Yes, ALL Jobs, or What Price Lives?

[seawasp]

This one's fairly short, so I'm not hiding it behind a cut.


One of the standard arguments about minimum wage is "it's just for teenagers and people trying to make a little money on the side" versus "all jobs should provide a living wage". 

There is argument about whether FDR and his people intended the minimum wage to be a true living wage. It's absolutely certain that he DID say that no company should exist that didn't pay the "wages of a decent living", but he said that in context of a DIFFERENT set of laws, not the minimum wage. The sentiment was certainly there, but the practical question of his actual intent remains. 

And depending on WHICH minimum wage you take, when, and project it to today, you can get radically different answers for what it OUGHT to be now. The original minimum wage in 1938 was 25 cents an hour, which maps to about $5.60 an hour today. One year later it was 0.30 and that is the equivalent of $7.60 today. In 1956 it was a dollar an hour -- or 11.60 in today's dollars. In 1974 it was up to $2 -- which is $12.80. And so on. 

So I'd rather just ignore that particular issue entirely, and focus on what SHOULD be done -- on what's the RIGHT thing to do.

My position: any job that's required for a business to operate -- janitor, waitstaff, back office, whatever -- should pay enough for the person to have a decent living on if they work reasonable hours. 40 hours a week is as far as "reasonable" goes; we should be working far less than that per week by now, given increases in output per worker hour. 

If you can't pay that much, you're demanding that people sacrifice themselves, in one way or another, for the sake of your business -- in grinding extra hours, in holding multiple jobs, or in requiring external help from the government (food stamps, supplemental income assistance, etc) which amounts to demanding the government subsidize your business' payroll. That's not being a savvy business, it's just being exploitative. 

I believe human beings, in this modern era, ALL deserve reasonably comfortable lives BY VIRTUE OF BEING HUMAN BEINGS. The value of my children, or yours, or anyone else's, is NOT dependent on what jobs they get later in life. It's in them being decent people. That includes people who can't work at all, or can only do certain kinds of work, or only a few hours a week -- and that includes them having remaining time, effort, and mental resources to do things they WANT to do. 

People should not be dragging themselves out of bed to go to a job and then grab a meal and then go to another job in order to keep themselves in a shitty apartment so they can drag themselves out of bed tomorrow and do it again. 

Human beings should all have the opportunity to LIVE -- in reasonable comfort BY THE STANDARDS OF MODERN SOCIETY (to avert anyone waving their hands trying to distract you by saying how we're all rich compared to medieval kings), with enough leisure time to keep them mentally, as well as physically, healthy. 

And no company  should exist that requires people to do that in order for the company to survive.

Comments

[dewline]

Amen to all of this.

[kengr]

Likewise, having the requirements to be *considered* for the job be ridiculous is way out of line.

Requiring a college degree to work at a burger joint (as staff, not manager) is silly at best.

And then there's the bit where they try *really* hard to prevent workers from being *able* to get 40 hours a week (so they don't have to give them benefits).

Grrr.

[dewline]

Seconded.

[djonn]

I don't disagree with the underlying principle, but as a practical matter it seems to me that this still leaves some of the variables out of the essential equation.

One of the major questions is "How many people should a living wage support?" I'm a one-person household in a suburban setting. My brother and his wife have raised two kids in a large urban center (and the four adults are still one household, because one-person households in that area mostly aren't financially realistic even if one has a full-time union-shop job). There are many other possible cases, including households with one adult and multiple kids, several adults and no kids, etc.

So suppose we define "living wage" as supporting an average household, that's probably an average of three to five people (not counting fractions, and considering "household" and "family" as separate concepts). By that standard, a family of four with a single wage-earner should get along well enough...but I, as a lone wolf, will be unreasonably wealthy by comparison. On the flip side, if we define "living wage" as supporting one person, I'll be perfectly okay, but a three- or four-person household with only one earner is going to be in serious trouble. And on the third hand, we can't very well pay people differently based on household size without opening several other very large cans of worms.

