Mining Poverty
Recall Senators McConnell’s and Graham’s strong opposition to the first COVID relief package? Said it was because they feared it might reduce the incentive of workers in their states to work for low wages; that’s really low wages as in less than a living wages. Mitch and Lindsey, and most of the present day republican party, are miners of poverty. Miners as in get every last possible cent possible out of the working class and personally wheelbarrow it up to those living in the big houses on the hill. Being as they are professionals, Mitch and Lindsey don’t come cheap.
Right to work states are right to mine states. With few exceptions, right to work states are red states. A living minimum wage is an anathema to the miners of poverty.
The miners’ motto: Get every last drop of blood. Though a hand full of democratic members of Congress (think FL) do prenez l’argent, most of the support for poverty mining comes from republican politicians. Faced with regulation or restriction, lenders of payday loans, cash advances, title loans, low wages, and such, turn first to the the republican party.
Another way of obtaining the very last drop is on the spending end. There are stores that deliberately take advantage of poor people. They may do this by way of taking advantage of the customer’s inability to compute price per unit in real-time, their innumeracy, senility, etc. Major grocery chains avoid low-income areas. Dollar stores move in and sell inferior goods for less.
Payday loans take a big cut of the working poor’s wages without hardly lifting a finger beyond signing a political contribution check. Car title loans are a great way of getting at any asset/savings the working poor might have.
Peonage, as practiced in say Alabama, is the cruelest of all the various means of mining poverty. Arrest someone for little or no reason, brand them a felon, then throw them in prison. Once incarcerated, the great state peddles their labor as a source of revenue. Local turkey/chicken/pork processor, general contractor, furniture manufacturer, … hires the the prison labor for a few dollars a day so as to better compete with turkey/chicken/pork processors, general contractors, furniture manufacturers who pay their workers a living wage. Meanwhile, across Alabama, the working class poor are competing for jobs with prison labor. Fine economic model you have there, Mitch and Lindsey.
Ken:
You are on a roll with a second good post in a row (got the spelling right [my fingers did not betray me]). What I have noticed are the lines have increased at the McDonalds and Burger Kings as they can not get low cost help or workers who will work for $7-$8/hour. They can make more by taking Unemployment.
Is this bad or good? Other than the slow down while waiting for a Dbl. Hamburger with no cheese for me which is relatively low in calories, I do not see a problem. Fast food could raise hourly wage for their workers with little impact on the price of a Dbl. Hamburger with no cheese and extra pickles. Ten cents maybe?
We did that calculation with fast food restaurants such as Papa Johns and Moo Cluck Moo in Detroit which has gone from fixed stores to mobile units. What is the impact of a higher wage on the costs of the product?
Pulling from my experience in manufacturing and improving throughput, I found there is a small impact or increase in costs. Why is that? As Drucker might tell you if he were alive today, Labor is a small portion of the costs of manufacturing. It is the Overhead and Material costs which are much higher and make of the greater bulk of cost of which each component surpasses Labor Cost. You could impact either of those two components by negotiations with suppliers for Materials, minimizing Labor to reduce Overhead, or reduce the impact of Overhead. The cost of either will still not be less if Labor is a component of the Cost.
One commenter to my Moo Cluck Moo post had this to say on his own blog. Econproph, Micro, Macro, and the Minimum Wage
Granted this article is from 2016; but, the essence of the comment still very real.
The cost boost of Labor has a relatively low impact on the pricing due to being a smaller portion of the total cost. In turn, the business reaps a more productive and happier worker who may take on greater pride and responsibility iin doping their job.
So yes there is a shortage of Labor at the old McDonalds Hamburger stand and we have to wait longer in line and burn more fuel in our Too Big, Too Fast, Too Often gas – guzzling Pickups and SUVs. Labor will return when the pandemic is less an obstacle to health. It probably would have risked an earlier return if the wage was worth it.
However, business does not think like this. They prefer a less assertive Labor pool.
Labor can squeeze all they can out of the consumer only by instituting REGULARLY SCHEDULED labor union cert/recert/decert elections — as per former SEIU president Andrew Stern — so they can withhold their labor for the best deal.
The minimum wage cannot be set above what the lowest paying labor contract pays — or it would put the latter out of business. Loose talk about a living wage without a union to achieve it is just loose talk.
