The Bishops and American Business: Rethinking the Minimum Wage

DECENT WORK and JUST WAGES. 

Those are the noble goals laid out in a January 8 letter to the chairs and ranking members of the Senate Committee on Finance and the House Committee on Ways and Means, and signed by Archbishop Thomas G. Wenski of Miami, chairman of the U.S. bishops’ Committee on Domestic Justice and Human Development, and Bishop Richard E. Pates of Des Moines, chair of the U.S. bishops’  Committee on International Justice and Peace. 

The letter asserts that the current federal minimum wage is not a just wage and that workers’ wages must allow them to form and support families.

In the letter, the bishops quote Pope Francis’ June 17, 2013 message to the G-8 summit:

“Every economic and political theory or action must set about providing each inhabitant of the planet with the minimum wherewithal to live in dignity and freedom, with the possibility of supporting a family, educating children, praising God and developing one’s own human potential. This is the main thing; in the absence of such a vision, all economic activity is meaningless.”

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I love Archbishop Wenski and Bishop Pates, and I applaud their heartfelt concern for the poor (and criticizing bishops is just not de rigueur here at Seasons of Grace); but nonetheless, I think this might be an oversimplified solution to a complex problem.  So at the risk of sounding as though I really understand the intricacies of economic theory, I pose this question for the good bishops:

Is there no room for “starter jobs”?

See, I think there are two groups who stand to suffer from an increase in the minimum wage:

1.  WORKERS who qualify for and depend on low-wage, entry-level jobs; and

2.  EMPLOYERS, whose profit margins may not support higher wages.

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THE “YOUTH UNEMPLOYMENT” CRISIS

Pope Francis engendered controversy a few months ago when, asked what is the “greatest problem” facing society, he cited “youth unemployment.”  Granted, the pope really did understand other seminal problems like abortion and euthanasia and hunger and war; but the point is, in that off-the-cuff response he identified one of the sources of tension and frustration among today’s youth.

Here in the United States, teens aged 16 and 17 faced a staggering 29.2% unemployment rate (32.7% for males) in July 2013, the mid-summer month when the highest number of teens seek summer jobs as soda jerks and lifeguards and grocery store clerks.  That compares with an overall 7.3% rate of unemployment for the general public during the same period.

But the young people who seek these low-level or entry-level jobs are not qualified to handle the responsibilities of a professional position.  They’re there to earn, but they’re also there to learn.

And that’s okay.

But it’s impractical to insist that these young workers must be paid a family-supporting wage for flipping burgers at McDonald’s or washing cars at Jax.  Hundreds or thousands of fast-food and convenience store outlets would stand to close, if they were forced to pay on a scale equivalent to higher priced restaurants and specialty shops.

THE DIVERSE AMERICAN WORKFORCE

Some of our workforce, whether liberals like it or not, are unprepared for career jobs which require experience or education.  Some of these “underpaid” workers are teens who will, in a few years, move on to progressively more responsible positions.  Some are unprepared for another reason:  lack of education, a language barrier, or even mental retardation or other diminished capabilities.

For the person who is truly unprepared for an advanced or higher-paying job, the solution lies, I believe, in education:  on-the-job training, career schools, GED and high school completion programs in the local community.

But all jobs are not the same, and raising the wage of the lowest-level worker will only result in wage inflation, as the market self-corrects by offering higher wages to higher producers.  The dollar will be further deflated on the world market, and the result will be zero growth.

THE CHALLENGE FOR BUSINESS:  A CASE STUDY

I recently came across an August 2013 article in Bloomberg.com titled “Why Wal-Mart Will Never Pay Like Costco”.  The writer cites an earlier article in The Atlantic which implies that big retailers can pay decent wages and thrive.  Here’s a clip from that earlier article:

The average American cashier makes $20,230 a year, a salary that in a single-earner household would leave a family of four living under the poverty line. But if he works the cash registers at QuikTrip, it’s an entirely different story. The convenience-store and gas-station chain offers entry-level employees an annual salary of around $40,000, plus benefits. Those high wages didn’t stop QuikTrip from prospering in a hostile economic climate. While other low-cost retailers spent the recession laying off staff and shuttering stores, QuikTrip expanded to its current 645 locations across 11 states.

Many employers believe that one of the best ways to raise their profit margin is to cut labor costs. But companies like QuikTrip, the grocery-store chain Trader Joe’s, and Costco Wholesale are proving that the decision to offer low wages is a choice, not an economic necessity. All three are low-cost retailers, a sector that is traditionally known for relying on part-time, low-paid employees. Yet these companies have all found that the act of valuing workers can pay off in the form of increased sales and productivity.

Well, yes; and it’s that perspective that leads the U.S. bishops to aggressively pursue social justice by encouraging an increase in the minimum wage.

