Minimum Wage

Spoiler: It’s Not Higher Wages That’s Making The CEO of Carl’s Jr. Threaten Automation

March 21, 2016 Hanna Brooks Olsen
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Economics, Minimum Wage

carls' jr automation

I’m going to come right out and say something plainly: Andy Puzder, the CEO of CKE Restaurants, Inc (the parent company for Carl’s Jr.) is not a good dude.

He’s an elite-level sexist—”I like our ads. I like beautiful women eating burgers in bikinis. I think it’s very American”—who, despite himself earning over $17,000 per day, has railed against paying overtime to salaried fast food managers because “what they lose in overtime pay they gain in the stature and sense of accomplishment.” He’s claimed that the existence of social services actually make people more poor, completely neglecting to note that the poverty wages he pays is actually the reason the working poor are reliant on social services, and seems to have a fundamental misunderstanding of how poverty actually works.

So imagine my surprise when this Not Good Dude with a history of getting it wrong on basically everything having to do with labor and wages for the lowest earners makes a comment about automation and everyone—even sensible people!—point to it and say “See? See? We knew it!”

In a Business Insider piece last week, Puzder said he’d like to try a fully automated restaurant because it would be cheaper. But it’s clear from him other quotes that it’s not just wages and the cost of health care that are making him look at robots—the man clearly just doesn’t like the idea of human beings, and his disdain for the very people who make him his multi-millions each year is evident in quotes like this one:

[The machines are] always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case.

Plus, he clearly thinks kiosks are simply more appealing to young people (he explains that “Millennials like not seeing people”) which means it’s less about the cost of the work and more about his own interest in trying something different and without humans. But that’s not stopping him from tying it back to the cost of labor to further is own long-standing anti-minimum wage agenda.

The threat of automation is hardly new; since the days of the Triangle Shirtwaist Factory, conservatives have been threatening to fire all of their employees and replace them with robots if they’re forced to pay them fair wages. Most recently, though, you may have seen these threats in the form of a ridiculous meme about how McDonald’s has replaced its workers with kiosks all because of the call for higher wages. Sure, it’s been swiftly disproven—the kiosks are more expensive than the labor, anyway, and can’t yet handle manning the drive-thru, which is responsible for 70% of McD’s sales—but that isn’t stopping minimum wage opponents from making scary claw-hands, baring their teeth, and telling spooky stories about job loss.

But of course, these scary tales (let’s be honest—these threats) are usually told by people who are not in any danger of losing anything. Dunkin Donuts CEO Nigel Travis, who famously doubled his income to $10M per year (because stock options, duh), has slammed New York’s proposed $15 minimum wage, achieving peak levels of lack of self-awareness and empathy.

Though the federal minimum wage hasn’t been increased since 2009, pay for guys like Travis and Puzder sure has. Between 2009 and 2014, the ration of CEO-to-employee pay in the United States grew from 196:1 to 303:1.

Meanwhile, workers’ wages have remained stagnate. So it’s hard to see how it’s the wages, rather than, oh, I don’t know, greed maybe? That’s to blame.

It could also be that Puzder and his crew at Carl’s Jr. made some bad bets. As most fast food restaurants were doubling down on cheaper deals—because they know that poor people need to eat, too!—Carl’s Jr. and Hardee’s were trying to make burgers bigger. In a 2009 interview with AdAge, Puzder boasted about bucking trends:

When everybody goes one way, we go the other. Two or three years ago, investors were saying you’ve got to sell salads and applesauce. We said, “To hell with that, we’re going to sell the Monster Thickburger,” and our sales went very, very well. This year everybody is doing 99-cent double cheeseburgers, and quite honestly, go to the grocery store and buy the meat and the buns and the condiments and you don’t pay rent, utilities, labor. You can’t make a decent burger for 99 cents. People are looking to sell this garbage and trying to out-garbage each other.

Now, just a few years later—while his pay has increased and the pay of his workers, largely, has not—Carl’s Jr. made industry headlines when it rolled out an ultra-cheap deal that includes not one but two sandwiches for $4. Carl’s Jr.’s chief marketing officer, Brad Hadley, called the current climate “a price war.”

Gosh, who could have predicted that when workers have less money, they want to spend less money to eat? That sure surprises me.

