If businesses don’t pay employees a living wage, what happens?

As the minimum wage debate gridlocks in Albany (check out Karen DeWitt’s latest update here) I stumbled across two arguments that seemed to get at the heart of the stand-off.

Five reasons why not from Unshackle Upstate (click to enlarge)

The first, from the group Unshackle Upstate, argues that a hike in New York’s minimum wage would slam small businesses, forcing many to close, lay off workers, or move out of state.

“New York will maintain its reputation as being anti-business,” the group argues.

Fair enough.  I know a lot of small business owners who haven’t been doing all that well lately.

The idea of forcing them to increase their salary costs in this tough economy seems pretty sketchy.

But on the other side of the equation is the often overlooked fact that 84% of New Yorkers who earn minimum wage aren’t kids.

This debate really isn’t about college students or high schoolers earning a few bucks on the side.

That argument, made all too often by opponents of a minimum wage hike, is a cop-out.

It doesn’t confront the  deep poverty that comes with earning $7.25 an hour.

So as we make this decision, Albany lawmakers and advocates on both sides should confront honestly what happens when businesses can’t or won’t pay their employees a living wage.

Many of those workers — even those employed full time — will wind up falling back upon government services, relying on taxpayers for everything from rent support to medical care to food.

That may well be a reasonable role for the government to play.  But it strikes me that there might be a more reasonable way to approach this.

Rather than allow workers and their families to fall first into abject poverty, before we ask Albany to step in, perhaps the state should offer some kind of wage supports to the employees of companies that a) can demonstrate an inability to pay living wages, and b) can show that their workers are grown-ups, not teenagers.

The truth is that as long as American workers can put in a 40 hour work week and still not earn enough to pay for basic necessities, someone’s going to have to foot the bill to stave off unacceptable levels of poverty.

(I think it’s safe to say that no one wants a return to the days of tenements, widespread hunger, infant mortality, and so on.)

So if the answer isn’t to require higher minimum wages, then we should begin looking for smarter approaches to helping the fully-employed poor.

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74 Responses to “If businesses don’t pay employees a living wage, what happens?”

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  1. JDM says:

    James Bullard: “Things like promising a job on the books after an “off the books trial” below minimum wage”

    It’s this kind of issue that another law will not solve. If someone is paying “off the books”, then how is upping the minimum wage going to stop that?

    Apparently, these observations you are making are made with the current minimum wage and other labor laws already in place.

    Different problem, altogether.

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  2. Walker says:

    You’re right, JDM, but you’re also missing the point– not all employers are decent, fair-minded people. There are plenty who would avoid breaking the law, but would still fail to reward hard work with fair wages. Of course, in a decent economy, a worker so treated can just look for a better job. But in this economy, and especially in the North Country where jobs are fewer still, that’s not much of an option.

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  3. Sunshine says:

    A couple of years ago, my son opened up a new business. He paid all his employees $15 an hour (including himself).
    Why did he do this? He remembers what it was like working for minimum wage.
    Is he a socialist? No.
    He believes in equality.
    Is he a trustfunder…
    I wish.
    He is a person with, what I believe, are his priorities in the correct place.
    And, by the way, he is still in business and it is thriving.
    How did he manage that in the current economy? He works hard, is open to changing and tweeking his business to meet consumers demands.
    Good luck to all and to our politicians: please increase the minimum wage.

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  4. knuckleheadedliberal says:

    Minimum wages by adjoining states and provinces.
    PA and NJ – $7.25
    CT — $8.25 until July when it will be $9.00. $9.75 next year.
    MA — $8.00
    VT — $8.46 with adjustments for inflation built in.
    Quebec — $9.90 Canadian
    Ontario — $10.25 Canadian, $9.60 for students and some other adjustments

    Canada looks better and better all the time.

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  5. Walker says:

    How do those Canadian small businessmen ever stay in business?! You’d think they’d have all gone bust and closed down long ago. Or are they better businessmen than we are?

