This season, the most important thing we can give is a real living wage

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My wonderful wife came in and talked to me the other day. She had just seen a holiday commercial in which a wife presented her husband with a $50,000 GMC pickup truck for Christmas after the husband gave her a dog. That seems wrong on so many levels but this article focuses on one particular aspect.

I had just read that Wall Street had its best month since 1987, rising nearly 11% in November on its way to a record close above 30,000.

Meanwhile, millions of Americans were wondering if there was even going to be a Christmas or if they would have a home come New Year’s Day; Congress has done its usual marvelous job of dealing with anything but gotcha politics; and it has now been more than 4,150 days since the minimum wage was raised.

That’s eleven years, four months, and nine days. That’s almost a year-and-a-half longer than the previous record, set during the George W. Bush administration, and more than two years longer than the disastrous Reagan years. To be precise, the current minimum wage set a new longevity record on June 15, 2019.

My wife said, and I certainly agree, that with all that’s happened during 2020, it just seems wrong to see aspirational commercials right now.

Everyone who wants to jump in and blame Trump should consider that the minimum wage remained unchanged for 2,737 days under Obama; just 1,416 days under Trump.

The big push currently is for President-elect Biden to push for a minimum wage of $15/hour. I will get to the various reasons given for not raising it in a moment but the important thing is to look at the comparisons of initial and ending purchasing power. Initial purchasing power is what the wage was worth in October 2020 dollars when it went into effect; ending purchasing power is what it was worth at the time it was “adjusted.”

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Since January 24, 1950, more than 70 years ago, there have been only two times the minimum wage has had less actual purchasing power than it does now: the Reagan administration and the George W. Bush administration. Incidentally, Reagan gets at least a partial pass because of the inflation rate. Had the $3.35 been indexed for inflation, it would have been $4.66 by the time he left office, a 39% increase and equivalent to $10.02 today.

This is also the main reason for the 50% drop in value of the $1.60/hour minimum wage over its six-year run.

Indexed for inflation, the current minimum wage should be $8.77/hour. $7.25/hour today has the equivalent purchasing power of $6.00/hour in 2009 dollars.

When I started working, the minimum wage was $1.40/hour, equivalent to $11.87/hour in October 2020. By the time it was adjusted, the purchasing power had dropped to $9.62/hour.

Based on 40 hours per week and 52 weeks per year (remember, no mandated vacations or sick leave) those figures yield annual incomes of about $24,690 and $20,010, respectively. The current minimum wage has the equivalent purchasing power of $12,480 annually.

In other words, a person making $2,912 a year in September 1963 had the same purchasing power as a person making almost $25,000 a year today, more than twice the reality.

Who was making a living wage? The burger-flipper in 1963 or the burger-flipper in 2020?

If $15.00/hour is too much, how about $9.65 or, better yet, $12.00? That would be a raise of almost $5,000 per year or nearly $9,900 per year in straight dollars or $7,600 to $12,500 per year in purchasing power.

Then index it to the same cost-of-living adjustment that is used for things like Social Security payments.

While you’re at it, mandate ten paid days off per year, covering sick time and vacation. Maybe add a holiday or two in the mix. Let employees have a life to go with their living wage.

Last month, Michael Busler penned an article that appeared in The Startup explaining why a $15.00/hour minimum wage would be the end of the world as we know it.

It’s pretty much all bullshit but does raise some interesting points.

Predictions of massive job losses have probably preceded most increases to the minimum wage. The predictions have been invariably wrong. Following an occasional minor blip, those jobs have still continued to be offered and filled.

Andrew Puzder, the former CEO of Carl’s Jr., threatened to automate all of the company’s restaurants in California if the state raised the minimum wage. The state went ahead and raised the minimum wage and, when I checked just now, there were still 824 non-automated Carl’s Jr restaurants in the Golden State.

Busler said “The GOP has the view that paying a worker more than the value of the worker’s output would cause market distortions that harm the economy.”

What is the value of the worker’s output? Let’s put it another way: How much is it worth to stay in business?

Sticking with Carl’s Jr., the Big Carl burger was $2.49 in 2009. Today, it’s $4.99, a 100% increase in the past 11 years. In 2009, a minimum-wage worker could have had two Big Carls, a side of fries and perhaps even a drink for one hour’s work. Today, that worker couldn’t even afford a Big Carl combo with a single burger, fries and a drink.

When beef prices started jumping, Carl’s Jr., like most everybody else, raised prices, even though it was during the Great Recession. Companies can often absorb small supplier price increases but eventually they have to either pass along some of the increased costs or go out of business. Customers were apparently willing to accept the higher prices because Carl’s Jr. is still open for business.

The same is true for increases in other costs, such as leases, paper costs, taxes, and condiments.

Even though I make no claim to be an economist, it’s easy for me to see that the whole “value of a worker’s output” argument is facile camouflage to justify abusive wages. It’s like a poker game where workers are invited to play but owners have all the aces and faces and get upset when they are told they have to give up at least a few Jacks and Maybe even a Queen.

It all goes back to how much a worker’s output is worth when you can’t credibly replace them. And I can say that with great confidence, knowing a bit about both the current state of automation and running a fast-food restaurant. There isn’t a robot on the planet that can come anywhere close to offering the advantages of the human being.

I can have an automated burger-maker that is superbly consistent but what happens after the restaurant closes and I need it to mop the floor? Or I need it to run to the bank with the day’s receipts? Or check in a supplier delivery?

If my burger guy calls in sick or hung over, I can call in another burger guy or even step up to the grille myself and keep the food coming. If my burger-bot crashes, I have to close until it can be repaired.

That’s not only worth a couple of Jacks in the wage game, I can tell you from experience, that it’s worth more than a few face cards.

The same is true of many other minimum-wage positions outside of straight assembly line work that involves repetitions of the same actions.

We will probably get there someday, but that day isn’t today and it’s probably not tomorrow, either. And until we get there, it’s time to raise the minimum wage to have purchasing power roughly equivalent to what I had over a half-century ago and peg it to the cost of living.

As to those workers making more than the minimum wage, why is there even a question about adjusting their earnings? If we don’t have bots to replace them, we should admit we value their work and compensate them accordingly. If the new hires are making more than the experienced employees, the fault doesn’t lie with minimum wage laws.

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