It’s easy (and convenient for minimum wage opponents) to paint automation as the direct result of higher labor costs—assuming you’re viewing those two elements in a total vacuum. But in drawing a straight line from “high wages” to “all jobs replaced by robots,” you’re leaving out the numerous other elements like skyrocketing CEO pay, tightened purse strings among consumers, not to mention changing consumer tastes and innovations in technology. —

And while it’s true that automation is definitely on the horizon—we’ve been automating jobs for centuries and it’s actually been ok because they’re usually just replaced with different jobs. Instead of doing the thing a robot does, employers have to hire the guy who services the robot, or who does all of the jobs a robot can’t do (seriously, a lot of basic tasks for people are vexing for robots). Plus, employers need humans to be employed somewhere because of course, robots don’t eat burgers.

If Carl’s Jr. really wants to improve their bottom line, you’d think Puzder would invest more in his workers to ensure there’s always a steady stream of demand for his products. But, of course, that’s assuming he’s actually a good dude who likes people and wants them to do well which, as we’ve established, he is not.

Reporters and Redditors Agree: Seattle’s Minimum Wage Increase Is Great for Business

March 17, 2016 Paul Constant
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Minimum Wage

shield-1020318_1920In the spring of last year, we here at Civic Skunk Works spent a lot of time debunking stories about raising the minimum wage. At times it seemed like every reporter left in America last year was publishing a scary piece about business closures. I’m not complaining—it’s fun to debunk those pieces! But it’s interesting to look around and see that except for a pair of very loud holdouts—the Abbott and Costello of trickle down economics, you might say—most of those complaints have fallen away.

Today, Jed Graham at Investor’s Business Daily has published the latest story about minimum wage increases around the country. And Graham goes out of his way to point out that the doom and gloom that was predicted has not come to pass: in fact, the story is headlined “Has Minimum Wage Knifed Seattle Restaurant Jobs? New Data Say No.” Here’s the section on Seattle:

Data through the end of 2015 released in February suggested that Seattle restaurants had trouble adapting as employment at area food and drinking places grew at the slowest pace since 2009. The newly revised data show that restaurant employment actually has accelerated since the wage hike, rising 5.4% from a year ago in January.

The Seattle-area data cover the entire Seattle-Bellevue-Everett metro, of which Seattle is just one-fourth of the population.

You really ought to go read the rest of the story, which travels around the country dismantling negative claims about the minimum wage. Honestly, I’m most happy about that last quoted sentence about the Seattle-Bellevue-Everett metro data, which clarifies a point that minimum-wage opponents often use to obfuscate the data. Such clear-headedness!

It’s not just reporters who have gotten the message about the minimum wage: regular folks on the internet aren’t suffering any fools, either. Three days ago, the Redditors at r/Seattle debunked a post from someone who wanted Seattleites to acknowledge the (nonexistent) “negative trend” in business since the wage went up. The user, appropriately named “folderol,” wrote:

So what is the excuse now Seattle? Who’s fault is it other than your own? And just for fun let’s not have the answer be “Republicans” this time.

Redditors immediately started picking apart folderol’s post, decrying it as “cherry picking with an ideological axe to grind,” and getting to the bottom of the issue as quickly as possible. Here’s user SovietJugernaut:

While unemployment did tick up to 5.3% in January, there are two things you should remember:

  • 5.3% is still well within the range that most economists consider “full employment.”
  • Paying too much attention to monthly ups and downs with things like the unemployment rate is a mistake that will often cause people to miss the longer term trends. Even in the very best of economies, some months will be better than others. Take the averages over several months to get a better idea of how the economy is doing overall.

Seattle’s economy is just fine.

Took the words right out of my mouth.

It’s amazing to see how the narrative has changed in just one short year. Reporters and Redditors all agree: Seattle’s minimum wage increase is working. Raising the minimum wage doesn’t kill jobs. It doesn’t kill business. In fact, it’s great for business.

It’s Ok, New York—Seattle’s Still Standing

March 14, 2016 Hanna Brooks Olsen
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Minimum Wage

Dear New York City,

I know that recently a certain Murdoch-owned newspaper may have tried to scare you about the potential minimum wage increase that Governor Andrew Cuomo is proposing. To make their point, this Paper Who Must Not Be Named pointed to Seattle, the land of ever-increasing rents and tall trees, as an example of a city that raised their wage and is now paying dearly with job losses that, to hear them tell it, make it sound like we’re living in a wasteland with a busted Space Needle and not a single barista in sight.

