Driving home from a New Years Eve party I noticed it was business as usual at one local McDonald’s, where no matter what hour of the day or night the drive-through lane appears clogged with cars, an apt metaphor for the passengers’ arteries. But whatever the health of its customers, this burger joint appeared to be thriving, despite the fact that only hours before, Washington state had raised its minimum wage to a nation high best $8.07 an hour. Our state’s lowest paid workers now earn $2.22 an hour more than their counterparts across the border in Idaho, and yet McDonald’s franchises in both states manage to profitably sell double-cheeseburgers for a buck a piece. Go figure.
When organized labor put Initiative 688 on the ballot back in 1998 — raising Washington state’s minimum wage to $6.50 while mandating automatic annual increases pegged to the Consumer Price Index — our business community, right-wing “think tanks” and Republican establishment warned of dire economic consequences: lost jobs, small business closures and a steady stream of industry moving to greener (ie, cheaper) pastures out of state. I-688 we were told, would hurt those it was intended to help most: unskilled and young workers who would be better off earning a low wage than none at all. Yet since its passage, Washington workers have not only enjoyed the highest minimum wage in the nation, but one of the strongest state economies as well.
While our economy certainly isn’t immune to downturns, Washington has weathered recent economic turbulence well, currently boasting robust job growth, record state budget surpluses and a real estate market that continues to defy the gravity of a nationwide housing bubble collapse. And while it would be silly of me to argue that I-688 deserves much of the credit for Washington’s prolonged economic boom, it would be even sillier still to argue that our state’s relatively high minimum wage has produced any sort of noticeable economic drag. Hell, even Forbes Magazine ranks Washington state as having the fifth best business climate in the nation. What more do the pro-business lobbyists want?
What I-688 has done is made the lives of our state’s 80,000 to 90,000 minimum wage workers just a little bit easier. The difference between Washington’s $8.07 an hour and even the recently raised federal minimum of $5.85 is the difference between earning $16,786 a year for a 40-hour work week versus only $12,168, and it doesn’t take an economist to figure out what an extra $89/week can mean to our state’s working poor. Plus, a higher minimum wage raises the bar for all workers, resulting in larger paychecks for more skilled jobs. No, such policies don’t come free, and at least some of the costs are passed on to consumers. But given the choice between a race to the bottom and a race to the top, Washington’s voters proved wise to choose the latter.
It took ten years and a new Democratic majority to finally raise the federal minimum wage from where it stood back when I-688 went to the polls, and despite Washington’s decade of prosperity in the face of what should have been a competitive disadvantage, minimum wage opponents trotted out the same old dire warnings that failed to hold true here in the Evergreen state. Conservatives used to hold forth states as laboratories for experimentation, but when these experiments disprove their firmly held theses, the lessons learned are quickly dismissed and discarded. There is no compelling evidence to suggest that workers have been harmed by Washington’s minimum wage law or that our economy has been significantly disrupted, while the benefits to our state’s low wage workers are as obvious as the extra dollars in their wallets.
What the other side fears, what they refuse to acknowledge, and what they so vociferously reject in rejecting the minimum wage is that experience tells us that sometimes government regulation of the market does indeed improve the lives of many of our citizens while ultimately costing the rest of us little or nothing of consequence. If the minimum wage, a concept absolutely anathema to the principles of an unfettered free market proves a net benefit to the economy as a whole, what sacred tenet of the anti-government / anti-regulatory ideologues will fall next? First the minimum wage, next “socialized” medicine? If government is given the opportunity to prove it can provide universal health care security where the market clearly cannot, is it Katie bar the door to a new progressive era that re-embraces the principles of managed economy that helped us rise from the Great Depression, irrigate and electrify rural America, defeat the Japanese and the Nazis simultaneously, construct the interstate highway system and build the United States into the greatest military, industrial and economic power on the planet while providing its citizens the highest standard of living average workers have ever known?
Like Social Security, the minimum wage has been a target of the right since its inception, not because it harms workers and business owners, but because its failure to do so refutes the core principles at the heart of right-wing ideology. Eight buck per hour workers producing double per buck cheeseburgers is an example of something that government does right, and as such is a threat to the agenda of those who would see our destiny placed solely in the hands of corporatists and preachers, for whatever reason.
