The Paradoxical Meanness of the Minimum Wage

Over at dotcommonweal, Paul Moses links to this Bloomberg piece on the pay gap between McDonald’s CEO and a Counterman, and I urge you to read both the article and Moses’ blogpost.

The issue of pay disparities between the CEO of any company and it’s “front end” employees is one of those fights I leave to others, like Moses; I am never sure if people are seriously suggesting there should be no difference, salary-wise, between them, or if they’re just trying to make a point. Morevoer that whole “at some point you’ve made enough money” argument is one I truly would be much more sympathetic to, if it were more broadly (and fairly) applied — meaning if it were a standard applied to athletes and artists and media-elites and not just to corporate “fat cats.” Because that sentiment is apparently not meant to be uniformly applied throughout the monied classes, I tend to doubt the sincerity of those who promulgate it.

All of that said, however, I don’t know how anyone can accept an idea that a man who has worked faithfully and industriously for 20 years, at any job, should still be making minimum wage.

(Tyree Johnson of Chicago, 20 years at McDonalds, earning $8.25 an hour/source)

When I got my first job, as a department store cashier, I made $2.10 an hour. After 30 days, I got a “raise” to $2.30 and a year later I was making either $3.40 or $3.50 an hour. Had I remained with the store, it is unlikely I would ever have gotten rich (or made “enough” money; I am still waiting for that day) but certainly had I remained there for 20 years I would have — like most of the Department Managers, who were promoted from within — seen my responsibilities rise and my wage, as well. Such managers may not have been rich, but they managed to own homes and raise families on what they made.

To keep a loyal, well-trained and dependable employee at minimum wage — the same wage paid to unskilled workers newly hired — is pretty unconscionable. The job itself might not be “worth” $15 or $18 an hour, but the intangibles that such an employee brings to the job (dependability; knowledge of policy/procedure; demonstrated sense of responsibility; did I mention dependability) should be worth $12.50 an hour or so, shouldn’t it?

Last April, the HHS Mandate-rejecting Hobby Lobby store chain — citing its Christian sensibilities — voluntarily bumped up their minimum wage scale for their employees — $13 per hour for full-timers, and $9 for part-time. They’ve done that for the past four years.

In so doing, Hobby Lobby exhibits a tendency to broad-mindedness that goes missing within our minimum wage policies, and exposes a paradox inherent therein: by dictating what the minimum wage must be, we have trained business owners to a somewhat narrow, reactionary way of thinking. Prior to minimum wage laws, a smart employer knew that he could not keep good employees without paying them their worth. Once employers were told what they “must” pay, however, it created a baseline that mentally (and perhaps emotionally) narrowed, rather than broadened an employers sense of what wage was fair or deserved. In fact “fair” and “deserved” went out the window. If all a businessman (or woman) had to do was make sure a minimum wage was being paid, what did fairness or merit have to do with anything?

And that sort of thinking, born of the good-intentions of our own government — is how we get to the reality of a 20-year employee making $8.25 an hour, and having to live a pretty hardscrabble life.

This is unjust and dehumanizing; our minimum wage laws have helped corporations see employees less as skilled humans who might have more to bring to the table, but instead as units whose predictable, mandated wages sure make it easy to budget and finagle where they can.

Leo Rosten’s (sadly out-of-print) People I Have Loved, Known or Admired contains an essay entitled “An Infuriating Man” — his friend “Fenwick”, about an “exceedingly loveable little man” whom people could not stand, because he had the temerity to go around being logical. Fenwick, musing on minimum wage, manages to upset an entire cocktail party of elites:

Fenwick stunned Shmidlapp, whom I had forgotten to brief in advance, by mournfully remarking that the minimum-wage laws would wreak havoc precisely among those unskilled workers [minorities, teenagers] they were supposed to help.

“To begin with,” said Fenwick, “the American wage earner today gets twice $1.40 and hour, so the bill is not going to affect him –”

“The bill is designed to help the unskilled and the undereducated,” retorted Shmidlapp.

“An admirable intention,” beamed Fenwick, “because a tragic proportion of that group is unemployed. But if employers aren’t hiring them at $1.25 an hour, is there any reason on earth why they will hire them at $1.40?…Surely the unemployed will have less chance of finding a job under the new, higher minimum-wage laws than they had under the old.”

“What?” cried Shmidlapp. “Can you prove that?”

“Yes,” said Fenwick. “Every time minimum wages have been raised, the ratio of unemployed teenagers has risen — and mostly among [minorities]. . .Don’t you agree that every time you raise the minimum, you must push more unskilled or inexperienced workers onto the unemployment rolls?”