But I want to tell you, from here on the ground and with statistics and studies in hand: It’ll be ok.

seattle minimum wage job losses

When the Seattle City Council passed a $15 minimum wage 2014, they were fully aware that other cities and states would be looking to it as a model—would this grand experiment called Paying People Even A Fraction of What Their Time is Worth end poorly?

And of course, it depends on who you ask; those who are fundamentally opposed to minimum wage increases—like, for example, the American Enterprise Institute, who you may know as the sole citation of That One Newspaper’s op-ed—have found models that work for their narrative, while others, like a state economist, our own Office of Economic Development, and basically anyone else, have actually shown quite a bit of job growth.

It’s important to point out two things, though: First, that we’re not even a full year into this experiment yet. As I’ve written before, it’s just too soon to really see the impacts—positive or negative—of the new minimum wage because not even a complete 12 months has passed since workers saw a boost to their pay checks. And second, while the job losses or gains may all be hypothetical at this point, what is real is the higher earnings of thousands of workers in the city. Seattle’s job market may be cooling just like the rest of the country, or it may be booming thanks to tech jobs, or it may be a fiery hellscape of unemployed fast food workers (again! Too soon to tell!)—but what is 100% true is that workers in Seattle, this week, next week, and for the foreseeable future, are taking home more money, which they are in turn spending on things in their community. And that is truthfully—not theoretically—good for everyone.

AEI’s model doesn’t take that into account. Which you might not realize, since it was presented in the op-ed in Some Newspaper as the gospel truth.

Here on the ground in Seattle, though, I can confirm: It’s not that bad. Yes, it could potentially be slightly difficult in the short-term for farmers and non-profits (for what it’s worth, we heard the same concerns here and everyone’s still standing), but for those typically low-paid employees who have been scraping by on an unlivable wage, those raises will directly translate into more money into the economy, paying off bills and purchasing things they’ve been delaying buying.

raise the wage

And, though I’ve already presented much more evidence than that scary op-ed, I’m going to go ahead and throw in one more point of consideration: A study released just last week that concluded that Governor Cuomo’s minimum wage increase would actually boost jobs, not cost them. Not only that, but the increase in wages—which would improve the earnings of people working in a wide rage of industries, including health care workers, civil servants, individuals working in hospitality, retail, and service, and even teachers—would “include a ripple effect” that would lead to higher wages among those already earning more than $15.

All of which is to say, dearest New Yorkers, that actually, Seattle is doing fine. We’re opening new restaurants and employing lots of people and yes, struggling with our own economic issues (hello, affordable housing). But raising the wage—which, again, only just happened one! Year! Ago!—has not had the terrifying effect you may have heard.

seattle minimum wage jobs

You do you, New York, but don’t let anyone point to Seattle and say that we’re the example of what not to do on wages. Because I promise, we’re ok.

Love,

Seattle.

$15 Minimum Wage Would Boost Employment in New York State, Study Concludes

March 11, 2016 Goldy
1 Comment
Economics, Minimum Wage

Minimum wage model

A new study from UC Berkeley’s Institute for Research on Labor and Employment concludes that raising the minimum wage in New York City to $15 by 2018 and in the rest of the state by 2021, would actually result in a net increase of jobs:

Our estimate projects a cumulative net gain in employment of 3,200 jobs by mid-2021, which corresponds to 0.04 percent of projected 2021 employment.

Sure, 3,200 jobs is a tiny gain within the context of a giant economy like New York’s, but the point is it’s not the catastrophic loss that the naysayers warn of. It’s not any loss at all. In fact, it’s the opposite.

But more important is the “23.4 percent average wage increase for 3.16 million workers” in New York State. As The Donald would say, that’s yuuuge!

How is this possible? “How can such a major improvement in living standards occur without adverse employment effects?” Simple, the researchers conclude:

While a higher minimum wage induces some automation, as well as increased worker productivity and higher prices, it simultaneously increases worker purchasing power. In the end, the costs of the minimum wage will be borne by turnover reductions, productivity increases and modest price increases.

