Tag / minimum wage

by Frank Maduri

Minimum Wage Debate: A Six Month Review – Follow Up

The debate surrounding the minimum wage increase has been extraordinarily divisive among the American general public. I have covered this issue from a variety of aspects, particularly surrounding the referendum vote affirming a minimum wage increase in my home state of New Jersey in January.

 

Now, six months later, I will again follow up on this contentious subject and as I have done in the past, I will analyze the data available to measure the impact on the job market in those states which increased wages.

 

The Data: Six Months Later

 

The report from the Center for Economic & Policy Research is very promising. There were no job losses in most states which raised the minimum wage, and if you do not recall from my earlier coverage, 13 states raised that wage for the workers in their respective states.

 

In fact, all but 1 state of the 13 states saw job growth within the first 5 months of the passage of the minimum wage increase. The states that raised the minimum wage had better job growth than those that did not raise the minimum wage.

 

Furthermore, the top 10 states for job growth feature 4 states which raised the minimum wage: Florida, Washington, Oregon, and Colorado. This data is exciting for the proponents of the minimum wage increase and will help their cause to gain traction on the national level.

 

Conversely, the data in this report will be largely damaging to those factions which continue to oppose the increase in the minimum wage from being approved in other states or on the federal level.

 

However, the detractors will most probably point out that the economy needs to fill higher paying jobs at a much more prevalent rate in order to fully bounce back. This statement would be rather accurate given the current state of the economy.

 

The factions who strongly defend the minimum wage increase would argue that the economy and job growth usually always starts from the bottom and progresses up the salary chain. Therefore, the gains made in the minimum wage jobs, they would argue, are an indication of future job growth of higher paying positions. These factions would use the data from this report to illustrate a trend in overall job growth in the 13 states with raised minimum wages which have also seen stronger job growth across the salary spectrum.

 

The Garden State Blues

 

My home state, New Jersey, has the worst job growth of the states that raised the minimum wage and is the worst state overall for job performance with a decline in net hiring of .56%, according to the Center for Economic & Policy Research.

 

The national labor force participation rate is declining, and New Jersey has been impacted by that unfortunate pattern in the labor market as well. The labor force participation rate is the amount of people who live in a particular state who are within the legal working age and that are gainfully employed.

 

The labor force participation rate in New Jersey was 63% in January 2014, the lowest rate since June 1983, during that horrible recession. In New Jersey and across the nation the share of people in their prime earning years that are employed is declining.

 

New Jersey is suffering for multiple reasons, the taxes on businesses coupled with the high standard of living have caused companies to either leave the state or hire less people. The cutbacks in hiring are due to the fact that the labor force here needs higher wages in order to meet the cost of living. It creates a vicious cycle.

 

In another report I reviewed, a study of major metropolitan areas and their respective job growth versus population size, I found that both New York City and Philadelphia finished in the bottom for job growth given that measurement. New Jersey relies on both of those cities to employ large amounts of their residents, which is obvious when you look at the bedroom communities that have sprouted up in New Jersey near those two major cities in the past.

 

That metric, the labor force participation rate, has everyone, including the White House, concerned about the job market in the near term. A member of the White House staff confirmed that they have to do more to assist businesses to enable them to create more jobs that are higher paying to improve the participation rate.

 

Stigma

 

I poured through several reports and data, but the biggest issue with the labor force participation rate is the stigma involved in society over the perception of those who are long term unemployed.

 

The studies I reviewed displayed a growing misconception by hiring managers and large and small corporations that the members of the labor force who have been unemployed for a long period of time cannot adequately fulfill the duties of the respective job which is currently open.

 

Several labor market analysts and those within the federal government who analyze job market trends disagree with this assessment, and acknowledge that the American economy still has a huge issue with long term unemployed people who are in their prime earning years. That figure stands currently at 35%, so for all the news that the job market is improving, that statistic is particularly alarming and damaging to our economy.

 

The debate within these circles and within the federal and state governments will shift in the coming months into a new focus: how to reverse that mindset and reverse the downward trend in the stagnant hiring of the long term unemployed. Many options are being discussed including potentially incentivizing the process for companies that do hire those individuals who have been out of work for a prolonged period of time.

