I remember how difficult it is to work in the fast food industry. One of the toughest jobs I’ve had was when I had to work an overnight shift at a McDonalds, where I was greeted at each shift with an abusive boss, rude co-workers, and a demanding workload that increased regularly, along with the pressure to accomplish more in less time, essentially so that my employers could justify giving me fewer hours. All for barely $200 a week.
So with my memories of sitting in my car in a McDonalds parking lot, dreading the time when I would have to clock in, it is easy for me to sympathize with those fast food workers I saw on strike today. Most will go on to bigger and better things in their financial lives, either at the fast food places they are currently working or elsewhere, of course, but many will not. And not many, in fact very few, will benefit from these “#FightFor15” strikes.
Wages for salaried employees are generally the product of the size of the labor pool available to do a particularly job. This is not Nobel-prize winning economics. This is Barnes & Noble economics. If I’m selling widgets, and widget-building requires rare talents and skills, and competent widget-workers are few, I would pay my widget-builders much more than I would if good widget-workers were a dime a dozen.
This very simple formulation gets skewered occasionally but basically that’s how it works. So it should follow that those who wish to increase the wages of a certain set of workers would want to do so by decreasing the size of that labor pool, thus making each worker remaining in that pool a rarer, and thereby more valuable, commodity.
That is how it has worked in North Dakota. Thanks in part to an unemployment rate as low as 1.5% in some areas, the labor pool available for fast food employees is so small that employees began getting paid $15 an hour at least three years ago, plus many have received signing bonuses. This is all without the benefit of strikes or a government mandate.
One would think that those who pontificate endlessly about employee wages would want to replicate North Dakota’s success, and they would, if they truly cared about employee wages. Unfortunately this does not seem to be the case.
Those on the Right oppose higher wages, at least the higher wages that don’t result from economic growth. Lower pay for low-skilled worker means more profit for their employers, more hiring by employers, and lower priced goods for the consumer. It is for this reason that so many support guest workers – to prevent the sort of labor shortages that would otherwise necessitate wage increases. As the famed libertarian Bryan Caplan, economics professor at George Mason University, admits, under the open border system he proposes “low-skilled wages are indeed likely to fall.”
If there aren’t enough native-born or legal immigrant Americans willing to make widgets for $10 an hour, then instead of increasing the pay to a more attractive rate, simply expand the labor pool with illegal immigrants/guest workers.
Unfortunately, low-skilled workers searching for employment may find their unemployment extended by the increased competition from illegal immigrants, resulting in situations as one sees in NJ, which has a 6.6% unemployment rate with illegals accounting for nearly 9% of the labor force, or California, which has a 7.4% unemployment rate with illegals accounting for 10% of the labor force.
To me it seems obvious that the ease at which native-born and legal immigrant Americans could find work would be greater, and the likelihood that they could find higher wages would be greater if 10% of jobs were not being held by illegals.
Those on the Left do support higher wages for the low-skilled worker. Unfortunately they also support policies that increases unemployment. Liberals typically support both open border immigration which increases the size of the labor pool and policies that raise of cost of hiring; such as Obamacare and a higher minimum wage.
This makes the lower-skilled worker not just less valuable to the employer but more expensive to the employer as well. Much like consumers who typically spend are less willing to buy a good when its price is raised, employers typically are less willing to hire when the cost of hiring is increased.
Furthermore, this increase in wages dampens hiring because many employers, especially employers in the fast food industry, have a limited capability to raise prices. Recent stories indicate that many McDonalds franchise owners are suffering from increased rent (12% of store sales), remodeling costs, higher fees for training and software, and declining same store sales. Raising the minimum wage to $15 an hour would compound their troubles:
The higher labor costs would initially force fast-food restaurants to raise their prices by 15 percent, which would drive down sales by 14 percent. This would force restaurants to raise prices again, pushing sales down further. In equilibrium the average fast-food restaurant would have to raise prices 38 percent. Prices would rise roughly twice as much as the initial increase in labor costs.Total sales and hours worked would both fall by 36 percent. Fast-food restaurant owners would also have to accept a 77 percent reduction in profits in order to stay in business—leaving them with an average profit of just $6,100 a year per store. Otherwise they would have to raise prices to an extent that would drive away their customer base. James Sherk, Heritage Foundation
Increased unemployment and the increased price for goods are a small matter for Progressives relative to the benefits to them of their end goal: increased unionization. Once the SEIU succeeds in unionizing fast food workers, their membership numbers will grow from 1.7m to 5.6m, and a proportional growth in dues would supersize the amount of money the SEIU collects to $922M a year. Imagine the degree of influence on policy and elections this will give the SEIU, especially during the immigration-amnesty debate, which they will give them the opportunity to add this nation’s 10 to 20 million illegals to their roles.
According to various sources, nationwide, approximately 15% of people employed by fast food restaurants are illegals, a number much greater in states with greater concentrations of illegals. It is ironic then that fast food workers are striking for higher wages. These strikes are driven by an union that is promoting the amnesty that has prevented so many of these workers from achieving the higher wages that they seek.