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  6. dave says:

    The minimum wage absolutely did work JDM. Along with social programs, it is a big reason people do not experience the levels of destitution that they did back when we allowed market forces to rule the day.

    The problem with the minimum wage is that it is tied to inflation, and needs to be increased periodically in order to keep pace. If you do not increase it along with inflation, it loses its power.

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  7. mervel says:

    The minimum wage becomes more important when we enter into periods where we don’t see upward mobility and we see decreasing wages for the middle and lower income earners, which is what we have now.

    I think we do have to admit that it does create some unemployment, however that must be balanced against the increased incomes for those who are working at those lower wages. On the balance I favor a decent minimum wage for that reason.

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  8. knuckleheadedliberal says:

    Minimum wage stagnates but CEO pay sets new records!!!! Pay up 6% to almost $10 million a year for typical CEO.
    http://www.washingtonpost.com/business/ceo-pay-up-6-percent-last-year-ap-study-finds-shareholder-activists-see-progress/2012/05/25/gJQAdFKFpU_story.html

    Check out some of the great perks available to those at the top:

    http://www.boston.com/business/personal-finance/2012/05/25/top-big-salaries-companies-pile-perks/CDxuZD2YcYxQ43E6BAcjmN/story.html

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  9. mervel says:

    Sure they got raises for keeping their labor costs so low.

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  10. Walker says:

    And when everyone, including state governments, simultaneously focus on keeping their labor costs low, it stifles the economy. So the only people who make out are those CEOs who are rewarded for keeping their labor costs down. This is how all the money ends up in the hands of a tiny portion of the population. This is how you turn a country with a healthy democracy into a banana republic.

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  11. Walker says:

    Coincidentally, the Christian Left Facebook page put up this link.

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  12. JDM says:

    I’ll bet some of those CEOs started out making minimum wage. Can happen!

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  13. Kent Gregson says:

    So, The minimum wage should go up? I have always said since the minimum wage was about $3″ Don’t raise my wages. Make my money worth more.” Just think how much better off we’d be if we didn’t have inflation. A loaf of bread for $.30, a gallon of gas for $.79. Obviously if you want good employees you’ll have to pay a “living wage” but the constant drumbeat of growth has or will soon price us out of the market.

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  14. knuckleheadedliberal says:

    Kent, it is a good point. Our economic system should be based on a concept of sustainability, but it isn’t. Our economic system is based on a need for continuous growth otherwise the whole thing collapses.

    It isn’t too hard to figure out that long periods of growth are unsustainable. In medicine they would call it a cancer. In economics they call it the miracle of compound interest. I don’t want an economic system based on miracles. I want an economic system that provides a sustainable source of the necessities of life and security for everyone without a tiny sliver of the population hoarding all the wealth.

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  15. hermit thrush says:

    no no no no, positive inflation rate is absolutely essential for the functioning of the economy. a negative or zero inflation rate just encourages everyone to hang on to their money instead of spending it. the result is that the economy craters.

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  16. Walker says:

    “Just think how much better off we’d be if we didn’t have inflation.”

    Well, Kent, inflation is a funny thing– inflation makes your debts easier to pay off over time, so for debtors, inflation isn’t all bad.

    KHL, you’re right, continuous growth was a model that worked OK as long as there were still new continents to explore. Now, not so much.

    We also have to get over the idea that “the economy” is doing fine as long as more and more money is being spent, regardless of what it’s being spent on. There are things we’re better off not spending money on! Some days, it seems as if all of the real growth areas are in that category.

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  17. mervel says:

    Growth does not always mean we are just buying and building more bigger things, it also means the efficiency by which we produce things and the value of the things we produce, it includes services also such as public education, college education, it includes new discoveries such as they are producing at the Trudea institute that we talked about on an earlier thread.