Shmidlapp attacked on the flanks. “What about the greedy employers,” he demanded, “who cruelly exploit their workers by not paying them enough to live on?”

A twinge of pain crossed Fenwick’s boyish features, “Oh, very, very few employers can hold on to their workmen if they pay them less than the workers can get elsewhere.”

. . .”Some men just can’t live on that! Or feed and clothe their children! Or pay their medical bills!” This was Shmidlapp at his best.

“We certainly ought to remedy that,” said Fenwick. “No American who wants to work should go hungry because of the objective (and thus efficient) forces of supply and demand. Let us by all means give and guarantee the poor a minimum income; that does far less economic and political damage than a minimum wage. A minimum income does not discriminate against minorities, the illiterate, the inept — ”

“Do you mean to stand there and tell me…that no workers are actually helped with Congress raises the minimum wage?”

“Oh, some workers will have their wages raised from $1.25 to $1.40 an hour,” said Fenwick, “but far more will not get a job they might have gotten at $1.25. It is just too costly to train them at $1.40, much less $1.60 an hour, especially for skills that take long training periods. This makes a raise in minimum wages absolutely heartless,” mourned Fenwick. “It prices decent, innocent, willing workmen right out of the labor market.”

“Then why does Congress pass such laws?” shouted Shmidlapp.

Fenwick blnked. “Are you suggesting that Congress never passes foolish or short-sighted — “

Well, let’s leave it there, and ponder how it comes to be that, with the best of intentions, our government has created a situation wherein a man may work for 20 years at a job, play by all the rules, and only make a lousy $8.25 an hour, because that’s all an employer needs to pay him to satisfy the law.

That essay is too long for me to excerpt, but if you can find it, read it all — or better yet, buy a used copy of Rosten’s wonderful book while a few are still floating around. Fenwick, btw, appears to have been modeled on Milton Friedman and before he’s through with old Shmedlapp he brings in the geographical effects of the minimum wage law; When Shmedlapp, argues that “conservatives and Republicans favor minimum wage laws!” Fenwick/Friedman responds: “Of course they do. . .many of them are manufacturing products in the North [and] northern manufacturers are delighted to force up their competitors’ costs in the South; in that way, businessmen in the North won’t have to face the desirable effects of that free-enterprise system conservatives and Republicans love to extol…increased minimum wages lead to increased costs, which lead to higher prices…Then many honest, low-wage earners in the South (where the cost of living is lower) will become disemployed…”

I don’t pretend to have all (or any) answers, but it seems to me we are at a point where every status quo must be re-assessed, including our wage policy. What are you thoughts? Do you think a minimum income may do less damage, both to the economy, our political climate and — most importantly to the dignity of the human person — than a minimum wage?

RELATED:
The USCCB is currently running a series of pieces about poverty in America, and its underlying issues. No one, of course, has all of the answers, and we cannot always foresee the results of our best-intentions in trying to eradicate poverty, but do check out the series and go here to read what US Bishops have to say about Domestic Poverty.

About Elizabeth Scalia
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  • bagoh20

    Is it better to have one employee making $10 or two making $5?
    At $5, twice as many people are working, and completing twice as much work, and neither needs to collect unemployment which means it doesn’t cost any more money for the society to get double the work done. Also twice as many people are learning a trade, while avoiding the temptation of crime, while gaining self-respect and developing a stake and connection in their society. Again all at the same overall cost.

    An employer does not have the option of paying too low, or everyone will work for his competitor who pays more and puts the cheapskate out of business, so paying a wage at the natural minimum or higher is the only way to survive.

    The reverse of all this is of course less work accomplished, and higher unemployment with all it’s direct and indirect costs, which are substantially higher than the cost of employing more people at lower wages. Remember, all the costs are borne by the public at large either through government or buying the product of the work. The employer just acts as a middle man, usually only managing to hold on to a few cents on every dollar of product produced. That is what encourages him to invent, innovate, risk, and strive, which is the life blood of a civilization, and especially its advancement.

    With near full employment, the workers become a scarcity and highly valued, which allows them to demand higher wages and the spiral spins up, instead of down.

    The moral value is obvious.