As we’ve been saying all along: When workers have more money, businesses have more customers and hire more workers. Pretty obvious, right?

Local Radio Host Very Confused About the Minimum Wage

March 9, 2016 Paul Constant
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Minimum Wage, Uncategorized
Is radio still a thing? (Image courtesy of pandpstock001 at FreeDigitalPhotos.net.)

Is radio still a thing? (Image courtesy of pandpstock001 at FreeDigitalPhotos.net.)

Eric Mandel, the “Digital Content Producer” at myNorthwest.com, reports that Seattle-area conservative talk radio host Dori Monson has some opinions about Raise Up Washington, the coalition fighting to raise Washington State’s minimum wage to $13.50 over four years.

First of all, the column begins with a quiet little victory of its own. Monson, who has for years been an angry opponent of Seattle’s $15 minimum wage, seems to now be okay with $15. “Upping the minimum wage in Seattle is one thing,” Mandel says in a paraphrase of Monson’s argument, implying that he has come to accept the wage. He also seems to be taking it on faith that $15 is right for Seattle in this paragraph:

“The cost of living in a place like Colfax is dramatically different from the cost of living if you are on Queen Anne or Fremont in Seattle,” [Monson] said. “It doesn’t make any sense to have a statewide minimum wage. The economies of rural Eastern Washington and urban cities in Western Washington are night and day, and (it’s not smart) to say a minimum wage should be one-size fits all.”

So, yeah, it sure sounds like Monson might be a convert to $15. Welcome, Dori! It’s never too late to get right on an issue. But addressing Monson’s finer point in that paragraph: it’s perfectly okay to believe that the minimum wage should not be one-size-fits-all. That’s why, if Raise Up Washington’s initiative passes, the minimum wage will be $13.50 in rural areas by 2020, but in Seattle it will be more than two dollars higher than that in many cases, to account for the higher cost of living in Seattle. Problem solved!

Monson’s other point is a common misconception about the minimum wage that gets repeated a whole lot:

“Minimum-wage jobs generally are entry-level jobs,” he said. “They are jobs that you work while you’re finishing your college degree or while you are acquiring some trade skills if college is not for you. It is not meant to be a living wage. It is meant to be a stepping stone.”

That entry-level, stepping-stone argument maybe used to be true, but it’s not anymore. Minimum wage jobs have a tendency to remain minimum wage jobs, according to Ben Casselman at FiveThirtyEight:

During the strong labor market of the mid-1990s, only 1 in 5 minimum-wage workers was still earning minimum wage a year later. Today, that number is nearly 1 in 3, according to my analysis of government survey data. There has been a similar rise in the number of people staying in minimum-wage jobs for three years or longer.

As to Monson’s suggestion that the minimum wage isn’t meant to be a living wage—I’d like to see him tell that to the large number of low-wage workers in the state. Raise Up Washington’s FAQ (PDF) explains:

Over 730,000 workers in Washington State would benefit from raising the minimum wage to $13.50 an hour. Currently, over half of workers (53 percent) earning less than $13.50 an hour are over the age of 30, with a greater share of workers over age 55 (13 percent) earning less than $13.50 an hour compared to teens (9 percent). The majority are working full time (59 percent), and have family incomes below $60,000/year (66 percent). Women are more likely than men to earn under $13.50 an hour, as are people of color – over 40 percent of Latino and Black workers earn less than $13.50 an hour.

Really? Nearly three-quarters of a million workers in Washington, more than half of whom are over 30 years old, don’t deserve a raise? Their families don’t deserve a living wage?

I don’t know, Dori. I think you’re going to come around on Raise Up Washington the same way you’ve apparently come around on Seattle’s $15 minimum wage. You’ll figure it out eventually.

Hillary & Bernie Agree: It’s Time to Give Washington Workers a Raise & Paid Sick Leave

March 4, 2016 Nick Cassella
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Minimum Wage

Raise Up Washington had a very good day. The statewide initiative (I-1433), which will be on the ballot in 2016, is composed of two parts: increasing the minimum wage and implementing paid sick leave for all Washingtonian workers.

The wage increase is phased-in over four years, beginning at $11 (2017), $11.50 (2018), $12 (2019), and $13.50 (2020). The measure also allows workers to earn 1 hour paid sick leave for every forty hours worked, so workers can take care of themselves and their family when sick without fear of being fired or losing a day’s wage.

