation to $17.98—again, without raising your take-home pay a single penny!
Total compensation effectively shifts the burden of healthcare inflation from the employer, entirely onto the employee. And as benefits make up an increasingly larger percentage of total compensation, real take-home wages will steadily fall. For low-wage full-time workers, a total compensation minimum wage would be a formula for expanding the income gap, not closing it.
Admittedly, the impact on part-time workers is different. Lacking the cost of benefits to subtract from total compensation, low-wage part-timers could see their effective wage floor rise substantially. This in turn would remove from employers some of the economic incentive they currently have to shift low-wage full-time work to part-time work. So that’s one possible positive impact of total compensation.
But as a policy for raising the effective incomes of all low-wage workers—which is what the $15 minimum wage movement is presumably about—a total compensation minimum wage miserably fails. It would provide little or no immediate wage hike to most full-time workers while eroding the effective wage floor over time. But most importantly, it would be a lie. Mayor Murray and other leaders have promised voters $15, but total compensation only gets to that number by redefining the meaning of the word “wage.”
And that would not be a promise fulfilled.
When I started out as a dishwasher in a state (with tip credit) they certainly didn’t offer health insurance. Also, having prepared shift meal, it’s typically formulated from ingredients that haven’t been selling like gangbusters and typically aren’t expensive… and are usually served buffet style. I think shift meal is a lost cause trying to include/calculate and, at the very least, should be valued/estimated at food cost, not retail price.
Sure is awesome, that people now think that working at Taco Bell should be a career.
@2. It is becoming a career, by default, when most the other better paid jobs have been automated, off shored or require an educational expense that is beyond the means of the worker.
If you disagree, where are the better paying jobs for the taco bell worker to move into?
I’m open to compromises to get a higher minimum through, but I agree with you that total compensation is BS. I do think having a capped amount of compensation toward the minimum wage could be OK, because it would give some incentive for businesses (like Dick’s) that currently provide non-wage benefits to continue them. But that would have to be a manageable amount, like counting to up to 10% of total compensation. So for a $15 minimum that would be $13.50 in wages and up to $1.50 in either other compensation or additional wages.
I actually think that including tips is a good idea, because ultimately the tipping culture lets employers off the hook. $15 including tips with a requirement to pay up to $15 if tips are too low is effectively a $15 wage for everyone but also allows for more than the minimum for some well-tipped workers. It also provides an incentive for employers to just include a standard gratuity and end tipping by customers altogether, which is probably for the best.
Also, from a negotiating standpoint, being flexible on these points (but not to the point of unbounded total compensation) allows for other worker-friendly demands, such as a faster phase-in or wage indexing based upon cost of living or rent and not just flat CPI, to ensure that the value of the wage doesn’t erode over time. I fear if proponents are too inflexible on the wage itself, they might not get any indexing, and end up with a long phase-in period that will erode the wage off the bat and keep it dwindling until it’s no more than the current minimum.
Wage is what the employer pays the wait staff. Tip is what I give the wait staff for the service that they give me. Please do not think that they are the same thing. I give tips because I like the service I receive. Wage is payed by the employer so the employee will show up to work. Wages is the cost of doing business, tips are a thank-you. So do not count tips as wages.
Wait a minute Fascist Pigsty… We were told vote for Obummer and Obummer will fix the economy… Now we see Taco Bell as a career choice.
Hmmm…
Programming Jobs are not automated.
Networking Jobs are not automated.
Marketing Jobs are not automated.
Teaching Jobs are not automated.
Lawyers Jobs are not automated.
If the worker as a young student too education SERIOUSLY, the sky is the limit. Dr. Ben Carson was dirt poor in Detroit and became one of the most prominent neurosurgeons in the world! His mother made him take education seriously!
@5 Agree. Also, I’m in favor of prosecuting employers who take tip money meant for their employees for theft.
Wages are what the employer pays staff for service. Tips are a way to pass that cost on to the subset of the customers who appreciate service while allowing other customers to receive service without paying for it. There are already ample means to repay bad service–lack of promotions and raises, or termination, or anything the employer wants–tipping adds nothing to ensure good service. It should be included in the menu price.
NBC Reports Senate Deal On Extended Unemployment Benefits
NBC says this afternoon the deal reached by Senators will extend unemployment benefits for five months, with retroactive benefits back to December 28.
@6 Some people aren’t book smart, no matter how seriously they attempt to take their education. And yet they can still manage to perform useful manual work. Shouldn’t these people deserve a living wage too? Or is that just the luck of the draw under a cruel and capricious God?
If you allow credit for benefits towards a minimum wage you won’t see benefits that employees might actually use, like health insurance. You will see a flood of ESOP’s (Employee Stock Ownership Plans). Your “benefit” will be the opportunity to capitalize your employer. Also, you will have 5 year vesting. With high turn-over minimum wage jobs most workers will never vest, forfeiting their “retirement”. Even if they happen to stick around for 5 years, what are the chances that the employer will still be around 30 years later when it is time to retire.
The rich are doing fine, thank you very much.
“The number of millionaire households in the U.S. surged … to 9.63 million last year, … an all-time high. The number of households worth $5 million … also surpassed its pre-crisis peak for the first time, rising … to 1.24 million households. The number of households worth $25 million … surged … to 132,000 households.”
http://www.cnbc.com/id/101491613
Roger Rabbit Commentary: Meanwhile, I see stirrings of a worker revolt. Workers used to be disrespected; now they’re abused. And they’ve had enough:
“McDonald’s and some of its franchisees have been hit with multiple class-action lawsuits filed by workers alleging that the fast-food giant is systemically stealing their wages. The suits, which were filed Wednesday and Thursday in California, Michigan and New York, claim McDonald’s has engaged in widespread wage theft by making employees work off the clock, shaving hours off time cards and not paying workers overtime.”
http://www.cnbc.com/id/101491811
Of course, McDonalds isn’t the only employer doing this; lots of employers do. Meanwhile, every time the Seattle Times runs a story about local efforts to raise the minimum wage, its blog is filled with a torrent of apocalyptic comments from apoplectic wingers:
“I won’t tip anymore.”
