Information Technology, Investing

Labor Day and Minimum Wage

It should come as no surprise discussion about the minimum wage is heating up.  Add in the fact an election is just around the corner and you find no shortage of politicians trying to talk out of both sides of their mouths to get your vote.

There can be only one viewpoint when it comes to the massively widening gap between executive pay and the average employee.  It’s an epidemic which dwarfs Ebola and most other disease based epidemics.  According to the Economic Policy Institute executive pay was an average of 24 times a worker’s wage back in 1965. I have seen other reports documenting an even lower multiple during the 1950s.  Let’s be honest.  While most of us weren’t around during the 1950s we have to look back and say things were pretty good (wage wise) for the majority of Americans.  I mean there was even a television show called “Happy Days” about that era.  It was the era which brought about the station wagon vacation.  Nearly an entire generation of kids spent their early years facing the rear window of the wagon making faces at the people in the cars behind.

I cannot tell you the number of ethic-less talking heads I’ve heard railing against an increase in the minimum wage claiming labor will be priced above what it is worth.  As we have all seen with the convictions of companies who either (or both) forced workers to work off-clock or hired subcontractors knowing full well they were exploiting illegal immigrants, upper management will crush the spine of each and every employee to maximize their bonus and pay package.  The Golden Rule has been melted down and sold at a pawn shop.

Having been born a Republican, I wretch when I hear so called party elders talking about slashing food stamps and unemployment benefits while at the same time passing legislation reaping more financial benefits for their owners in the form of off-shoring core factory jobs.  In a tech heavy world it is an absolutely ludicrous fact that you cannot assemble a desktop computer or cell phone where each and every piece of it was made in America.  Yes, Lenovo has opened up factory space in America, but, from what I’ve read it is assembly space.  They aren’t etching the boards and making all of the chips on-site or sourcing the components from American factories.

This argument about having to move manufacturing off-shore to remain competitive doesn’t hold water either.  All you have to do is look in any sizable parking lot during business hours to find more Toyota cars than most others.  Toyota originally created assembly plants here to get around import laws.  A funny thing happened though.  Toyota became an American car company.  That’s not just my opinion.  Nissan, Toyota, Mercedes-Benz and quite a few other “foreign” car companies are building vehicles in America by the tens of thousands and exporting them, in some cases back to their country of origin.  The Nissan Altima and Toyota Camry have become viewed as “American” cars both here and abroad.

I keep hearing people say “if we slash benefits and subsidies to the point people can’t survive on them more people will go to work.”  No.  More people will become criminals because you off-shored all of the jobs they could have gotten or had prior to falling out of the labor market.

The correct solution will never be implemented.  Regular readers of this blog will already know what it is:  The Ethics in Income Act. The gist of it is simple.  Maximum payout and benefits to any executive at any publicly traded company cannot exceed 100 times the lowest paid employee or subcontracted employee.  Enforced by the IRS with various 100% tax, penalties, and prison time.  It will ensure there is more of the pie left on the table for both shareholders and employees.  It will also eliminate the incentive to pay children in a third world country 50 cents or less per day to make soccer balls since no CEO is going to let their total compensation package fall to $50/day.

If implemented though, it would end this constant battle between slashing benefits and raising minimum wage.  Why?  Because publicly traded companies have a massive number of employees.  If janitor at a publicly traded company is making north of $80K per year people are going to stand in line for that job.  All other companies will have to lift wages and benefits just to get workers.  Not immediately, given the current labor surplus, but soon.  Actually much sooner than would happen otherwise.  When people who are just scraping by suddenly get a better than living wage, they tend to buy those things they have been putting off and doing without.  Clothing, cars, furniture, a few meals out, etc.

You have to grow an economy from the bottom, not the top.  It never trickles down because the hogs won’t leave any money in the trough.  We’ve all seen that.  Time to put them on a diet.

I’m sure there will be great gnashing of teeth of wails of victimization.  Of course, they will overlook the fact some countries already have a cap in the low 20s.  Switzerland is currently trying to cap it at 12.

There is one tiny grain of truth sandwiched between all of the lies on both sides of the minimum wage argument.  If you can sit on your duff like a CEO and survive on handouts or you can take a minimum wage job, work like a slave and make not much more a large number will eventually opt to take the handout.  Where both sides of the argument fail is in their proposed “solution.”  Neither the slashing and burning of benefits nor the raising of minimum wage address the real issue.  Company executives are taking all of the money off the table with their pay packages and the increased pay they get from off-shoring jobs.  Putting them on a diet leaves more food for all.