And today, this groundbreaking initiative received the endorsements of both Democratic presidential candidates via Twitter. See for yourself!

Now that’s what you call getting earned media! Sadly, Donald Trump hasn’t tweeted his support yet. Until then, let me take this time to thank Bernie and Hillary for leading on this pressing issue.

Thank you!

Their Job Losses Are Hypothetical; Our Minimum Wage Gains Are Real

March 4, 2016 Goldy
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Economics, Minimum Wage

Jobless men keep going

I can’t actually bring myself to read all the way through Tim Worstall’s latest word jumble at Forbes, because I already have a slight headache, and Jesus, folks, it’s Friday afternoon, so gimme a break. But I would like to comment briefly on his disclaimer at the top:

Before we go any further, as with other minimum wage rises that have been discussed here, no, I am not claiming that the rise is about to destroy the economy of that fair state, nor that all that will be left is a howling wasteland as the unemployed desperately search for scraps. I also agree entirely that the macroeconomic issues of what happens to the whole national economy are going to have far more to do with the employment and unemployment rates in Oregon than this change to the minimum wage will bring about.

… The claim is this and only this: That a higher minimum wage will lead to fewer jobs than the absence of that higher minimum wage would have led to.

Good on Tim for being up front about what he is claiming; not all trickle-downers are so forthright. But let’s be clear about what the core neoclassical claim is: it’s not that raising the minimum wage will destroy existing jobs, but rather that it will lead to fewer jobs in the future than there otherwise might have been.

In other words, it is a claim that, no matter the empirical evidence, has the inherent advantage of being impossible to ever disprove!

How convenient.

Of course, the neoclassical models back Tim up. Run the models, and they’ll always project at least some theoretical job losses (in the future!) associated with minimum wage hikes large and small — despite the fact that the actual data from hundreds of local, state, and federal minimum wage hikes over the past 75 years show zero correlation between the minimum wage and jobs.

No, I can’t actually prove that there wouldn’t have been more jobs created (in the future!) had the minimum wage not been raised, because it’s entirely impossible to prove or disprove. It’s an alternate history. But what I can prove (and even Tim apparently agrees with this) is that a minimum wage hike has never destroyed the economy in the past.

Oh, also: that it always results in higher wages!

To be clear: Tim’s job losses are hypothetical. But our wage gains are real.

But even if Tim is right that a modest hike in the minimum wage would almost certainly lead to fewer jobs (in the future!) — and I’m not saying that he is — that still may be a tradeoff that’s well worth making. This isn’t a video game. The purpose of economics isn’t to score the highest GDP or the lowest unemployment rate. The purpose of economics is to broadly improve the lives of actual people. I’m more than willing to admit that there is a limit to how high we can reasonably raise the minimum wage — that there is a point beyond which the risk of theoretical job losses exceeds the benefits of actual wage gains.

If trickle-downers like Tim can likewise admit that there’s a point where the benefits of raising the minimum wage exceed the theoretical costs, perhaps we can have a rational and productive policy debate about how high the minimum wage should actually be.

Why Tip Crediting Should Be Hillary Clinton’s Next Big Issue

March 3, 2016 Hanna Brooks Olsen
1 Comment
Minimum Wage
hillary clinton tip crediting

Image: Hillary for Iowa via Creative Commons

One of the challenges of the presidential campaign trail is knowing which issues and talking points will land with which audiences. During a debate, for example, a viewer can expect to see candidates spar over ideas that are relatively palatable for the masses—think national security and some top-level economic policy ideas. During rallies with supports, local stump speeches, and private fundraisers, though, a candidate may try a slightly different approach that’s more tailored to the room.

But sometimes, those ideas and policies that candidates research for small, targeted functions could actually have huge momentum on the national stage. Such is the case, I think, with tip-crediting which, this week, Hillary Clinton came out against—again.

In front of a crowd made up largely of union members at the Javits Convention Center in New York City yesterday, Clinton praised Governor Andrew Cuomo’s proposal for a statewide $15 minimum wage. Then, she went a step further, decrying the practice of tip-crediting.