Here’s a better, simpler solution for minimum wage workers: Find a better job! Stay in school, get an education, learn a trade, go to college, join the service…all of these are paths to an improved life.
Other suggestions: quit smoking and drinking and using drugs, don’t engage in premarital sex such that you get pregnant, defer gratification, understand that the only person responsible for the quality of your life is you, quite looking at the government is a teat from which you’re eternally entitled to suckle…in short? GROW UP!
Tons of alternatives without government intervention or subsidy!
Instead of making assumptions about the impact of an increased minimum wage, Goldy, why don’t you go ask small business owners who employ these workers exactly what the impact is on their bottom line of government mandated wage increases without commensurate productivity or profit increases are?
That Mickey D’s can sell a cheeseburger for a buck in Post Falls as well as Spokane evidences only a national, corporately underwritten advertising promotion.
Markets are naturally operating forces, governments aren’t. When government interferes with the natural operation of the market, it’s just about as successful as directing the rain to fall up.
At some point, someone has to PAY for all these government provided goodies, and that someone is the taxpayer. Whether in the form of higher taxes or higher prices, the producing, productive taxpayer is left with less at the end of the day.
I’d much rather do away with all these subsidies and efforts to turn cows into horses and let the economy self-manage. Sure, there will be some hiccups, but at the end of the day there will be more for everyone and less for redistribution of wealth efforts.
Individual and economic liberty are far more important than any liberal notion of economic “justice,” which is nothing more than a form of liberal greed; you want greater wealth in the hands of lower-income Americans, then encourage them to do what’s necessary to become middle and then upper-income Americans.
That’s what freedom is all about.
The Piper
Since when is a McDonald’s franchise a “small business?” When is the last time you have seen one, in any neighborhood, anywhere, close? They are propped up by a massive corporation which is not true with little Mom and Pop companies which are actually hurt by mandatory wage increases.
Now, why are they hurt by the wage increases? Because they are practically business failures run by unimaginative people who refuse to adapt to changing markets. If a minimum wage increase single-handedly slays a small business, they were doomed to failure anyhow.
This, however, does not excuse unnecessary government intervention into the employment contracts which exist between employers and employees. It is simply not the government’s business, and they should butt the fuck out.
i think there are 2 constant in strong economies…high wages and high taxes.
“Markets are naturally operating forces. . .”
Go tell that to Alan Greenspan.
The contention that “the poor are poor because they’re lazy/dumb/crazy/want-to-be-that-way” is a load of manure. There are some very strong forces in our society that work to keep some people in poverty, and the reason is that, absent a “gold standard” or any other artificial metric, the poor serve as a reference by which the rich are able to measure their own wealth.
The minimum wage exists in large part because most Americans believe that work should pay, and that a person’s toil has value beyond what those who hold capital would pay.
You don’t need an advanced degree in economics to understand that in a consumption based economy such as ours, you have to pay well enough for people to consume beyond the bare necesities to keep the economic engine running. And besides, other than evil sadists, who wants to live in a society filled with pockets of extreme poverty.
I think McDonald’s workers should unionize.
You can predict the Republican/Libertarian response to raises in the minimum wage, and all of those responses are based on economic doctrine that is pure religion. When it comes to public policy, however, I prefer to use science, and I’ll even turn to good old uncle Miltie for an introduction to the science.
Milton Friedman’s most significant contribution to the science of Economics is the distinction he drew between positive and normative Economics. Positive Economics concerns itself with describing what is. At a fundamental level, it’s model-building that lies at the very heart of every scientific endeavor. Normative Economics concerns itself with what ought to be. Normative Economics is about policy.
Friedman’s central point about Positive Economics was that we shouldn’t care about whether or not the underlying assumptions map to reality so long as the model accurately predicts what will happen given changes in the Economy. We shouldn’t care, for example, that neo-classical models assume perfect information, so long as the assumption simplifies the model without making a drastic change in the model’s ability to predict Economic outcomes.
