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.