Bloomberg, though, delves deeper into the issue, explaining that while Costco is a store where affluent, high socioeconomic status households (with incomes averaging $80,000/year) occasionally buy huge quantities of goods on the cheap, Walmart is mostly a store where lower-income people do their everyday shopping.  This important difference results in a business model by which Costco is much less labor-intensive, offering fewer SKUs in a huge store; whereas Walmart has a much wider selection, and the higher inventory means that more employees are needed to stock more shelves with more items that don’t turn over that often, hence are less profitable.

Here, according to Bloomberg, is how that translates into profitability:

Bloomberg explains the consequence of the different business models, and shows why lower-income people actually may prefer to shop at the low-cost, low-wage stores:

However, there are people for whom the McDonald’s Dollar Menu is a bit of a splurge, and Wal-Mart’s prices mean an extra pair of shoes for the kids. Those people might theoretically favor high wages, but they do not act on those beliefs — just witness last Thanksgiving’s union action against Wal-Mart, which featured indifferent crowds streaming past a handful of activists, most of whom did not actually work for Wal-Mart.

If you want Wal-Mart to have a labor force like Trader Joe’s and Costco, you probably want them to have a business model like Trader Joe’s and Costco — which is to say that you want them to have a customer demographic like Trader Joe’s and Costco. Obviously if you belong to that demographic — which is to say, if you’re a policy analyst, or a magazine writer — then this sounds like a splendid idea. To Wal-Mart’s actual customer base, however, it might sound like “take your business somewhere else.”

In conclusion, Bloomberg shows how things most people rarely think about — like the number of products that a store carries — have far-reaching effects on everything from labor, to location, to customer service and demographics.  We tend to look at the most politically salient features of the stores where we shop:  their size, their location, the wages that they pay; but these operations are not so simple.

SO HOW SHOULD THE CHURCH BE INVOLVED?

The earliest minimum wage that I can recall, dating to early childhood, is 29 cents; and when I entered the labor market after high school, I was proud to earn a whopping $1.09/hour.  My mother-in-law has memories of working in a grocery store for 5 cents/hour.

Obviously, inflation requires that even a low-wage earner should expect a salary higher than that; but raising the minimum wage does not, in my estimation, hold hope of achieving the desired result of a more egalitarian society.  It would only send us into further spiraling inflation.

As for the worker who has a family to support, and who is truly unable to find employment at a higher wage, there are solutions which the bishops should embrace:

  • Provide educational opportunities so that he or she can truly achieve the goal of a more fulfilling and productive job. FocusHOPE in metropolitan Detroit is an excellent example of a program which strives to prepare men and women for the workforce.
  • Provide charitable support for those families who truly need help finding suitable housing, food and clothing.  The St. Vincent de Paul Society exists to help these families in crisis with a variety of services.

But to urge the federal government, already on a crash course toward increased socialism with the Affordable Care Act and other projects of the Obama administration, to embrace the goal of income equalization seems imprudent.

Let the market self-correct, with businesses paying the salaries which they can afford to pay, and which will attract the workers they need.

And let the Church be the Church, doing what it does well:  teaching the Faith and helping the poor, all in the name of Christ.

  • Cody

    The Church has a role in ensuring just wages. Do not forget that defrauding laborers of their wages (enough that they may support themselves) is one of the sins that cries to heaven.

    • Stilbelieve

      Where did Jesus ever teach that the disciples should go get government to take care of the poor or what employers should pay their workers? Read Mt 20; 1-16. v 14,15 “Take what is yours and go. What if I wish to give this last one the same as you? [Or] am I not free to do as I wish with my own money?

  • http://ashesfromburntroses.blogspot.com/ Manny

    Excellent! Excellent Kathy, excellent! Every one, not just Catholics, should read this. And especially all those economic simpletons who have this animus against Walmart.

  • Lisa Ann Homic

    No one mentions a maximim wage for government jobs that are paid by tax payers and not based on profit, meaning the actual productivity of the person hired.

    • Schlomo Weinberger

      Lisa, what you describe has no relevance in new paradigm of neoliberal uprootedness and flux. Homic, is that Yugoslavian? They know all about the new paradigms.

      • nestazhe265

        My Uncle Caleb just got red Ford Focus ST by working off of a computer.
        try this B­u­z­z­3­4­.­ℂ­o­m

      • Lisa Ann Homic

        There is no new paradigm of neoliberalism. Reality is reality. Happy thoughts just don’t count.

        • Schlomo Weinberger

          Lisa, yours are happy thoughts. Reality is the Future doesn’t need goys living to ripe old age or spending all their time on vacations. Plebs are needed. Yugoslavs make good case in point. What is coming is Ultimate Balkanization- dissolution of the traditional unifying forces, even purely economic such as labor unions. My people stand to benefit greatly from new arrangement. Sorry to break it to you but Yugos won’t fare well… they’ll go on talking about history and culture and community and we’ll laugh. Maybe just for good measure unleash Albright on them again.