Friedman’s most destructive contribution to public discourse, however, started when he forgot the justification he made for making these simplifying assumptions and started believing that these simplifying assumptions actually map to reality. Friedman moved from using these assumptions within the context of a specific model to using these assumptions as part of normative arguments. At that point, the assumptions lose their value entirely, because the normative arguments move outside the realm of the positive models.
Minimum wages are one of these issues where simplifying assumptions actually do harm to normative arguments. Wages are not simply part of a labor/productivity equation. They also translate into consumption. The workers who earn an increased minimum wage turn around and spend that increase on goods and services.
To truly understand the effect of an increase in the minimum wage, you have to compare the relative marginal propensities to invest and to consume of the workers who receive the increase and the firms who pay that increase out.
If you want a thorough treatment of these issues, I’d strongly suggest looking up the work of Jamie Galbraith (son of John Kenneth Galbraith). He’s been doing some very ground-breaking work on the overall effects of income distribution.
A cheeseburger at Dad Watsons (McMenamins) in Fremont costs $7.25. The minimum wage in Washington was $7.93/hour until 01/01/08.
http://www.mcmenamins.com/bin/Dads.pdf
A cheesburger at High Street (McMenamins) in Eugene costs $6.30. The minimum wage in Oregon was $7.00/hour until 01/01/08.
http://www.mcmenamins.com/bin/HighStreet.pdf
@6…Will…
“The minimum wage exists in large part because most Americans believe that work should pay, and that a person’s toil has value beyond what those who hold capital would pay.”
Can you prove that? Or is that a statement of belief? Of course, if it’s a belief, as an American you’re absolutely entitled to hold it. But I would suggest that compensation necessarily must always be linked to productivity and determined by the market; supply and demand in action.
The unskilled cannot demand beyond what they can produce. If they wish to demand more, become skilled at something the market recognizes as more valuable. Entry level jobs are just that: entry level.
Of course, a worker has the aboslute right to not become skilled or seek advancement. But then that worker also has the absolute obligation to fully live with the consequences of that decision.
The overwhelmingly vast majority of the workforce have the capability to direct their own lives and careers. Since I’ve worked professionally in the executive search and career change field for 25-years, I see it daily…and it works!
No one is entitled to a certain wage “just ’cause.” Each worker, from the third-shift janitor through the CEO, must understand and be able to articulate how he or she adds value to the enterprise, how their participation advances the mission of the enterprise, and how they contribute to getting product out the door and cash in the door.
If you can’t answer these elementary questions, then a fourth applies: Why are you here?
This is very elementary stuff and the basis upon which business works. Not only business, but all employment – public or private, for or non-profit, manufacturing, professional, service, even blogging…How do you justify your compensation in terms of your contribution to what it is that we do around here.
The successful worker – success is a fairly subjective term, BTW, and not limited to merely $$$ – always understands this and focuses on it. Whether you’re a machine operator on the plant floor, a sales rep, a product development scientist, or a divisional vice-president of manufacturing, your job is to advance the cause thus justifying your continued economic viability and continued existence.
When you lose sight of your responsibility to always serve your customer and be able to improvise, adapt, and overcome in the face of changing market conditions, then you sign your vocational death warrant.
The Piper
@ 4
Yes, you managed to find one of the major flies in Piper’s ointment (though “elixir” might be the more appropriate term, but that would lead to a mixed metaphor).
Markets are not natural forces. Markets aren’t even influenced by natural forces. They’re social constructs that are influenced by social forces that generally boil down to some combination of money and power.
The unskilled cannot demand beyond what they can produce. If they wish to demand more, become skilled at something the market recognizes as more valuable. Entry level jobs are just that: entry level.
First, you might want to read a bit of Tom Peters before you lump McDonald’s employees into that “unskilled” bucket. Indeed, in so far as nearly every job you can get in today’s economy requires some form of training, it’s doubtful whether the term “unskilled” has any meaning in today’s Economy.
Second, free market wages are, at best, indirectly related to skill levels, and that only affects the supply side of the market. The demand side of the market, i.e. how much money someone else can make form the work that labor performs, plays a role of which your statement appears to be woefully ignorant.