The PRO act will add some teeth to today’s toothless NLRA ($50,000-100,000 fines for retaliating against union organizers) and pull some teeth from Taft-Hartly (eliminate right-to-work laws). Does anybody think this is going to, say, triple union density from today’s 6.5% in private (non-gov) economy to 20% — even while 50% want to join a union? When private union density was 20% McDonald’s, Target, Walgreens and Walmart were not unionized. We want them to be unionized now, don’t we? We want a lot more than we had before.
Only federally mandated cert/recert/decert elections can achieve anything resembling fully adequate union membership — with all the political as well as economic benefits that come together.
Only mandate cert/recert/decert can pull back enough Obama/Trump voters to swamp any Republican attempt to steal coming elections (by putting the dominant political party of the state in charge of counting to votes for instance: the road to serfdom). New York Times numbers guru Nate Cohn:
“But pinning Mrs. Clinton’s loss on low black turnout would probably be a mistake. Mr. Obama would have easily won both his elections with this level of black turnout and support. (He would have won Michigan, Ohio and Wisconsin each time even if Detroit, Cleveland and Milwaukee had been severed from their states and cast adrift into the Great Lakes.)” https://www.nytimes.com/2016/12/23/upshot/how-the-obama-coalition-crumbled-leaving-an-opening-for-trump.html
A giant chunk of Trump voters are waiting desperately for someone to point them the way back out of American economic malaise — lower income, or shaky rung on mid income ladder level anyway. A giant chunk would kill for a union. A giant chunk would kill for REGULARLY SCHEDULED cert/recert/decert elections. Just ask them. I wish someone would poll them.
Run,
I’d have a less “laid back” attitude about how little pay raises will add to prices. I’d think about how much more labor can claw out of the consumer — thinking always about the “multiplication factor”, how little a pay raise costs the customer compared to how much pay rises. IOW, worst case, fast food: 25% labor costs. Raise pay 50%, prices rise 12.5%. Even if fast food purchases drop 12.5%, labor is still way ahead. Ditto for Walmart at 7% labor costs. More than double pay and prices only go up 10%. Same multiplication factor and labor is way, way ahead! Most businesses do 10%-15% labor costs. Double most wages, prices go up only 12.5%. Imagine what the Teamsters Union could do with that equation.
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We are looking at a 100% average increase in wages here across industries. Fits with bottom 40% of earners taking home 10% of overall income — fits with getting them back to 20%.
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There’s also the “flow back” factor. To some extent, fast food caters proportionately more to lower income consumers. If bottom income is getting more money it will spend it proportionately more on lower price goods — e.g., fast food. Meaning higher wages could possibly not even cost many sales — possibly even improve some sales.
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Of course there is only one way any of this is going to happen in the immediate future: regularly scheduled, cert/recert/decert elections at every private (non-gov) workplace.
On a more pressing problem :
fácil de reconocer el barranco.Dificultad en cada pico.cada uno de nosotros sabe cuándo empezar.nadie sabe cuando parar~~ Mucho Gustav ~
easy to recognize the bottom. Difficult at the top. each of us knows when to start. nobody knows when to stop. ~~Mucho Gustav~
for a Santa December if you can remember sell before May
go short before September, but you must remember to go long before Columbus Day .
for a Santa December if you can remember total dump before May.
Then go your own way ! ~~Mare E Juana~
@ Run75441
Minimum wage in my fair city is $14.73
Still a worker shortage.
DB
And many of these workers are women who are also home caretakers, caretakers of children who are not back in school 100% and are part time. Have you looked at the Civilian Labor Force numbers? 400,000 more people have joined it and are looking for jobs. I suspect this is in the low wage category as many highly paid people were able to work from home. The difference in Participation Rate from ~ one year ago January(?) and April increased 2 tenths of 1%. This is just business interests spewing lies and misinformation.
I will once again chime in to say that a market wage is no way to ensure that people are able to survive. Some people cannot find or accept a job for any number of reasons at any point in time. A UBI does not have this problem. With a UBI people would have to be enticed to take a job, they wouldn’t be forced to. With all respects to Unions, they can only ever be part of the solution.
Yes, I agree on the union take. There is also this whole Concept that Labor is the problem and the largest cost. It has been beat into people’s heads with misinformation and deliberate lies.