American Elephants

McDonalds’s Response to $15 Minimum Wage –Touch-Screen Cashiers by The Elephant's Child
June 16, 2015, 4:47 pm
Filed under: Capitalism, Economy, Politics | Tags: , ,

mcdonalds-minimum-wageSo you are demanding that the minimum wage be raised to $15 an hour? “You can’t raise a family on the minimum wage” is the common cry. Work at a fast food chain was never meant to support a family. The positions were meant to be for part-time workers,with some full time advancement. There is no shortage of people capable of doing the job. Most of the jobs go to beginners just starting in the job market,

Nevertheless, there is a lot for a new worker to learn: how to interact with customers, how to make change, how to stay cheerful and cope with difficult people and keep the premises clean. Those skills, if well performed, can be a stepping stone to the next job.

The mayor of Los Angeles just signed a $15/hr minimum wage bill into law. The minimum wage will go from its current minimum to $15 an hour by 2020, for businesses with 25 or more employees.  The federal minimum wage has been $7.25 since 2009.

Unions have been big supporters of the Fight for $15 movement, so supposedly they backed the effort to make the minimum wage $15 an hour in Los Angeles, which makes sense even if the $15 an hour does not.

Somebody apparently did the math. Unions are now insisting that $15 an hour should not be the minimum wage where unions are involved. Union shops should be allowed to set the wage lower than $15 if that’s what they want to do.

There should be no minimum wage. A wage should be determined by a willing worker and a willing employer. There needs to be a place for real beginners, for people down on their luck who want to earn enough for their next meal. Many people are willing to pay someone to do a dirty job, but if it costs too much — they’ll do it themselves. Think washing windows, raking leaves, digging a ditch. There are lots of jobs for those who are unkempt, don’t speak the language, Here in Seattle, hotel workers and airport workers get the higher minimum wage, but now they have to pay for parking and for meals.

People on the left always envision businessmen and corporate officers as mean and greedy people who treat their workers badly. So they plan to force businesses to do what they say, with no understanding that businesses exist to make a profit. They are not charitable enterprises.

“Progressive,” “socialist,” and “liberals” are today interchangeable terms that describe participants in a moral crusade with a political agenda usually referred to as “social justice.” It can be summed up as equality imposed by the state. The quest for a utopia of equals forges progressive alliances, defines their allegiances and justifies the means they are willing to use to get there.”  (David Horowitz: Take No Prisoners

McDonald’s in Europe just hired 7,000 touch-screen cashiers.

About that $15 Minimum Wage In Seattle by The Elephant's Child


If all other factors remain equal, the higher the price of a good, the fewer people will demand it. That’s the Law of demand, a fundamental idea in economics. The idea refers to the minimum wage — the price of a worker, as well as the price of a pound of butter, or a bottle of shampoo.

President Barack Obama claimed that increasing the minimum wage would “grow the economy for everyone” by giving “businesses customers with more spending money.” Economics was clearly not a feature of that mysterious transcript.

There is a lot of confusion about just what a “minimum wage” is. It is the least amount of money that can be offered to a worker for their labor as decided by the government. It is illegal to pay anyone less for their labor. “But you can’t support a family on the minimum wage!” they cry. You are not supposed to. It’s a starting wage for beginners.

It’s for a first job. It’s for learning how to work. When young people have savvy parents that tell them about the basics, and how to dress and how to act when applying for a job, and some kids don’t. But there is so much to learn: arriving before your shift begins. Dressing appropriately with appropriate grooming. Learning how to wait on a customer, how to operate the cash register, how to keep your workplace immaculately clean. How to treat customers so they want to return, keeping the restrooms clean, picking  up, cleaning up, smiling at customers. That’s aside from learning how the establishment works. When they have learned successfully how to become a worker instead of a beginner, they will probably have had a raise (statistically most do within 6 months). And they have skills that they can take to another workplace. A new worker learns those skills from a manager or another worker who must devote their time to teaching. A new worker is a cost, rather than a benefit.

Seattle, a city of the left, has had some experience with the minimum wage. Sea-Tac, the district surrounding the Seattle-Tacoma International airport raised their minimum wage to $15 on January 1. 2014. Its a district of hotels, restaurants and bars and lots and lots of parking lots. The results were predictable. Leftists crowed that hardly any businesses shut down, and most people didn’t lose their jobs. What happened is that brand new workers didn’t get a job.

At the Clarion Hotel off International Boulevard, a sit-down restaurant has been shuttered, though it might soon be replaced by a less-labor-intensive cafe…

Other businesses have adjusted in ways that run the gamut from putting more work in the hands of managers, to instituting a small “living-wage surcharge” for a daily parking space near the airport.

The publisher of the Northwest Asian Weekly had a conversation with two hotel employees who have been affected:

“Are you happy with the $15 wage?” I asked the full-time cleaning lady.

“It sounds good, but it’s not good,” the woman said. “I lost my 401k, health insurance, paid holiday, and vacation,” she responded. “No more free food,” she added.

The hotel used to feed her. Now, she has to bring her own food. Also, no overtime, she said. She used to work extra hours and received overtime pay. “I have to pay for parking,” she said.