////

Also: wholly apart from the question of what wage is appropriate, there are practical questions about how the job market handles first-time, part-time, seasonal, and student workers - many of whom may be there explicitly for training of one kind or another, such that the wage is not necessarily the only compensation being received. If we decide that all jobs must be paid at living-wage rates, where does that leave the teen looking for date-night money or trying to save up for a car...or the retiree who just wants to sell books at a museum gift shop on weekends...or the graduate student whose loans get suddenly larger because the university now has to pay market wages for their required teaching duties? I agree that all these folks should be appropriately compensated, but I also think that there should be room in the marketplace for people and jobs that don't fit the full-time formulae.

(That said, I am boggled by the very large number of people who fail to understand the connection between greatly increased minimum wages and the rapid across-the-board price increases at fast-food and quick-casual restaurants. Yes, McDonald's and Subway food now costs a lot more than it used to...and the reason for that is that their labor costs have gone way the heck up. This is not rocket science....)

[dsrtao]

You can be boggled all you want, but it turns out that reality disagrees with you:

https://www.snopes.com/fact-check/big-mac-cost-denmark/

The minimum wage in Denmark is US $22/hour.

"At a McDonald's location in Copenhagen, for example, this burger cost 30.00 kr (about $4.73). At a McDonald's location in Tulsa, Oklahoma, a Big Mac costs $4.82."


So it is clear that either wages are not a significant component of the price of a Big Mac, or Danes average three times more productive than Americans, or the Big Mac is a huge loss leader in Copenhagen.

And it's not a loss leader.

[djonn]

The combined responses convince me that citing McDonald's was a bad example; they do not, for various reasons, convince me that my more general bogglement is wholly unjustified. I'll try to avoid repeating myself too much in these individual replies - in general, my take is that there are more variables in the price-hike equation than either of our stated viewpoints have acknowledged.

Now, a couple of notes:

I'd observe that while the Big Mac may not be a loss leader, it is also not necessarily the profit center that it was when it was one of McD's high end menu items. Nowadays, it's near the middle of the sandwich-price pack, with more advertising, more promotion - and higher prices - focused on the Quarter Pounder lines.

The Snopes citation is...interesting, and on point, but I don't find it conclusive - it's a single price point at a single location and it's four years out of date besides. I'd poke at the Big Mac Index directly, but that turns out to be behind a subscriber-wall. Nowadays, I'd like to see the prices in NYC and especially LA as well as the ones in Oklahoma and out here in Oregon. I grant that prices in LA vs. Oregon wouldn't necessarily invalidate the collective counter-argument, but the data would still be interesting. (There's also the question of whether hourly wage rates between Denmark and the US are really directly comparable, but for present purposes that's a side issue.)

[dsrtao]

I've read through your other responses, and you're still boggled, but you haven't found a sufficient counterexample.

I suggest to you that for many, probably most, retail markets, the price of a good is not so much related to the cost of providing that good as to the demand for that good at a particular location and time. And for almost every good, the cost of labor is an insignificant fraction of the cost of the good. (Obvious counterexamples: services rather than goods.)

The most obvious example in the US is gasoline. Here's a local example which you have probably seen many times:

There are several gas stations around my city. The pricing is highest at the on-interstate rest area. Next highest is the station visible at an off-ramp. The lowest prices are at intersections of significant roads.

All of them pay the same price for labor. All of them pay the same cost for the gasoline. All of them have similar rents/mortgages -- the price of gas station land is actually dominated, in my state, by the construction and tank maintenance costs.

When the state raises the minimum wage, the price of gas does not go up. The price of gas changes according to demand, with nobody willing to sell below cost.

[seawasp]

That's not the way it works, actually. Prices are up because corporations found people bought that as an excuse, really. Raising wages turns out to be a small fraction of the costs, so if you increased the cost of a burger based on raising pay, it'd be a few cents per burger. After all, a McDonald's sells LOTS of burgers (and fries, and nuggets, and especially sodas which cost them virtually nothing to make), so adding a few cents to the cost of each would cover dollars per hour.

But people BELIEVE as you do, so when they add a dollar onto the price of a formerly 2 dollar burger, you say "hey, they have to pay those kids more".

[djonn]

The short version: I won't say that corporations never price-gouge purely because they can get away with it. But I think the assertion that the present inflationary market is all a function of price-gouging is at least as much an over-simplification as my initial bogglement above may have been.

