Above Photo: From Flickr.
The working poor need more money. “But retail stores can’t raise wages very much—their profit margins are too small,” say conservatives. Aha—but there is a solution!
All types of people across the political spectrum agree that people who work hard should not have to live in poverty. Movements like The Fight for 15 have focused on raising the incomes of the lowest-paid workers by forcing low-paying industries like fast food to raise their hourly wages. Which is fine. They need a higher income. But the most common response from corporations that employ lots of low wage workers is simply: we can’t afford it. Our profit margins are too thin. A prime example of this genre appears in the Wall Street Journal editorial page today, in a piece written by Andy Puzder, who is the CEO of a fast food restaurant chain. He calculates the average profit per employee at a major American retail or restaurant chain to be $6,300 per year. Then comes some back-of-the-envelope math:
How would a minimum-wage increase affect the retail industry? According to the Bureau of Labor Statistics, the average hours worked a week in the retail trade sector is 31.5. Assuming an employee earns the current minimum wage of $7.25 an hour and works only 30 hours a week, an increase to $9 an hour would result in an annual wage increase of $2,730…
At $10.10 an hour, these employee would make $4,446 more a year, decreasing profit per employee by 71%. At this level, the CBO found that the economy would lose about 500,000 jobs.
In essence, Puzder argues that the service industries that employ most low wage workers operate on small profit margins, cannot easily raise their prices significantly, and therefore will be impacted so negatively by minimum wage increases that the will begin to busily lay off workers. Leaving aside the question of whether minimum wage increases cause job losses (a point that is hotly disputed in economics), the broad outlines of this argument have at least some truth to them: these industries are not currently constructed in a way that would enable them to implement large wage increases without digging into (or destroying) profits.
Poverty level wages are a key part of the service industry’s business model.
Hardcore free marketeers believe this is the end of the argument. “Businesses can’t afford to pay people more, the end.” But that is backwards. The purpose of human existence is not to service the bottom line of ethereal corporations. On the contrary, corporations exist to serve humans. The proper way to begin this conversation is to accept that no just and functional society can afford to pay people who work hard poverty wages. That constitutes a broken system. The question, then, is: How can we get more income to the poorest workers while retaining as many of the advantages of the current model as possible?
You do not have to be an economist to grasp the fact that forcing hundreds of millions of Americans to rely for their basic needs on the good graces of corporations is not a wise system. Corporations are machines built for making money. They are not programmed to care about human needs unless those needs directly impact the bottom line. A corporation is not the thing you want overseeing your welfare. We live in a democracy, which means that (if we could ever make it function correctly) the state is a much better choice for looking out for people’s needs.
Fortunately, there is a way to reconcile the needs of people to earn a living with the desire of greed-centric corporations not to pay higher wages. It is to provide everyone with a basic income. The state takes in tax money; everyone is granted a certain sum to provide for their basic needs; and everyone can then work without feeling that they must beg a faceless corporate monster for enough income to cover rent and food and child care. And what do you know: the idea of providing a minimum income is catching on. It is somewhere near the realm of reality in Canada; it’s been instituted in a Dutch city; it’s being tried in Germany; it’s popular in Finland and Switzerland. In other words, the most civilized nations in the world, with the highest standards of living and strongest social safety nets, are leading the way on the minimum income issue.
A minimum basic income would allow us to dismantle vast bureaucracies that exist to police welfare recipients, and just cut everyone a check. And it would take a great deal of pressure off the movement to raise the minimum wage, because everyone’s income would have a floor already, meaning even low-paid workers would be less vulnerable to financial disaster. It’s a large-scale way to smooth out some of the inequality that plagues our nation. And it would allow fast food CEOs to stop bitching.
How would we pay for it? Partly by redirecting money we already spend, and partly by taxing the rich, like fast food CEOs, and by taxing corporations, like fast food corporations. Well. At least they could bitch about something novel.