I then asked the part-time waitress, who was part of the catering staff.

“Yes, I’ve got $15 an hour, but all my tips are now much less,” she said. Before the new wage law was implemented, her hourly wage was $7. But her tips added to more than $15 an hour. Yes, she used to receive free food and parking. Now, she has to bring her own food and pay for parking.

When the law changes, businesses adjust in different ways. They no longer have the staff time to hire brand-new workers. Youth unemployment goes up.

Seattle voted for a $15 minimum wage, which took effect on January 1. Several restaurants have closed, and economists have made much of it, but a local blogger claims to have spoken to the owners of the closing businesses, and says they were closing anyway, and it has nothing to do with the minimum wage. That may or may not be true. We are only 2 months into this government-mandated wage floor, and there will be inevitable effects. Young people will find it harder to find that first job. Hours and benefits will be cut back. More computers, more robots.

The Panera Bread CEO supports raising the minimum wage — as long as it is applied equally to all. CEO Rob Shaich, a Democratic donor recently announced that he will be replacing cashiers with computers.

Companies like Costco and Walmart are supporting hikes in the national minimum wage, knowing that will adversely affect their smaller competitors.

McDonald’s had a 30% drop in quarterly profits last year, on a 5% drop in revenue. Unions have made McDonald’s a target of their campaign for a $15 minimum wage. Internationally they are experimenting with replacing cashiers with computers. But they are also under attack from the food police. Low income families don’t eat out as much in the current economy. The WSJ said: “As many contributors to these pages have warned, forcing businesses to pay people out of proportion to the profits they generate will provide those businesses with a greater incentive to replace employees with machines.”

The Minimum-Wage Stealth Tax on the Poor” Wall Street Journal. When a fast-food business is forced to raise pay, it also raises prices. Guess who gets hit worst by the increase.

“We Can Predict the Effects of Seattle’s $15 An Hour Minimum Wage” Forbes. We can get a good idea of what it is like before that wage comes in. And then we can go back when it’s fully implemented and see what the effects have been.

ADDENDUM: Here’s another take on Seattle Restaurants, from Seattle Magazine: Why Are So Many Seattle Restaurants Closing Lately?” Ouch! The reasons vary, but the restaurant business is never an easy one. Operational cost increases and failure to thrive. I apparently erred. The wage hike does not take effect till April 1.

The Washington Restaurant Association’s Anton says “It’s not a political problem, it’s a math problem.” A a common budget breakdown among sustaining Seattle restaurants so far has been the following: 36 percent of funds are devoted to labor, 30 percent to food costs and 30 percent go to everything else (all other operational costs).  The remaining 4 percent has been the profit margin, and as a result, in a $700,000 restaurant, he estimates that the average restauranteur in Seattle has been making $28,000 a year. If restaurant owners made no changes, the labor cost in quick service restaurants would rise to 42 percent and in full service restaurants to 47 percent. “Every operator I’m talking to is in panic mode trying to figure out what the new world will look like.”

Who cares if Romney wants to index? A generation of young people may. by American Elephant
February 4, 2012, 7:30 am
Filed under: Capitalism, Economy, Election 2012, Liberalism, News, Politics | Tags: , ,

We’re excited to present the following guest-post, contributed by reader & twitter friend, Erik Newton (follow him on twitter at @Newtonslawpc), a smart young conservative who makes lots of sense. Give him a read, we’re sure you’ll think so too.

A firestorm erupted this week in conservative circles when Republican presidential frontrunner Mitt Romney (R-MA) reaffirmed his longstanding commitment to automatic indexing to inflation of increases in the federal minimum wage. Romney held this position at least as far back as his campaign for governor of Massachusetts in 2002. To many Romney supporters, this is their candidate again sticking to his guns, showing his “constancy,” and refusing to flip-flop. It is the second such major issue on which he’s refused to nuance his views to come in line with those of many conservatives in the GOP base. The first is Romneycare, from which Romney also refuses to distance himself even in the heat of the 2012 campaign.

In 2007, Romney said he supported indexing the minimum wage because he likes the “idea of getting the political debate out and [likes] the idea of not having the huge jumps as we do now.” Most practical politicos probably didn’t think much ado about this explanation, but it has fed some critics. The first part of Romney’s defense, that indexing “get[s] the political debate out,” seems to detractors like Romney is again trying to back what is of immediate political advantage to him. He’s backing an “anti-growth” policy, as Club for Growth’s Chris Chocola calls it, so he doesn’t have to defend free markets when it comes to wage prices, so goes the criticism of Romney.

But to understand what is behind the criticism of Romney’s minimum wage position as a policy matter, one has to take a closer look at the minimum wage and the state of the law. To take the second area first, Romney’s own explanation for his indexing support relied, in part, on avoiding “the huge jumps” we’ve had in the federal minimum wage recently. From an economic standpoint, Romney does have a fair amount of support for this argument—large shifts in the wage price floor create dramatic distortions in the wage market. Smaller, incremental shifts create smaller distortions. But Romney’s leading opponent in the 2012 GOP presidential contest, Newt Gingrich, uses the former’s own argument against him. He points out periods of hyperinflation (14% in 1980; 15% in 1947-48), and says indexing “would be a very dangerous idea,” for exactly the reason Romney supports it. In an inflationary period, the minimum wage would jump dramatically through indexing, something Romney professes the desire to avoid.