“I’ll lay off half my employees.”
“I’ll hold my breath until I turn blue!”
These assholes got spoiled by the recession. For a while, high unemployment and a bad job market allowed them to get away with treating job applicants and employees like dog shit on a shoe. Apparently they expected the repression to last forever. (And it might have, if Republicans had won the 2008 and 2012 elections, and made us all live under Republican economic policies.) But the economy is recovering and workers don’t have to take their bullshit anymore.
These fascist whiners actually resent low-wage workers getting a raise. They’re offended by the argument that someone who works full-time at a hard and dirty job should make enough to pay rent and buy food. Well, here’s a message for them:
http://www.holytaco.com/25-animals-flipping-bird/
You see, I’m a capitalist now — just like them — and don’t have to work at all. And I won’t. I’m living off the fat of the land, just like them. Working sucks. Nobody should work. We should all be capitalists! Then everyone will be rich, and nobody will be treated like dogshit anymore. What a beautiful world that will be!
Goldy wrote,
Puddy was responding to Fascist Pigsty and automated jobs. The jobs Puddy wrote about are NOT automated. So you are saying God didn’t give everyone a brain Goldy? Wait a minute don’t answer that… Your side doesn’t believe in God so maybe He didn’t give useful brain matter to some DUMMOCRETINS!
Regarding a working wage, Taco Bell, etc., jobs were NEVER designed as a living wage. Puddy flipped burgers at Burger King when Puddy was in high school. Puddy learned every job in the restaurant and received raises when Puddy passed the certification tests.
It’s Obummer’s economy that forced DUMMOCRETINS to scream these jobs need to become a living wage. Puddy hasn’t viewed any leftist DUMMOCRETIN on this blog has acknowledging Obummer has failed on the economy. If they have it must have been in some obscure thread. So, there are many people skeptical regarding this central raise the wage argument.
Funny thing, you keep hearing the Douglas types talking about how so many places will close as they unimaginatively can see only one way of paying the wage – decreasing staff.
The owner of a local bakery was on KUOW today with the same story.
They are 100% sure that if they raise prices by 2% they will lose so many customers that they will die.
It boggles the mind that it doesn’t occur to Tom Douglas that the average cost of a meal for two in his flagship restaurant without alcohol is $75. What percentage of his well-heeled customers will stop coming if that goes up to $80. If the price of a pint at the Bravehorse, which on a busy night easily pours 150 pints an hour goes up $.50 the sky will fall and the hipsters who love the place will disappear. Or maybe Tom can just clear and extra $75 an hour and cover the wage increase for 10 employees just on that one sales category. Or maybe it does occur to him but saying very publicly it’s a job killer is a political calculation. (Pencil it out, a server turning over three tables an hour at $5 more per table covers the entire wage for the hour. So if really, Tom is paying servers $10 an hour now and only has to cover $5 an hour increase…didn’t that additional $10 cover two busers or a dishwasher and a Host? for every server with three tables, such a small increase just covered three employees.)
How did Starbucks (and small independent business) handle a huge rise in the price of milk and coffee over the last decade? Well a few dumb business owners tried to swallow it until it bled them dry. The smart ones, and the global behemoth, analyzed pricing and figured out which categories could raise without losing customers to cover the increased cost of doing business.
A Dick’s Deluxe will be just as inedible at $3.00 as it is at $2.70 and the line will still be out the door because lunch will be under $6. So when you hear Jim Spady, V.P. of marketing say all over local media that the only way to cover the minimum wage hike is to fire workers, know full well that he’s full of shit.
Stop pretending cutting staff (It’ll kill jobs!) is the only option.
First, democrats cannot do much to improve the economy because of the unprecedented obstructionism of the republicans. I would love to see Puddy’s job review if half of his co workers were actively blocking everything he tried to accomplish.
Second. Puddy is willfully ignoring that I said “automated, off shored or require an educational expense”
Companies don’t normally hire teachers or lawyers or programmers without significant education.
Programming, networking and lawyer work is being offshored and automated.
There will always be exceptions to the rule. carson was an exception to the rule. But he would be an angry black man with anger problems in jail since he almost flunked out of school and nearly stabbed a teenage rival to death, without a mother to push him, and a public library and a public school system to support him. Note that the last two are being eroded by republicans and those wouldn’t be there for the next exceptional black man if Puddy and his masters had his way.
Also, show of hands, how many think there are there 10.5 million unfilled teaching, networking, programming, laywer, marketing and neurosurgeons jobs in America?
That’s just amount of people out of work, not counting the people who would like better work.
Puddy, what’s your plan?
Omigosh. Didn’t know Puddyidiot was the subject of a scientific study:
Scientists catch brain damage in the act
An out sourced job here, an automated job there, and it add up.
Puddy, where the republican solution?
@17. IMHO, Puddy doesn’t have brain damage, he has acute empathy deficit and an desperate need for attention that he’s not getting from his wife, boyfriend or political party.
Really appreciate that those on take home pay of less than $15/hour could use the increase to just exist. What of the min wage employee, that declares over $50K per annum with tips? Assuming two weeks vacation and 40 hours per week that is equal to $25/hour.
Love to focus on those that really need it – the fast food chains can afford it but small local bars and restaurants cannot afford it for all staff.