 

Outlook

 

This report on the minimum wage increase certainly casts some light on the Congressional Budget Office (CBO) report which I think was too quick to “jump the gun” on the effects of the minimum wage on job growth. That report, in summary, basically maintains that minimum wage increases would have little to no positive impact on the creation of jobs.

 

The outlook for the proponents of the cause to get the federal government to raise the minimum wage is, in my opinion, strengthened by the data in the report from the Center for Economic & Policy Research. The groups in favor of this measure have a petition launched on the White House website if you would like to lend your support to this cause.

 

The growth of jobs overall is obviously the much larger issue here, and it will be interesting to see how the government and the business community will address the labor force participation issue in the future. It is becoming increasingly clear that something has to be done to employ more people in the prime of their respective careers, the overall improvement of our economy depends upon it.

 

(Statistics, rankings, and some background information courtesy of the Congressional Budget Office, Office of Management & Budget, Center for Economic & Policy Research, The Fiscal Times, and Forbes.com )

 

 

 

 

 

 

 

by Frank Maduri

Follow Up: Minimum Wage Increase & Jobs

In a follow up story to recent coverage on the topic of the minimum wage increase and its impact on employment, some positive news made headlines today. The Center for Economic and Policy Research issued a report that in 13 states where the minimum wage was increased, after two months of data, the number of jobs increased in those states.

 

These findings have caused the proponents of the minimum wage increase to basically say “I told you so”; and that it is evidence that the correlation between the slight increase in wages and a negative impact on jobs is a weak argument.

 

Conversely, the detractors have stated that this report is based on too short a sample window (two months) and that the increase in minimum wage will have a “ripple effect” on the rest of the economy and the overall jobs market.

 

In my home state, New Jersey, where this has been a very “hot button” issue, and where residents just approved a minimum wage hike which came into law in January, the employment numbers decreased slightly. This data could fuel the detractors of the minimum wage increase here in The Garden State.

 

However of the 13 states with the increased minimum wage, only New Jersey, Connecticut, and West Virginia had either decreased or flat job level changes. The sampling may be small, but the main message here is that the increase in the minimum wage is not the devastating blow to job creation that the detractors were making it out to be during the implementation of these changes in January.

 

Minimum Wage Workers

The report also provided some information on the minimum wage worker in the United States. The percentage of the work force making minimum wage is 3 percent, so this increase does not effect a huge group of the overall labor market.

 

However, the industry groups such as the National Restaurant Association, the large fast food chains, and other groups are still strongly against the increase in the minimum wage in states that have yet to make a change.

 

In my earlier writing on this subject, particularly on the fast food workers, I described the protests of the worker and their rallying cry “We can’t survive on $7.25” alluding to the current minimum wage in some states. I factored out that hourly wage to approximately $15,000.00 per year, and this report also notes that figure and ties it to the national poverty level figure of $22,282.00 for a family of four.

 

Many of these workers have dependents, and they also now have to pay into the exchanges for their own health care or family health care coverage. This is all very difficult to achieve on the current level of $7.25 or $7.40 per hour depending on what state you reside within.

 

Moving forward

 

This report is just the first of many that will be commissioned by the government, research groups, or other interested parties in this very controversial matter. The initial data shows that the increase in minimum wage levels had a more constructive overall impact on job creation than what was initially forecasted.

 

The overall issue moving forward I think is not to focus on the minimum wage effort, I think those workers deserve higher wages and I agree with the federal increase to the $10.00 per hour level. The bigger issue is the examination of much larger methods with regard to government regulation and corporate tax structures which could be revised to create a climate capable of fostering job growth across the rest of the labor market.

 

Increases in minimum wage jobs are great, but it is only representative of a very small amount of the work force. The American public, the government, and the business community should be much more concerned about job creation for the other 97% of the work force.

 

The Federal Reserve Chair, Janet Yellen, said this week, and I am paraphrasing, that the recovery of the U.S. economy still feels like a recession to the majority of Americans. That is where our focus should be and not on the increase of a few dollars per hour for a very small, but hard working segment of our work force.

 

 

(Statistics courtesy of The Center for Economic & Policy Research and CBS News. Additional financial market data and background information courtesy of The Wall Street Journal -www.wsj.com)

by Frank Maduri

Fast Food Wage Wars

The news cycle recently has been littered with stories on the domestic front regarding the labor strife within the major fast food chains. The news today featured footage of workers protesting peacefully in front of a Burger King restaurant.