Lastly, see my comment above about the relative differences in the marginal propensities to consume and invest. We’re talking about aggregate effects, here, and the utility of micro analysis is limited. Given the Bush tax cuts for the wealthy, ewp @ 7 is quite likely correct: our economy’s growth is consumption bound, not investment bound, in which case an increase in the minimum wage is likely to have a net positive effect on overall GDP.
Why not double it to $16.14? Why stop at $8.07?
Why not double it to $16.14? Why stop at $8.07?
Because, at that point, the relative differences in the marginal propensities to consume and invest would result in a net negative effect on output.
Do you understand the concept of a mini-max problem?
“Washington state had raised its minimum wage to a nation high best $8.07 an hour.”
Actually that’s a misnomer, Goldy. Washington wages are higher than national averages across the board. They have to be, because the cost of living is higher here. In standard of living terms, you are not necessarily better off making $8.07 an hour in Washington than you are in some states with lower minimum wages. Our highest-in-nation minimum wage is justified and necessary because of the lower purchasing power of a dollar here.
Hmmm, so Piper has worked in the executive search field. That’s revealing. Most executives I have encountered over the 30+ years I’ve worked in the business world couldn’t find their ass with both hands and an instruction manual.
Beyond the first level of management, it is rare to find one who contributes in a positive way to the success of a business, and the higher you go, the worse it gets.
How much has Kerry Killinger contributed to WaMu? How about Harry Stonecipher, who almost managed to destroy not just one, but TWO airplane manufacturers during his career? And need I mention everyone’s “smartest guy in the room,” Ken Lay?
Upper management and the people who suck up to them all drink the same koolaid. For that reason, they get to go from CEO slot to CEO slot, destroying companies and popping their golden parachutes, and blaming it all on labor when they leave.
What is truly ridiculous is the claim that they have to be paid tens of millions because of the “great risks” they take. What risks? They have their golden parachutes. The ones who take the risks are the workers, who are the only ones who provide real value to the companies, like the ones who got laid off from Boeing in the 1990’s and the ones who are being laid off from WaMu now.
If you want to find out how good a manager really is, get out on the shop floor and find out what the workers really think of these people. You’ll find that most workers are actually more concerned about the long-term health of their companies than the managers are. Top management is only concerned about squeezing as much profit out of the workers as is humanly possible.
And that’s the nature of Capitalism. It isn’t about “free markets” which are a fantasy, or voluntary exchanges or anything else like that. It is about concentrating wealth into the hands of Landowners and Capitalists (to use the classical descriptions).
Unregulated Capitalism works like an engine without a throttle return spring. It simply accelerates until it explodes, unless there is regulation put on it from outside.
Show me a true free-market system where the GINI index shows a reasonable distribution of wealth. There is no such thing.
The government have never allowed the minimum wages to be raised higher then what the labor market will bear. Right wingers talk out their ass. Who can live on 8 bucks an hour?
PR @ 17
NPR’s Fresh Air this evening had an interesting interview with the author of Free Lunch, David Cay Johnston.
Interesting tidbit from the show: nearly half of our nation’s wealth was created since Reagan took office, yet a vast majority of the population is not better off than they were in 1980–many being worse off than they were in 1980. Turns out the whole “rising tide lifts all boats” was a load of bullshit, though not that many of us are at all surprised.
DJ @ 19; Yes ! The post Reagen era just made a bigger bad pie that is upper crust, lower crust and no middle class filling.
19 A rising tide lifts all yachts.
The claim is often that raising the minimum wage will force employers to lay people off, resulting in fewer minimum wage jobs and more struggling people who can’t find work at all. So far, I see no evidence that this has materialized around here. Even with our high minimum wage, fast food and retail outlets never seem to take the “Now Hiring” signs out of their windows, and in fact often struggle to find enough workers. I’d be interested to hear conservatives’ explanations as to why that is so.
Yes, increasing the minimum wage (as with anything else that increases costs to a business) might be a bit of a strain on small businesses who are already struggling to stay afloat. But small businesses tend to have relatively few employees, so paying the ones they have a few cents more an hour probably won’t add up in nearly the way it would for a large company with hundreds of employees. Certainly other costs that have increased drastically lately — gasoline, food (for restaurants), etc. — have had a much harsher impact on small businesses than the minimum wage.