“It is time we end the so-called tipped minimum wage…We are the only industrialized country in the world that requires tipped workers to take their income in tips instead of wages.”

She called the practice—which is the law of the land in 43 states—”shameful.”

Which, to be fair, it is.

INFOGRAPHIC: Who are Tipped Workers?

Tip crediting, also called the “sub-minimum wage,” assumes that a worker’s tips, combined with extremely low wages, will bring their hourly pay to a level that is commensurate with the federal minimum wage. Put another way, it directly puts customers on the hook for ensuring that a worker makes an amount of money that can even be passably considered to be appropriate for a day’s work in the year of our lord 2016. If a worker is unlucky enough to pull down less than $7.25 per hour in tips, then and only then is their employer required to float them the extra cash through wages.

But you don’t have to take my word for it. From The Nation in 2014:

A unique economic relic, the base wage for tipped workers has eroded steadily since 1996, when it was unpegged from the already absurdly low federal minimum. The crumbling value of both wage tiers over the past decade,according to the calculation of advocacy group Restaurant Opportunities Center (ROC), amounts to a yawning gap between tipped workers’ earnings today and what they would have made had the wage rates been adjusted equitably. All in all, the gap represents a net “loss” of more than $20 billion.

“Relic” though it may be, the war on wages is still being waged; just last year, Representatives in Minnesota, a state that previously did not have a two-tiered wage system, attempted to enact one.

This isn’t a new issue—nor is it the first time Clinton has brought up the idea of getting rid of it. She mentioned tip-crediting back in September at a Women for Hillary rally, and the restaurant workers’ union ROC United has used it as a talking point since that time. But why hasn’t Clinton, herself, flown the flag a little higher?

In part, I suspect it’s because this particular facet of the wages and middle-class economy conversation hasn’t been the most splashy; the bulk of the discussion around tip-crediting is by super-wonks, labor leaders, service workers who feel like they’re getting bilked, and businesses that are trying to compromise on raising the minimum wage. Despite its wide-reaching impacts, it’s just not an issue that’s at the top of mind for most voters.

But it is a policy that impacts millions of Americans—a Pew Research study from 2014 found that 1.8 million workers earn less than the minimum wage, many of them because they work for a tipped wage—and one that has deep roots in racial and gender equity. Much like sick leave, the tipped minimum wage has huge implications for women, non-binary folks, and people of color.

Tipped workers are disproportionately neither male nor white, which means they already tend to earn less than salaried workers; coupled with the low wages that are a result of sub-minimum wage, and tipped workers run a greater risk of ending up in poverty. The average tipped worker earns just barely above the federal minimum wage—slightly under $9/hr—whereas their peers earn $12 to $15 including tips. Add in the fact that tip crediting leads to an unreliable income, and that it basically ensures that customers are forced to accept even the worst behavior from customers to make a living, and it’s a pretty poor system all around.

It’s also a system that can be easily pointed to as both anti-worker and anti-business. Though the Chamber of Commerce and the National Restaurant Association might disagree, paying workers such a drastically low raise is terrible for business, because it puts a drag on the local economy. Workers simply aren’t earning enough money to get ahead in tip-crediting states, which means they certainly can’t afford to eat in restaurants, buy new clothes, go to the movies, or even fill their gas tank.

As part of Clinton’s inclusive economic platform, getting rid of tipped credit makes perfect sense—and it’s an opportunity for her to get ahead with young people and those who may feel like her pro-labor platform is all talk and no action. It’s also a chance for her to speak up on an issue that, while he’s been quiet about it, Bernie Sanders has legislatively been active on, though surprisingly tame. In 2015, Sanders, who supports a federal minimum wage of $15/hr, introduced a bill to Congress called the Pay Workers a Living Wage Act. The act called for a raise for employees who are receiving tips and, eventually, a phasing-out. However, it was never a cornerstone of his $15 push.

This could be a brilliant opportunity for Clinton, if she opted to take it, because it would either force Sanders to get on board with getting rid of it, or paint him into a corner of being pro-worker but, potentially, not as strong on race and gender equity. If she wanted to set herself apart as uniquely on the side of all workers, this would be a good way.  This is a time when wage issues are bigger than ever, and eliminating tip crediting would be an easy talking point for Clinton if she chooses to take it for a walk on the national stage.

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