 

The central issue here is wages, and this labor turbulence follows a spirited, and at times, heated national debate over the raise in the minimum wage. The political spectrum and the general public are largely divided over the issue, and in my home state of New Jersey, the public referendum on the last ballot dealt with the minimum wage. The people in New Jersey overwhelmingly voted to raise the minimum wage, though in a state with a high standard of living, it still may not be enough to help some workers.

 

Some politicians believe that the raise in the minimum wage is going to slow or halt part time job growth. Some business leaders share this view as well, and have made the new minimum wage standards the scapegoat for a sputtering economy.

 

Fast Food Wage War

 

The wage issues in the fast food industry impact all the major industry players: McDonald’s, Burger King, Wendy’s, and KFC/Yum Brands. The workers in this case are looking primarily for the following:

 

  • Wage increase to $15.00 per hour
  • Ability to unionize

 

These two goals may seem reasonable to some people, but the reality here is that both objectives are problematic, and will probably be difficult to achieve.

 

In most states that voted for a minimum wage increase, the wage went from $7.25 or $7.40 per hour to around $10.00 per hour. These workers are seeking an additional $5.00 per hour increase. That is going to be met with resistance by the respective corporations they are employed by in the coming weeks.

 

The second issue is the ability to unionize, some people do not realize that the ability of Wal-Mart to be so competitive on pricing for the products they carry is because the corporation does not allow unionized labor of any kind.

 

This allows Wal-Mart to be very competitive in all products but particularly in the grocery segment because their competition: the national/ regional grocery store chains have unionized labor forces. The unionized work forces do not allow the grocery stores to stay open as late as Wal-Mart. In addition, the unions involved creates a wage threshold for these grocery store chains where they cannot compete on price with Wal-Mart and remain profitable.

 

In fairness to Wal-Mart, they maintain that while not allowing unionized workers, they pay a good wage and provide their employees with great opportunities to grow within the company.

 

The same profitability scenario with fast food is not a reliable comparison because the profit margins within fast food and the entire business model is completely different.

 

I am also unsure of the potential impact unionized workers could have on the fast food business or if it would impact the ability for the respective corporation to continue providing low cost products such as a “dollar menu” or “value menu” with the same margins for profitability. I have read that it is a price sensitive business, though I am not sure what that actually means in terms of dollar figures.

 

The restaurant and fast food industry groups are pushing back with great force regarding the idea of a raise to $15.00 per hour. Their rationale is again that the fast food industry is price sensitive and cost sensitive and that the $15.00 figure is too steep for them to meet at this point.

 

 

Wage Theft

 

There are currently three different states involved with cases in their respective judicial systems involving McDonald’s and allegations of wage theft by their employees.

 

The workers here claim that the fast food giant has deprived them of wages through a variety of ways. The company has not formally responded to the allegations.

 

The workers are using these lawsuits as further leverage for the increase in wages they seek as well as the ability to unionize.

 

The cost to McDonald’s is numerous unhappy employees which disrupts company morale on the restaurant level, and bad publicity which could hurt their sales.

 

Outlook

 

In my view, nobody should have to try to survive on $7.25 an hour or even $10.00 per hour. This issue is not going away without a resolution that is concrete to improve conditions for these workers in some way.

 

I also reject the notion by some politicians that the raise in the minimum wage has negatively impacted job growth. It is a very sad state of affairs in our world if multi-billion dollar corporations are going to haggle with people over a few dollars more per hour.

 

The situation here comes down to multi-billion dollar companies that want to keep more of their profits and not pay their workers on the ground level. It is greed driven activity, and it sends a very negative message by these corporations to the general public, which for a fast food company is also their target customer base.

 

I have read accounts of protesting workers today throughout this country who were told by their manager that they would no longer be on the schedule to work if they participated in the protests.

 

In fair balance, reports have stated that McDonald’s is looking into some of the wage theft claims more closely and is going to take action on franchise owners who may have violated certain policies.

 

In the end, these people work very hard on the restaurant level to provide customer service or cook our fast food. Many of these workers have families or dependents. All of them deserve to be paid a fair wage for the work that they do each day.

 

 

(background information and statistics courtesy of USA Today, The Washington Post, CNN.com, and CBS News.com)