  • KarenJo12

    Did you ever think that if Walmart paid its employees more, then it could have a more Costco-like business model? Even Henry Ford wanted his employees to buy his cars. Walmart wants its employees to shop at Goodwill and use food stamps.

  • MR

    The bishops should learn economics before speaking about wages.

  • ahermit

    I see that Wal-Mart’s profit margin is twice that of Costco. Clearly there’s room there for more reasonable wages.

  • Y. A. Warren

    “But to urge the federal government, already on a crash course toward increased socialism with the Affordable Care Act and other projects of the Obama administration, to embrace the goal of income equalization seems imprudent.

    Let the market self-correct, with businesses paying the salaries which they can afford to pay, and which will attract the workers they need.

    And let the Church be the Church, doing what it does well: teaching the Faith and helping the poor, all in the name of Christ.”

    Have you ever been very poor? Have you ever worked, as an adult, in a minimum wage industry with no hope of working your way to the top?

    So much of what is called “Christianity” still justifies the caste system. There are no “untouchables” or “slaves” for the true followers of Jesus.

    • riannonqas321

      my Aunty Julia got silver Volkswagen Beetle Convertible by working
      parttime off of a home computer… Look At This J­u­m­p­9­9­9­.­ℂ­o­m

  • Y. A. Warren

    Your full argument supporting minimum wage is predicated on poor people who can’t afford for their children to be dependent on them for support until adulthood.

    As a person who worked in the food service industry for over 20 years, I can tell you that our U.S. economy relies on the caste system that values all essential services: food, clothing, education, and many other care taking positions on the same level as the “untouchables” in Hindu caste society. Very catholic, don’t you think?

  • nannon31

    The Church is often helping the poor with government money. A Catholic old age home is not run on donations ( except the simple living of nuns) but on having 60% or more of its residents funded by the Medicaid that Paul Ryan wanted to reduce by billions over ten years. 45% of childbirths and pediatric bills are funded by Medicaid in Catholic hospitals. Yet the mythic Church of home sent Catholic donations in little envelopes persists. We need a worldwide assessment of Catholic help of the poor and it would result in Catholics patting tax payers of all religions on the back along with patting our nuns on the back. Stop the myths.
    Many more of our institutions would close without government/ taxpayer help.

  • Y. A. Warren

    “Christians” continue to create a world in which the “soldiers of Christ” are “saviors” to those we persecute. This is nothing more than the Stockholm Syndrome on a global level.

  • Yonah

    The article is text book Republican flim flam rhetoric. The first tactic in the screw the 47% agenda is just to fabricate definitions and parameters that simply do not exist in reality. Case in point: the “starter job” riff tied to young people.

    First. NO. It is not just to employ YOUNG people at less than a living wage. Why?Because of what stuff costs.

    It is not just to employ mentally challenged people at less than a living wage (Peter Schiff thinks $2 per hour is fair)…because of what stuff costs.

    It is not just to pay ANYONE less than a living wage. Everyone has a RIGHT to live.

    Now. The whole thing about “starter jobs” only applying to the young. The author and all Republicans KNOW very well this in an aboslute falsehood. The rhetorical/psychological trick here is to silence into submission any older workers who are in minimum wage jobs by just humiliating them. This covers the Republicans from facing that many skilled jobs, for example, in health care or social work or education are very low paying. What does the home health care nurse make? The nursing home worker? The caseworker? The Teacher’s assistant? What does the fork lift operator make…do you really want a 16 year old running a fork lift…have you ever seen a man’s body impaled by a fork lift?

    My daughter works with mentally challenged adults…the most profoundly mentally challenged. She teaches them…has lesson plans; guides them through their work in a sheltered workshop business; takes care of their physical needs in eating and hygiene; conducts training sessions for newer staff; does continuing ed classes after hours and is not reimbursed for travel…all for $9 an hour…while the managers of the agency give themselves raises by making up supplemental contracts for this or that faux task supposedly outside of their main job description. No regular staff have gotten raises the whole time my daughter has worked there. So then what? By the article’s logic…everyone should aspire to be a manager?…just in order to live…to survive? That’s just plain nuts.

    It’s not complicated.

    The economic interests which the article’s author champions and represents have simply stolen money from workers. Outright theft…for over forty years on an ever increasing pace.

    The best practice remedy is also not complictaed. The money has to be taken back…through law…through taxation of the oppressing rich…through redistrubution…through socialist takeover of the economic rules of the road. Let them cry like stuck pigs about how they will take their bat and ball and go home. No they won’t. Take that bat and ball from them first, and then they can just go babble to themselves in a far off corner about how they used the rule the world.


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