Monday, September 2, 2013

Labor's Goal for Labor Day - A Living Wage

We celebrate the rise of labor unions and the efforts of working men and women on Labor Day. Of course, Labor Day has become just another three day weekend for many. Sadly, the decline of America’s private sector labor unions has taken away Labor Day as a major celebratory event for the unions. Parades that once saw tens of thousands workers marching now see thousands, many of whom are public sector workers. Only 11.5% of American workers are in unions. Thus, all too often we hear the sounds of silence from Labor on Labor Day. The SEIU had a different idea this Labor Day. It sponsored a “strike” by fast food workers in 60 cities on Thursday in support of a living wage, whatever that is, and the right to organize without fear of retaliation. The workers are asking for $15, but that’s far short of a living wage. The Living Wage Calculator, available at the MIT Poverty in America database, suggests a minimum wage of $23.53/hour would be necessary to support one parent and child in Long Beach and $24.81 in neighboring Orange County. Fast food workers at most chains are paid the minimum wage to start. The minimum wage is insufficient to support a family, especially for a single mom in an expensive city. $15/hour would equal $600/week, which after deductions would probably come to less that $400/week. Have the workers join the union, and their take home pay will be even less. The fast food industry historically hired high school and college students at the entry level. Employee turnover was high as the students moved on in their lives. Today though the sinking economy has driven displaced adults into working for low wages after being laid off their previous employment. The worker ‘s stories can be compelling as their earnings cannot sustain any meaningful lifestyle. An additional complication for the workers and unions is that about 60% of workers being hired today are in part time positions. Employers, especially in the restaurant business, are scared of the application of ObamaCare to full time employees. President Obama is succeeding in transforming the American economy. The profit margin for fast food restaurants is low; most of the restaurants are not owned by the large chains, but by individual franchisees. For example, over 99% of Burger Kings are independently owned. Many fast food restaurant owners only make $50 – 60,000 annually. The profits of the McDonalds and Wendys are irrelevant to the franchisees. The chains do not control their hiring, wages, or fringe benefits. The current federal minimum wage is $7.25/ hour. Many states have a higher wage. Minimum wage, or close to it, for those working full time will often be a starting point. An employee with good work habits should be able to move up in the organization, whether it be at a restaurant, hotel, or retailer. Let us never forget that a major part of America’s success, until recently, is the ability to move up on the job and elsewhere in the workplace. If they can’t move up in their current job, then they should move to a new position elsewhere, at least in a growing economy. The “living wage” will have the same economic effect as a rising minimum wage – increased unemployment. Unemployment among teenagers, especially black teenagers, has been rising. Less than 1/3 of students found summer employment this past summer. Industrial employers respond to rising labor costs by automating and outsourcing. Restaurants, hotels, and retailers can’t outsource, but they can automate and downsize employment. Substantial price increases can be counterproductive. The key to raising wages and benefits in the fast food restaurant is a growing economy with rising employment. It’s back to the Clinton maxim “It’s the economy, stupid.”

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