I also think #16’s point is very important — $8.07/hour won’t go nearly as far in Washington as it would in some other parts of the country. So just comparing the wage and saying “we have the best minimum wage in the country” is deceptive.
re 11: Demand is not a mysterious force that acts on its own internal rules (e.g. like the solar system). Except for the basic necessities of life –like food, water, and shelter — supply is created first and demand is created by advertising.
This really is not a subtle point. I’m sure you understand what I am saying. But as to supply, demand, and a living wage, I don’t think you really see that the supply and demand in an advanced economic system like our own is pretty scientifically thought out and predicted by the “producers”.
Low wages are a part of the model that is also factored in. Why did Ford pay his workers more than anyone else. I think you know.
#23
Umm…supply is created first and then demand is created through advertising? What drives the creation of supply? Oops, you did it wrong.
re 24: Many things drive the creation of supply.
1- Boredom and a desire for change (the failed ‘new’ Coke).
2-The desire for profit even though you are not creating anything really new: Like forcing people to buy the same thing over and over by changing the technology (Classic rock). I’ve bought Led Zep II as an album, 8-track, cassete, and CD. Real creativity would be making better music, not repackaging the same thing.
Google the term, ‘manufactured consent’.
@10
The relative property value of Fremont vs. Eugene didn’t factor into it?
Look, the average entry-level pay for anything other than the restaurant industry has been $10.00 per hour in the Seattle-Tacoma-Everett area, for the better part of the past decade. Even the guys standing outside Home Depot looking to pick up day labor know to ask for at least that much. But this rule doesn’t apply to jobs outside of the metropolitan area.
The restaurant/fast food industry has always been the low-wage exception, always trying to push to minimum wage (or below, if they can get away with it). The reason is that it is a labor-intensive business, so the lower the wages, the better chance the owner can make a profit. But restaurants are the one industry which cannot relocate to another area with lower wages, because it has to be located near its customer base. So as long as the customers are willing to pay a bit more for eating out (or going through the drive-through), instead of cooking at home, a moderate rise in the minimum wage will not unduly affect a business. As others have noticed, if the dishwasher earning an extra buck-an-hour causes the business to fail, it had other problems, anyway. Personally, I think maybe we are over-saturated with marginal restaurants/fast food joints, and a little weeding out wouldn’t be a bad thing.
Sure, a lot of fast-food workers are part-time students, or immigrants getting their first work experience in the U.S., etc. But that doesn’t mean that they should get a lower pay. We experimented with that in the late 60’s/early ’70s (a different wage tier for minors), and it didn’t work well – businesses just hired minors, and found a way to fire them around their 18th birthday.
Under Reagan, waitress’ tips started to be taxed as income.
What a fucked-up, old, pinch-penny bastard that one was!
Luigi Giovanni says:
A cheeseburger at Dad Watsons (McMenamins) in Fremont costs $7.25. The minimum wage in Washington was $7.93/hour until 01/01/08.
A cheesburger at High Street (McMenamins) in Eugene costs $6.30. The minimum wage in Oregon was $7.00/hour until 01/01/08.
Apparently it takes an hour to prepare one of these cheeseburgers.
In Eugene, it takes an hour to do anything.
Freakin’ stoners.
The parody just writes itself:
‘Individual and economic liberty are far more important than any liberal notion of economic “justice,”…’
Take that, you stupid Enron employees and stockholders!
‘…which is nothing more than a form of liberal greed; you want greater wealth in the hands of lower-income Americans, then encourage them to do what’s necessary to become middle and then upper-income Americans.’
Uh, liberals want poor people to come from a really rich family, gather some nasty cronies, and stomp all over anyone stupid enough to ask for a return on investment? That’s how G.W. Bush did it (along with insider trading of Harkin stock).
I love how “liberal greed” is A Bad Thing because it alleviates poverty, whilst regular greed is great because it loots and pillages wealth. Whatever. Keep providing Lee with such great material; you make trolls on other liberal blogs look unproductive by comparision.