The federal minimum wage is $7.25 an hour. That sounds high compared to the $1.60 an hour that was the minimum wage in 1968. But that $1.60-an-hour wage in 1968 had the buying power of $10.56 an hour in 2013 dollars.
So this push by fast-food workers across the country to raise attention to the wage floor is valid on that count.
The current movement isn’t talking about $10 an hour or $11 an hour, which itself would be a high in terms of purchasing power since the first minimum wage was set in 1938 at 25 cents an hour, with a 2013 value of $4.07 an hour.
The $10- to $11-an-hour minimum wage is way, way back in the rearview. The push is for $15 an hour.
The sound you hear is the foundation of the food-service and cheap-retail economy at the floor of the U.S. economy beginning to crumble.
(No, not really. More on that directly.)
We’ve seen studies suggesting that doubling labor costs for companies like McDonald’s and Wal-Mart would push prices for the low-cost items that they offer towards the sky. I’m coming to be partial to the argument offered by some economists that at best we’d see prices go up incrementally, because consumers who frequent the McDonald’s and Wal-Marts of the world still tend to be on the lower end of the economic scale, and even with a massive increase in the minimum wage, you’re not going to see their fortunes on the aggregate improve that dramatically.
Wait a second, you’re thinking to yourself. You double the minimum wage, and yet you’re still not going to see a lot of improvement in the livelihoods of those who have minimum-wage jobs? How does that make sense?
The same way it makes sense in our industrial sector, where we still see roughly the same number of people employed today (around 17 million) as we did in 1962, but the labor market has tripled in size over the past half-century, meaning more and more people in the job market today work in service industry (read: “lower paying”) jobs.
Manufacturing famously put its money into research into ways it could automate its processes so that manufacturers could reduce labor costs. Manufacturing jobs are still gold standard in the U.S. economy, with average wages in the $24- to $25-an-hour range, so the issue isn’t the pay. It’s the relative scarcity of those jobs.
Push the minimum wage to $15 an hour, and industries that have only dipped their toes in automation, like fast food and lowest-prices retail, will thrust themselves headfirst into doing anything and everything they can to automate their processes so that they can hold the overall costs of labor roughly where they are now.
What that means is probably obvious, but I’ll go ahead and say it: one group of minimum-wage workers keeps its jobs at $15 an hour, and another group ends up being left out in the cold, figuratively and literally.
I don’t think you’d see literally half the minimum-wage workforce lose its jobs, but I do think it’s fair to assume that the cuts would be substantial. In the interim, the McDonald’s and Wal-Marts and their brethren would start by cutting its least productive workers and putting more of the burden on the low-rung workers and low-level management workers left behind. Over time, as companies learn how to get the work done with more automated processes and less employees, the competition for what are right now entry-level jobs will get more intense.
Essentially, the winners in this game will be much like the people in other industries who already earn $15 an hour or more. The more qualified you are, the more productive you are, the more likely you are to get and keep a job.
This of course is assuming that the push for a $15-an-hour minimum wage has any chance at all of achieving success, which it doesn’t. A more reasonable and realistic goal for the labor movement would be $10.50 an hour, which would bring the minimum wage back to the purchasing power of the all-time high in 1968.
Not that anybody in the labor movement asked me for any advice.
Share
Contributors
