Fast-Food Fight….reader Denis offers some pointers

Reader Denis Drew writes (lifted from comments) :

The bottom 50% of America’s workforce now takes 12% of overall income. If the federal minimum wage is raised to $15/hr that will add 3.6% direct inflation.

$15/hr being today’s median wage, half the workforce, 70 million employees receiving an average $8,000/yr raise would add $560 billion to the cost of $15.8 trillion dollar economic output = only 3.6%.

It is hard to believe that the products and services produced by half of the American workforce (70 million people!) would no longer be in demand over a 3.6% increase in overall prices.

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Reader Denis Drew points us to think about an American institution, food, and wages…maybe much more elastic than we pretend (lifted from comments).  McDo in France via  Slate Magazine shows us some innovation is possible.  Much more after the fold:

It may surprise some, but McDonald’s France—called MacDo by the locals—is the highest-grossing McDonald’s market outside of the United States (despite the fact that worker pay, a recent source of controversy in the United States, starts around $12 an hour—France’s minimum wage) …. If McDonald’s has found success in France, it’s because in many ways it has become the anti-McDonald’s: The service is warm, the interiors thoughtfully designed, and, above all, the food—from the baguette vessels to the pain au chocolat to the camembert-swaddled patties—is made for French palates. (italics are mine)

Before you book a two-top for Friday night, remember that this is still fast-food: The beef, while grass-fed and hormone-free, still comes from an industrial cattle lot, the lettuce still wilts under the glare of a heat lamp, the tomatoes are redolent of, well, nothing in particular. While you’re here, you’re not likely to forget that you’re eating at a multinational chain restaurant, but with enough macaroons and Camembert in your belly, it may just soften your opinion of the golden goliath.

The secret sauce at McDonald’s used to be lockstep consistency, the fact that a meal in Memphis tasted the same as it did in Moscow or Madrid. But the novelty of the American hamburger stand has worn off in the new millennium, and with it McDonald’s ability to export American culture as its staple commodity. A cheeseburger, fries, and Coke don’t register the same level of excitement when the café next door and the bistro down the block are also serving burgers. More and more, the key to McDonald’s future appears to be found in the DNA of the places it inhabits. And with it, suddenly the fast-food giant that to many represents the globalization of taste suddenly finds itself in a very unlikely position: as a defender of local cuisine.

And also from the THE EDITORIAL BOARD New York Times yesterday:

Fast Food Fight

The fast-food workers who have been walking off their jobs illustrate a central fact of contemporary work life in America: As lower-wage occupations have proliferated in the past several years, Americans are increasingly unable to make a living at their jobs. They work harder and are paid less than workers in other advanced countries. And their wages have stagnated even as executive pay has soared.

As measured by the federal minimum wage, currently $7.25 an hour, low-paid work in America is lower paid today than at any time in modern memory. If the minimum wage had kept pace with inflation or average wages over the past nearly 50 years, it would be about $10 an hour; if it had kept pace with the growth in average labor productivity, it would be about $17 an hour.

In contrast, the median hourly pay of fast-food workers — most of whom are in their 20s or older and many of whom are parents — is less than $9 for front-line workers and just above $9 when shift supervisors are included. Not surprising, the strikers demanded better pay — $15 an hour — and the right to organize without retaliation.

Also not surprising, they have been motivated to act by the inaction of the nation’s leaders. Republicans are against a higher minimum wage, and Democrats are too timid.

And Denis writes:

If Obama (or Hillary) truly cares about the troubles of minority youth, where is his $15/hr minimum wage?

Recent L.A. mayoral candidate (46%) Wendy Greuel pushed a $15/hr living wage for hotel workers.  Washington D.C. just passed a $12.50/hr living wage for major retailers.  Massachusetts freshman Senator Elizabeth Warren has suggested the federal minimum wage could be nearly $22/hr if it had kept up with productivity gains since LBJ’s $10.74/hr minimum in 1968.

Felix Salmon – author of Time Magazine listed #2 Finance Blog (after Krugman) – recently called a $15/hr minimum wage a“win-win-win-win-win-win.”  Much to my surprise, listening to the Larry Kudlow show (I don’t usually, but a visiting relative does), his substitute anchor and, I take it, regular crew took exception to Wal-Mart’s stingy hold-out against D.C.’s new living wage — one even pulling up the old “Ford paid his workers enough” saw.  I’m not saying Larry concurs but these are usually the most unfettered market, cut taxes, etc., folks on earth.

* * * * *

My minimum wage worksheet — my easily-could-have-been minimum wage double-indexed for inflation and per capita income growth:

yr  per capita    real     nominal  dbl-index%-of
68    15,473    10.74      (1.60)                    100%
69-70-71-72-73                 [real, low point — 8.41]
74    18,284      9.47      (2.00)     12.61
75    18,313      9.11      (2.10)     12.61
76    18,945      9.44      (2.30)     13.0472%
77                             [8.86]
78     20,422     9.49      (2.65)      14.11
79     20,696     9.33      (2.90)      14.32
80     20,236     8.78      (3.10)      14.00
81     20,112     8.61      (3.35)      13.8962%
82-83-84-85-86-87-88-89        [6.31]
90     24,000     6.79      (3.80)      16.56  
91     23,540     7.29      (4.25)      16.2444%
92-93-94-95                                                [6.51]
96     25,887     7.07      (4.75)      17.85
97     26,884     7.49      (5.15)      19.0239%
98-99-00-01-02-03-04-05-06     [5.97]
07     29,075     6.59      (5.85)       20.09
08     28,166     7.10      (6.55)       19.45
09     27,819     7.89      (7.25)       19.4240%
10-11-12                       [7.37]

13    29,209?    7.25      (7.25)      20.20?36%?

* * * * * *

“35 years ago”, what could the federal minimum wage have been Obama (and Hillary)?  Try $14+/hr had LBJ’s minimum been double-indexed for both economic growth and inflation.

Hair cutters in Warsaw earn less than hair-cutters in Paris – not because they are less productive – but because Poland has much less to pay them with than France.  That’s why double-indexing tells the truer tale.

I explained to my late (more articulate) brother John how gigantic a sinkhole the American labor market fell into beginning decades ago and he came back with: “Martin Luther King got his people on the up escalator just in time for it to start going down for everybody.”  Our labor market – and our politics which can only reform if the market does – is overdue for a top to bottom rebalancing.  Doubling the federal minimum wage in a big hurry would be the simplest, most plausible way to start that restoration rolling.

Denis Drew
Chicago

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