Per above, McDonald's is likely a bad example - although I find it interesting that both McD's and Taco Bell have made a sharp turn in the last year or so into having customers order via lobby kiosk, which has to be counted as a labor-saving measure. (My local Taco Bell has entirely stopped staffing its registers except for customers paying cash, and even cash buyers are expected to order via the kiosk.)

Subway - and indeed the whole class of counter-service chains that rely on customized made-to-order menus (Chipotle, Five Guys, etc.) - is in a different ballpark. Not only is making a (customized) entree to order much more labor-intensive than assembling a burger and a bag of fries, a high percentage of that labor is happening while the customer watches. And especially in places that slice their own meats (say, Jersey Mike's), there's more labor involved in setting up and maintaining the production line itself.

My personal experience says that prices are up much more sharply in that class of restaurants than they are at McD's and the other major burger chains. That makes far more sense as a labor-related phenomenon than it does as a how-much-can-we-squeeze-out-of-the-customer issue, because if labor wasn't the real issue, this would be a great moment for the whole quick-casual segment to steal a march on the fast food tier by narrowing the price point between the low-price chains and their own stores.

Instead, I see the opposite happening; McD's and its competitors are focusing on value menus because they can do that by trimming costs (and automating as much as possible); Subway and its fellows are raising regular prices because they have to...and struggling as a result, such that Subway's $6.99 value deals pretty much have to be loss leaders given the combined cost of ingredients and labor.

[seawasp]

Basically, no. That's not the way it works. Sure they'll go cheap whenever they can, but the kiosks only work... as long as people use them.

But really, it takes about 3 minutes, or less, for a Subway person to make my sub. At ten bucks an hour (which is well over minimum wage), that's 50 cents. At *retail*, if I assume they put a whole CAN of tuna on my sub (as an example -- and they do not) that's a buck and a half. The veggies maybe add 20 cents, add another 50 for the roll (which is highway robbery, I get a pack of better quality rolls at retail for about that), and you're below three bucks for the 6.99 sub. Soda is nothing, chips at wholesale are really cheap.

Double your labor costs, you barely hit three bucks on that sub. And that's mostly assuming retail, not wholesale/bulk pricing. I can get four cans of tuna for less than six bucks at my local store; wanna bet what THEY get their bulk tuna for? Way less than a buck-fifty a can, and they're not using a whole can on a small sub. Maybe on a big one.

The local independent deli has a constant deal going on -- a 15" ham sub for 7 bucks. This is a ridiculously overstuffed ham sub, too, and their NORMAL 15" subs are more like twice that. I sometimes order one of their salami subs and I have to order it with half the meat, because that's just too much salami. They'll often drop the price because of that.

They pay well over minimum wage, and they offer more food at less than Subway -- better quality, too. And they're doing fine, and have been for something like thirty years.

The chains absolutely ARE ripping us off and blaming the workers, because the workers ain't the ones driving the costs.

[ninjarat]

I don't know for sure if it's still the case (probably is), but when I worked at a local to me at the time McDonald's, they didn't actually sell soda.

They sold *cups*.

Let this sink in for a moment: the cost of soda is so insignificant that they didn't bother counting it in their sales figures. They did keep track of syrup bags and carbon dioxide tanks for inventory management, and of course the cups. Where I worked the water was municipal water filtered on site so that was essentially free. The money is selling you a disposable cup worth maybe a quarter of a cent for however many dollars.

If you think this is something recent? Nah. My experience working at McD's is from around 1985. When minimum wage was... I think $3.50/hour. I don't remember the prices from 40 years ago but say that a large soda was around 75 cents (a 12oz can was 50 cents so I think that's close enough to work with). Just five such drinks would cover one employee's wages for an hour and still be profitable for the restaurant. Our crew during lunch rush (between 11:30am to 1:30pm) was 8-9 people plus the shift manager, which means some 50 drinks would cover all our wages for an hour. Not counting any other food items.

We sold a lot more drinks and burgers and fries and fish and chicken than that during lunch rush. Like an order of magnitude more than that.