  • Adam

    I think this is one of those areas where Church teaching is going to be too broad to have any precision. Here’s what a quick Google search found me from the Catechism:

    2434 A just wage is the legitimate fruit of work. To refuse or withhold it can be a grave injustice. In determining fair pay both the needs and the contributions of each person must be taken into account. “Remuneration for work should guarantee man the opportunity to provide a dignified livelihood for himself and his family on the material, social, cultural and spiritual level, taking into account the role and the productivity of each, the state of the business, and the common good.” Agreement between the parties is not sufficient to justify morally the amount to be received in wages.

    So, generally speaking, I got it: a wage should be “fair.” Having said that, what is the fair value in current U.S. dollars for handling money and putting french fries in a vat of oil? I don’t doubt that the man is working hard for his money, but the Catechism isn’t capable of telling us if he should be getting $8.50 or $850. (This is not a criticism–it’s a difficult reflection on the ambiguity of moral rules.)

    Being in the military, there’s a weird egalitarianism to our salaries. Our pay is set by Congress, but base specifically on your rank and number of years in. So for example, every lieutenant colonel with 15 years experience makes the exact same amount of money, regardless of whether he’s an engineer, a doctor, a lawyer, or a Catholic chaplain. (Certain jobs, like pilots and doctors, get retention bonuses, but the base pay is the same.) Is that “fair”? Our civilian counterparts would undoubtedly be making much more or much less money for doing the same work–the lawyers and doctors would be richer, and the priest would probably be poorer. In the military, though, we all pretty much make the same–bonuses notwithstanding–and nobody complains about that.

    The thing is, the reason our salaries are all the same is because we’re subject to the whim and control of the government. Our only bargaining power is if a large number of us decide to quit, in which case the government might increase salaries in order to promote retention. Beyond that, I don’t have the ability to bargain for a higher salary, and they pretty much do “own” me until I retire or quit.

    That’s what makes me kinda-sorta nervous about an overarching government determination of what people should be earning: rather than society determining for itself what people should earn, it’d be one more thing we the people would be ceding to the government. Charity is good, but you can’t cede charity to the government, nor can the government promote charity by forcing employers to be egalitarian in their pay scales.

    I would prefer we took the hard-and-patient road of promoting social change within. You comment on Hobby Lobby voluntarily increasing their minimum wage as a matter of conscience. Maybe it’d be nice if society would wake up and compare Hobby Lobby to its competitors and say, “Gee, this place supports a living wage–maybe I should shop there.” Unfortunately, social consciousness in consumerism is seldom promoted (and I admit to not thinking about it much myself). How many households actively think about whether the companies they purchase from pay just wages and avoid sweatshop practices? If McDonald’s is withholding a just wage, then maybe instead of complaining to government, we should just…not shop there until McDonald’s gets the message?

    I don’t know if social consciousness in consumption works. I suspect the problem is that it’s not heavily explored. (Too bad that this is coming up just after Christmas–it hadn’t even occurred to me to check my daughter’s presents on whether they were ethically manufactured.)

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

    The man has been with McDonald’s for 20 years and he still makes minimum wage? I find that hard to believe. There’s got to be more to the story. I worked minimum wage jobs and it got me through college. But I had periodic increases as well. Perhaps times have changed. The man has to be more ambitious too and find something a little better than putting together Big Macs. He’s working a part time school kid’s job as an adult.

  • Cowboy

    I worked in fast food, specifically in a Braum’s franchise (ice cream & hamburgers). I sought that job out because they paid above minimum wage. At the time, minimum wage was $3.25 or so. Braum’s offered $4.00, but with a trade off. You’d never get a raise at Braum’s. A friend of mine got a job at the McDonald’s instead, for $3.25. I thought I did better.

    But I learned better after about a year. My buddy at McDonald’s kept getting raises, because he was a good worker and a critical member of each shift. I was doing about the same role along with another guy at Braum’s. His wage rose to $5.00 per hour over there. Ours were stuck forever at $4.00, along with the rest of our crew, many of whom we drug along in terms of workshare.

    We used to go meet our buddy at McDonald’s after his shift sometimes, and it struck us how they seemed to be in good cheer over there. That was rare at Braum’s. His shifts didn’t bring him down, that’s for sure. Ours sure did.

    I’m glad I left that job eventually, but also glad I took it. I learned flexible wages based around worth are a pretty good thing in a lot of ways. Wage ceilings, even or especially when everybody’s at them, are not at all.

  • Thomas R

    Bummer, I kind of like Braum’s ice cream. (This is basically admitting I’m from one of five or six states)

  • Dad of Six

    I have a hard time accepting the premise of the Bloomberg story…it doesn’t smell right. I have some nephews and nieces who are shift managers at Micky Dees or Tim Hortons, and they have been there 1/10 the time this guy has worked. They also are not planning on a career at these places. They are attending colleges with the intention of securing a job in a field that interests them, and that will allow them to have a family. They’ve told me stories of new workers who do not know how to push a broom or can’t believe they have to actually work to get paid.