There is no avoiding that several states have adopted a minimum wage that is indexed to inflation. Some of these measures were passed through the legislature, such as Florida, whereas others were passed by voter initiative, such as Washington. All told, there are six states with annual minimum wage increases indexed to inflation: Florida, Washington, Arizona, Montana, Ohio, and Missouri—quite a mix of the red, purple, and blue. Since these laws were adopted, the nation hasn’t faced the level of inflation, as referenced by Gingrich, which would put to the test the reasonableness of these automatic hikes. While certainly not a majority of states, or even an “evolving trend,” these state policies show Romney is not alone among politicians (not even among Republicans, at least in private), who would love to avoid taking minimum wage votes.

So, what’s the big deal with the minimum wage? As Rush Limbaugh said on his radio program, “Why not $10. Yeah, okay. Well, why not $15? Now we’re talking!” This may sound a little bombastic, but the late Sen. Edward Kennedy of Massachusetts was long an advocate for a “living wage.” Kennedy’s idea was to guarantee each citizen an amount earned that will cover their basic costs of living, which is only a small change in policy and no change in logic from current law. But the point Limbaugh highlights is a concern with both a “living wage” and an ever-increasing “minimum wage”: the higher the wage floor, the more low-skilled and younger workers will be out of work. These laborers are priced out of the market for work, because they can’t charge as much for their labor and employers aren’t allowed to pay less.

Without a wage price floor (a minimum wage), small and other business are more likely to hire unskilled and younger workers. To be clear, depending on the job, some companies are still able to hire such workers even at a pretty high minimum wage. There is no denying that McDonald’s hired 50,000 such workers last year. But all this says is that for McDonald’s, with its success and profit margins, it is willing to hire X number of people even at the current $7.25 federal wage price floor. It says nothing, for example, about how many young and low-skilled laborers McDonald’s would hire at, say, a wage rate of $4.25. Additionally, President Obama has complained about the rise of automation, including ATMs. Left unexamined is how the government’s distortion of the wage market drives companies towards what might otherwise be a prohibitive level of investment required for automation. This is particularly true of a company like McDonald’s, which spends hundreds of millions each year inventing or implementing such devices as the computerized fountain drink dispenser—a job previously done by a young worker. Of course, a fact lost on the President is that most of this trend in automation is nothing more than the march of economic history (no more jobs filling drinks; now you have to know how to fix the drink filler). But it is important to point out that wage market distortions, such as the minimum wage, also drive companies toward these types of investments today by making the investments presently more cost-effective.

The reality is that most minimum wage jobs (indeed, the vast majority) are held by young and unskilled workers. Those are the people hurt most by a minimum wage and its effects. Those effects mean less jobs (remember full service gas stations and window washers? (Yes, I know NJ and OR still have them by state fiat!)) and higher unemployment. The unemployment rate among 16-17 year-olds is 28.1 percent and 18-19 year-olds is 22.4 percent. Among young African-Americans the unemployment rate is over 38 percent—a national disgrace of epic proportions. Having a job gives a person dignity and one’s first or early jobs train them in productivity and open doors for future promotion and social mobility. It is also an exercise individual liberty. If a young person, whose fundamental right is to their own labor, chooses to agree with a business to work at a certain rate, why should the government say otherwise? One needs to learn to trade their services, exercise their rights, and make these important decisions. But the minimum wage and its effects hinder these very important hallmarks of a successful society.

By Erik Newton (Twitter: @newtonslawpc)

“Minimum wage lowers earnings, produces unemployment.” by The Elephant's Child

Over at Hot Air, Ed Morrissey reviews Minimum Wages, a new book by a professor of economics at UCI and an associate director of research and statistics at the Federal Reserve Board, which argues that efforts to increase the minimum wage do more to hurt the working class by lowering real earnings and eliminating job opportunities.

Mr.  Morrissey says:

The minimum-wage increases that enjoy such popularity among politicians generate much less enthusiasm among economists, and for good reason.  It artificially inflates the cost of labor, especially in low-skill markets, which pushes employers to either reduce their labor through automation or scale back on staffing.  The higher the cost of labor goes, the less competitive the lowest-skilled workers become.  Those n that cannot absorb the costs will pass them along to their customers, raising the cost of living and eventually  eliminating whatever transient increase in actual buying power the wage increase produced — which prompts politicians to raise the floor again and start the cycle over.

I couldn’t agree more.  Beginners have to start somewhere.  Studies have shown that most people who start out at minimum wage move up within 6 months.  Politicians, anxious to raise the minimum wage, assume that someone is trying to support a family on that wage, but that is not usually the case. Politicians just distort the market once again.

Do read Hot Air’s review of Minimum Wages by David Neumark and William Wascher.  Might make a perfect Christmas gift for someone on your list.  As Ed says: “Told You So.”

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