Now consider that minimum wage where I live is $15/hour, and the price of a soda from McD's via doordash is $2. That's a 4 times increase in minimum wage but only a 2.5 times increase in the price of that cup. Hm. If increased labor costs were as significant a factor as it's made out to be then a soda at McD's should cost you 50% more ($3) than it actually costs. But it doesn't.

As you say, it's not rocket science. It's basic arithmetic. The claims of increased labor costs simply don't add up.

[djonn]

My experience in working fast food is slightly more ancient than yours, so I'm very familiar with the utter cheapness of fountain soda and the "selling cups" model - which very nearly became the default for all but full-service restaurants prior to the pandemic. (Mind you, soft drink prices in general have never made mathematical sense no matter what form it comes in, but that's another side issue.)

As to arithmetic - we're all oversimplifying the equation. Labor is far from the only expense of running a McDonald's (or any other) franchise - there's cost of ingredients, rent/lease payments, janitorial and other maintenance (part of which is labor, but which the customer doesn't see), cost of non-edible consumables (including cleaning gear, uniforms, etc.), and in most cases franchise fees. But labor is also one of the few costs that an individual location or franchise owner can control and adjust on the fly. And menu prices - within limits - are one of the few tools a franchise operator can use to adjust their revenue stream.

So it's not at all unreasonable on its face for a sharp local wage increase to trigger an equally sharp change in menu prices, because those are among the few cost/revenue centers that the local operator can easily modify. (Corporate price gouging is certainly an alternate explanation, but not necessarily the only or even most likely one.) Which is what I saw happen in the Oregon food-service industry several years ago, when our legislature's version of the $15 min-wage law was passed. (And what happened in food service was comparatively more noticeable than most other consumer price bumps at that time.)

One last note, on soda prices in specific: McD's is an outlier. Most places where I currently buy fountain soda do charge at least $3; at full service restaurants it's often $4 to as much as $6 - although almost all establishments allow free refills, and are thereby selling cups (or renting glasses).

[ninjarat]

Sure, soda is a weird case but it's a known case. We know within a few cents what it costs every operator from the cheapest hole in the wall to the Michelin 5-stars. This makes it useful for first order approximations.

One last note, on soda prices in specific: McD's is an outlier. Most places where I currently buy fountain soda do charge at least $3; at full service restaurants it's often $4 to as much as $6 - although almost all establishments allow free refills, and are thereby selling cups (or renting glasses).

My point exactly. People are willing to pay $3-$6 at a sit-down restaurant for exactly the same soda that they would pay $2 at McDonald's. So, we have McD's selling soda for half the price that, say, Cheesecake Factory charges, while paying their workers more than twice as much -- minimum wage for service workers here is $6.75/hour. This isn't labor costs driving price increases. It's institutional greed pushing what the market will bear and using labor costs as an excuse to do it.

[ckd]

Seattle has one of the highest minimum wages in the country. It also has Dick's Drive In, a local chain that sells hamburgers for under $3.

[djonn]

[checks out Dick's web site]

Which they can get away with by (a) running very inexpensive physical locations, (b) because the burgers in question are very small (1/8 lb. patty) and minimally topped, and most likely (c) because the first two factors allow them to sell in unusually high volume. Their business model is pretty clearly focused on keeping their overall operating costs as low as possible, and they've done a good job of keeping to that focus.

[seawasp]

A typical McDonald's patty weighs 1/10th of a pound, so it ain't the size of the patty.

Back in the day McD's had bigger patties -- WAY bigger, you can see pictures comparing a model of the 1980s Big Mac with the pathetic "Big Mac" of today. Today they're selling smaller burgers than Dick's at higher prices. Everywhere.

Seriously, labor costs are nothing on this scale. They're a great EXCUSE to raise prices, because people HEAR about the raise in wages, so they are ready to believe that suddenly the burgers cost half again as much... when really, it should be a nickel more.

[ninjarat]

I suspect some misleading models or missing information. Patties were 10:1 ("ten-one", ten patties per pound) in 1985, or 4:1 ("four-one", four patties per pound) for the Quarter-Pounder burgers, before cooking. And they were all frozen then. So ostensibly there is no size difference before cooking.

It's possible that McD's have changed the fat:lean ratio which could account for greater shrinkage when cooking. Or alterations in bun sizes.

[claidheamhmor]

Agreed.