    Minimum wage jobs are not meant to support a family. They are meant for school age workers or other beginners in the job market. My first job was a summer position at a vegetable farm for $1.50/hour. I learned how to work…to be on time, to be responsible for a task or a group, and basic economics like how the farmer supported his family by raising lettuce, carrots, onions and potatoes. I also worked as a mason tender and an assembly line worker on summer employment. I am now an engineering manager for a large firm. I encourage my employees not to be content with their current positions, but take advantage of the company’s tuition aid and better themselves.

    Discussions of income inequality seem to pivot around class envy. Do I think the McDonalds CEO makes too much money? He is being paid what what the market says he is worth for his skills and efforts, or otherwise the board of directors would let him go. The same goes for our high priced athletes. The owner of the sports team has to retain these players, and somehow be able to make a profit. Of course, I hope the athlete or CEO tithes with his time, talents or treasure…just like I did at $1.50/hour.

    Or maybe the 20-year McDonalds veteran is literally following Thomas a’ Kempis:

    “Seek, child, to do the will of others rather than your own. Always choose to have less rather than more. Look always for the last place and seek to be beneath all others. Always wish and pray that the will of God be fully carried out in you.”

  • Tofu_Killer

    What I want to say to you and the above commentators is, you have been very fortunate in your work life if you cannot believe that it is possible for someone to spend 20 years at a job and still be paid minimum wage.
    If you cannot see how this article simply reeks with condescension and privilege, you have been very very fortunate.
    But most of all, if you can buy into this argument that a labor market freer of regulation would somehow subscribe to a rational morality that would do anything other than chew up employees and discard them when they demand anything more than the very least of compensation betrays a deep misunderstanding of business, an incredible ignorance of the history of this country, labor economics, and of working conditions in the developing world.

  • Steve Cavanaugh

    ” Do I think the McDonalds CEO makes too much money? He is being paid what what the market says he is worth for his skills and efforts, or otherwise the board of directors would let him go.”

    Do you really think this is how most businesses work? That the Board of Directors somehow objectively assesses the CEO’s work and pays accordingly? I think you’ll find it’s more likely that the Board of Directors and CEO have a much closer relationship. Typically, there are other relationships, such as serving on other boards together and social acquaintance that make for a much cozier relationship. For example, Don Thompson, the current CEO of McDonalds serves on other boards with at least two of his directors, John Rogers, Jr. and John Canning, Jr. (you can check out the links below). So the relationship of Mr. Thompson to his board is not merely employee to employer. Mr. Thompson is also a member of the Board of Directors at McDonalds.

    In noting this, I am not saying anything in particular about the McDonalds Corp’s governance; just pointing out that the relationships in corporate governance are not so cut and dried as the quote at the top might suggest. My experience at other businesses is that the cozy relationships that can be formed can result in the enrichment of the leadership at the expense of the “average” worker.

    Don Thompson (CEO of McDonalds) serves on the Board of Directors for McDonald’s Corporation, the Exelon Corporation, Northwestern Memorial Hospital and Purdue University.
    http://aboutmcdonalds.com/mcd/our_company/leadership/don_thompson.html

    John W. Rogers, Jr.
    (Board member of McDonalds)
    Chairman and Chief Executive Officer of Ariel Investments, LLC, an institutional money management firm, which he founded in 1983. Director of Exelon Corporation and a trustee of Ariel Investment Trust. Director since 2003. Class of 2013.
    http://www.aboutmcdonalds.com/mcd/investors/corporate_governance/board_of_directors.html

    John A Canning, Jr.
    (Board member of McDonalds)
    Mr. Canning also serves on the Board of Directors of Northwestern Memorial Hospital and Exelon Corporation.
    http://en.wikipedia.org/wiki/John_Canning,_Jr.

  • T

    So the disparity between a McDonald’s CEO and a counter employee is a moral outrage.

    What about the mention of the salary differential between Angelina Jolie and a crew electrician?

    Or Katie Couric’s former salary and the cameraman on CBS news?

    Or Al Gore’s take from his recent sale of current TV vs his employees?

    or Brad Pitt, or Ed Schultz or Andrea Mitchell . . . . . . . . .?