    So is it good to produce more education? I would say yes. Is it good to produce more technologically advanced products that can help our environment and our health? I would say yes. Is it good to grow by making bigger and bigger houses and bigger and bigger cars, in that I would say no not really. I don’t think it is an easy question. Economic growth is not a bad thing, how we handle our society and culture I think causes the problems. I choice to want huge homes and big cars and big fatty meals, these are not the fault of economic growth, they are a reflection of our choices.

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  18. Philip Williams says:

    An old businessman once told me, “The difference between good help, and no help at all, is $1.00 an hour”. He had been in the auto parts and housewares business over 50 years, quite successfully. Good help often moves on and usually up but I have found that observation to be true when I hired anyone – and I have had up to five employees at once.

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  19. Walker says:

    “…huge homes and big cars and big fatty meals, these are not the fault of economic growth, they are a reflection of our choices.”

    Mervel, you’re ignoring the power of advertising. We want stuff that’s bad for us and for the planet because the marketers have our number! Sometimes I really think the refinement of marketing is going to be the undoing of the world. It is the power of political marketing that has turned us into a nation that routinely votes against its own best interests. And I would blame the (increasingly) worldwide obesity epidemic directly on the power of marketing, combined, of course, with the willingness of companies to do absolutely anything that will fatten the bottom line (pun intended).

    It’s weird! Corporate CEOs are living and raising children in the same world we all live in– you’d think every now and then one of them would stop and think, is this really leading to the kind of world I want to leave to my kids?

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  20. mervel says:

    Well as Merton said back circa 1950, ” If we are fools enough to remain at the mercy of the people who want to sell us happiness, it will be impossible for us ever to be content with anything. How could they profit if we become content? We would no longer need their new product. The last thing the salesman wants is for the buyer to become content. You are of no use in our affluent society unless you are always just about to grasp what you never have.

    The Greeks were not as smart as we. In their primitive way they put Tantalus in hell. Madison Avenue, on the contrary, would convince us that Tantalus is in heaven.”

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  21. Walker says:

    I just heard a piece that said that children spend 7 1/2 hours per day in front of a screen– they’re immersed in advertising half of their waking hours.

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  22. VBurnett says:

    Going waaaay back to the question about Earned Income Tax Credit; My experience with friends and family who qualify for this credit is that they use the credit as a once-a-year budget boost at tax return time to pay off bills they have fallen behind on, to buy one major purchase or to pay off the Christmas credit card bills. It does not help much with the day-to-day need to put food on the table and gas in the tank. I know plenty of locals who would be able to be a little more free with their money in local businesses if they had an extra few cents on the hour year round instead of one mid-sized chunk in April. It is often a pretty disappointing chunk, too, considering that the bill collectors are already standing on the doorstep waiting to claim it.

    EIC helps but it doesn’t really empower consumers the way that a significant hike in minimum wage and/or a significant reduction in energy costs would.

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  23. knuckleheadedliberal says:

    It gets even worse VB. Many people who are entitled to the EIC go to tax preparers who promise immediate refunds which turn out to be loans against the tax refund and the tax preparer collects the fee for preparing the return and a percentage of the refund and a fee for processing the refund.

    There is no lack of imagination in Free Market Capitalism when it comes to finding new ways to fleece the poor, the downtrodden, the naive, and the gullible. While the poor are working a second job for minimum wage there are people on Wall Street and K Street staying up late dreaming up ways to pick their pockets.

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  24. mervel says:

    I just heard driving home today the story from NPR about the fees that the lawyers litigating the Bernie Madoff settlement have made. OVER 1/2 of a BILLION dollars! Not on the payouts to those fleeced by Madoff, but on FEES to negotiate settlements, which they get. The payouts so far have been around 300 million but may pay more. But can you imagine. This is the country we live in where one guy is working his butt off for 7.50 on two jobs that are actually honest and do something for society, and another guy is making millions and millions administering money to be paid out for another guy who fleeced people for billions.

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