Here in the DC area, we are about to engage in a new kind of experiment. The minimum wage in the Maryland suburbs is going up to $ 11.50 an hour. As it will be in the city of DC. But, in Northern Virginia, the minimum wage will be the Federally mandated one of $7.25. Do you really think the jobs will leave the northern suburbs and move to Virginia?
Of course, not. This has already been a consideration for in SeaTac, near the Seattle airport, which raised it’s minimum wage. After all, where will you move the jobs that cater to those in the airport? To Des Moines?
As is the other case (we can’t really derive experiments of this sort) found about two decades ago in the Northeast. When, New Jersey raised the minimum wage by 80 cents an hour over the federal minimum, while Pennsylvania did nothing to change the wages. So, David Card and Alan Krueger (then both at Princeton) analyzed and published results of this change. Basically, they found that employment was not lost in the New Jersey area- even in fast food restaurants, which claimed they would slash employee census.
But, there’s another method to effect change, if we don’t’ want to raise the minimum wage. Impose a surtax on the franchisee AND the franchisor (50/50 split)- and any independent entity (at 100%) of the amount of federal subsidy the government must provide to their workers who are not paid living wages. Let’s use McDonald’s as an example of franchisee-franchisor deals.
McDonald’s profits are $ 10 billion annually. The corporation rakes in about $ 5 billion and the franchisees collect about the same amount. Since McDonald’s takes its franchise fees from the gross, it would be fair to have it cover ½ the higher costs- say $ 1 billion, while the franchisees ante up $ 1 billion. Realistically, you can expect each stay at McDonalds to cost you about 36 cents more- because neither entity is going to part with any money- they’ll pass along the higher wages to you. (Because I don’t eat at McDonalds, it’s not me.)
Now, you can bet that a lot of franchisees (and franchisors) are not going to like this situation. As a matter of fact the International Franchising Association (IFA) reports one of their studies warning us that they will be “taking things into consideration” if we raise the minimum wage. (Notice I have not proposed changing the employees’ wages- just having the company pay a tax covering the subsidy their substandard wage costs America. Why should they get a free ride?)
I am not saying that IFA members won’t consider the effects of wages. Any sentient business owner would. But, that does not mean they can terminate employees willy nilly. You, the consumer, may want things your own way- but not if it takes you twenty minutes longer because the establishment lacks sufficient staff to satisfy your FAST food order.
And, we should also consider that 65% of the corporate owned facilities (such as McDonald’s owned units) don’t pay anyone the minimum wage- but 65% of the franchisees do- to a substantial number of their employees. And, that places like Costco know that paying reasonable wages gets staff with great attitudes and low turnover. Which contributes to the bottom line, just as much- if not more- as shafting your employees. Not quite germane, but certainly on-topic.
Below you can see the graph of how much income the top 1/100% (that 0.01%) of Americans grab of the total income earned each year. Yes, Virginia, that total ranges about 5-6%… 
Do you like what you are reading? You can get a complete analysis of how life in America (and the world) has changed, now that the business compact with its employees and its community has been abrogated. Why folks are not paid fair wages (leaving the rest of the US citizens to pay the difference between fair and minimum wages with our subsidizing their corporate profits with EITC, welfare, food stamps, and the like.
The Kindle edition: Click here The Paperback edition:
Living Wages. The Very Bottom Line. | http://t.co/AoEZVVOuwI via @Adjuvancy
Am I wrong in saying/reading/understanding that it is your belief that if we raise min wage the prices go up (which I take to mean it kind of negates the raising of the wage). But you are proposing the wages might stay the same, but the business owners then are liable for a tax which would help subsidize the benefits that the low wage earners would be entitled to due to their wage. If that is it…I’ll say I kind of like that idea, but only if there was some automatic way the employee received the benefit. Having worked with folks in situations like this I know how hard it is for people to get approved to receive the benefits. It’s not easy, and often times brings on a hardship, loss of housing and such. I need to buy your book and read it through…I’ve been so willy nilly with getting to your blog posts I’m probably talking out my ear.
Lisa recently posted..Twas A Good Year Ii by Lisa Brandel
I am saying – at least for the fast food industry- that they (the franchisees) claim they will raise prices- which may or may not happen. But, if we truly assess 100-105% of the change in wages to the cost of the food, the change per visit is less than 35 cents or so. I hope that answers that question, Lisa.
But, right now, they are using that 35 cents per visit to fuel their profits- at OUR expense, since we (the taxpayers) must cover the shortfall for their workers.
My real idea is to NOT change the minimum wage. But, to assess each employer whose gross revenue exceeds (not totally scientific here) $ 2 million- or has more than 10 employees- the exact amount of subsidy we (the federal government) must provide their employees in Food Stamps, AFDC, welfare, Medicaid, etc.. Then, the employer can make the choice of having less-than-motivated employees (minimum wage employees are typically much less “gung-ho” than those paid reasonable wages; using Costco, Target, and Trader Joe’s as some examples) or pay them wages to make them feel proud to work for their employer- at no different cost to the employer.
Living Wages. The Very Bottom Line. | http://t.co/3ud6ox1b4Z via @Adjuvancy