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  • T

    ToFu Killer,

    The ignorance is yours. The free market drives prices and wages to an equilibrium and that equilibrium is always upset when one has some unique talent or product. Raise the minimum wage all you want, no business man or businesswoman who must meet payroll is going to pay $15/hr for a dishwasher or a busboy. Raising the minimum wage causes entry-level jobs to disappear which is why there is such a high unemployment rate among teenagers. The black teenage unemployment rate is 39%. Are you going to tell anyone that it’s better to have teenagers loitering on corners or doing mischief rather than earning money, participate in the workforce and developing a sense of self-worth?

    Secondly, you write: ” . . . an incredible ignorance of the history of this country, labor economics, and of working conditions in the developing world.” Since when does the minimum wage in the United States improve the working conditions of a third world economy?

    It is your comment that evinces not knowing whereof you speak.

  • Omar F. A. Gutierrez

    Great post. Very well laid out. This is what helpful additions to the conversations around social teaching look like. Thank you.

  • Pam H.

    RE “Morevoer that whole “at some point you’ve made enough money” argument is one I truly would be much more sympathetic to, if it were more broadly (and fairly) applied — meaning if it were a standard applied to athletes and artists and media-elites and not just to corporate “fat cats.””: I think most people DO apply the same standard to athletes and artists and media-elites, when their pay raises prevent littler people from getting any pay increase (as happens, ’round here). I don’t believe most people are arguing that the CEOs and the counter-workers’ pay should be the same, or even close. But there’s a huge grey area that’s being ignored – simply huge.

    It is true that being poor makes it much, much harder to become prosperous – poor people aren’t as willing and able to take risks with their money, because they and their families need it for basic human needs, or if they do, they tend to get shafted because they lack experience in investing. And their losses are more dangerous, because when they fall, it often is into situations so much worse than “middle class”. So even if they work as hard as the CEOs (physically, often very much harder, though their jobs are intellectually easier), they don’t get rewarded as freely as CEOs do.

    Most of the rich didn’t get there solely on their own labors – most of them didn’t start out dirt poor. They built on their parents’, their ancestors’ wealth. Who maybe paid for their education, or at least let them get a higher education instead of working to help support their parents and siblings, and maybe even gave them a car, or other things. So I don’t like to hear people claiming they did it all themselves. If your parents are dirt poor, yes, you can climb out of it, but it’s much, much harder than if they aren’t. It’s not always their fault, if the poor can’t do this.

  • Gary B

    I don’t see how the government is ‘making’ businesses do anything. Businesses always look for the highest profit margin. The same thing will shortly take place under Obamacare. Business will be cutting workers hours to make them into part time workers and avoid having to give them medical benefits. Did the government force them to do that? The Bloomberg articles points out the growing gap between what workers make and what management make. In case anyone hasn’t noticed, worker wages have stagnated in the last 20 years. At the same time, CEO salaries have skyrocketed. So tell me again how minimum wage requirements ‘force’ business to pay employee less or stops them from hiring people. It’s obviously not due to lack of profit.

  • T

    GaryB,

    First of all, minimum wage jobs are unskilled labor; they simply can’t be compared to a ceo who is responsible TO shareholders and FOR thousands of employees. That aside, while you may be correct in noting that businesses are not FORCED to postpone hiring, the minimum wage requirement influences them to move in that direction. The unhired employees (or fired employees) are the losers.

    Example. Say you own a pizza parlor and you employ 3 teenagers each night to run the shop. If you pay them a minimum wage of $5/hr each that’s a labor cost of $15/hr ($5ea x 3 teenagers). Now raise the minimum wage requirement to $7/hr. To cover that you’re forced to either take less profit (in a slim profit-margin business already), raise prices or let people go. Now no business wants to be the first to raise prices. Doing that makes people go elsewhere (to pizza shops who haven’t raised their prices yet). Even if those other shops eventually DO raise prices, many of the lost customers never return because they’ve now established a new buying pattern. You do not want to lose current customers.

    So what to do? You now use only two teenagers, you increase their workload, you pay them $7/hr ($14/hr total for two teenagers instead of 3 teenagers at $5/hr). One teenager is now out of work. Were you “forced” to do this? NO. The minimum wage police were not standing there with a gun to you head, but the rise in the minimum wage pretty much dictated your respnse. The difference is purely academic, or as Yogi Berra said: “In theory there’s no difference between theory and practice. In practice there is.”

  • http://www.withouthavingseen.com Ryan Haber

    Minimum wage laws are *intended* to create and enlarge a dependent class of dependable voters. The monied classes are too good with money to imagine any result but what they get. These people know what they are doing.


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