In the January 15, 2019 Ask The Headhunter Newsletter a business owner says a $15 minimum wage law will put him out of business.


minimum wageI operate three restaurants. It’s getting harder and harder to hire workers. People just don’t want to do this kind of work any more, but for young people it’s actually a good way to learn good work habits. We do a lot to train new employees.

I’ve tried local newspaper ads, online job postings, and I even sent jobs to local college career offices. I know you’ll ask how much we pay and it’s not the $15 an hour they’re trying to raise the minimum wage to. But it’s good pay, $8.75 an hour. I can guess what you’ll say: That’s why the minimum wage should be raised, so people will take these jobs. But I can’t afford it. It would put small businesses like mine out of business. A $15 minimum wage is counter-productive because it will price low-level workers out of jobs altogether.

What else can I do to fill these jobs?

Nick’s Reply

You’re not the only restaurant owner facing a supply and demand problem with labor. And it’s not just the food service industry that’s facing it. Employers across industries have a big supply of jobs but labor is demanding more pay!

I’m not going to mince words. If your business can’t afford to pay a minimum $15 an hour wage, your business cannot afford to exist. You should close it down and let a better-managed competitor hire your employees and service your customers. Many will disagree with me vehemently, but I’ll try to explain why I say this. (See  also The Job Monopoly: How companies keep pay low.)

Let’s cut to the chase

My economic logic is simple and you — and many employers — have already discovered it, even if you all pretend otherwise: Nobody’s going to work for you because it costs more to live than the peanuts you’re paying.

You cannot — or you refuse to — pay fair-market compensation. That’s why you can’t hire the workers you need, no matter what your rationalizations are. There is no “talent shortage” in America. That’s politically radioactive bunk!

Fair-market compensation is an amount people need for shelter, food, transportation and other basics of life. That’s more than $70 a day where most people live.

If your business can’t generate enough cash to pay a living wage, your business is going to fail for lack of workers. Shut it down now and get it over with.

A shortage of workers who will work for peanuts

Please read this recent article in Bloomberg Businessweek: Restaurants Are Scrambling for Cheap Labor in 2019. We’re going to discuss your complaints about the “shortage” of workers, which really seems to be a shortage of workers willing to work for peanuts — and the apparent shortage of sound business practices.

Echoing you, the CEO of Applebee’s says to Bloomberg, “It’s hard to find quality folks to work in the restaurants.”

But many restaurants cited in that article “are loath to raise wages, which must be offset by higher menu prices. They count on ample pools of workers willing to accept modest pay.”

Bloomberg also reports a November 2018 Pew Research Center study that tells us there’s a shortage alright — of young workers willing to accept modest pay.

“Just 19 percent of 15- to 17-year-olds had jobs in 2018, compared with almost half in 1968… It wasn’t much better for 18- to 21-year-olds: In 2018, 58 percent had been employed in the previous year, down from 80 percent in 1968.”

That means employers have to take measures to attract their share of a smaller “willing” labor pool.

Misguided hiring strategies

You mentioned what you’re doing to find workers — posting jobs in different places. Let’s look at the “strategies” restaurants in that article have developed “to recruit and retain young workers” in what they complain is a very tight labor market:

  • Employers throw “hiring parties with free nacho fries to draw prospects.”
  • They hand out “recruiting cards that say, ‘We are looking for great talent like you!’”
  • Employers blast out “text messages with links to… food freebies to lure candidates.”
  • One employer offers “an employee mobile app” that lets workers swap shifts easily.
  • Another tries to keep employees engaged by surveying them about a “new rib recipe” on the menu, and about their “happiness” with their uniforms!

Gimme a break! What do free nachos have to do with convincing people to accept low wages? This is someone’s idea of “strategy” for filling jobs?

From the Bloomberg article: “The younger labor market, they really want to feel connected to a brand,” claims Will Eadie, “global vice president for strategy at WorkJam, which provides training and other digital labor services through a mobile app for clients including restaurants and retailers.”


But where’s the money?

While companies pay consultants like Eadie to connect hungry employees to their company brand, a couple of companies in the Bloomberg story are actually giving away money:

  • “A Naf Naf Middle Eastern Grill in Madison, Wis., is offering $500 hiring bonuses for shift leaders and assistant managers.”
  • “A Wendy’s in New Hampshire last year tried luring candidates with $1,000 bonuses.”
  • “Golden Gate Bell [a Taco Bell franchise with 80 locations], which employs about 1,800 and competes with Wendy’s, McDonald’s, and big-box retailers for employees, also recently started a quarterly bonus program for hourly staff.”

Bonuses are a good thing — but a one-time bonus is the oldest compensation trick in the book. It’s a one-time expense a company can write off. But it’s a far cry from permanently higher wages. (See Why employers should make higher job offers.)

$15 wages will put us out of business!

There’s been a national chorus of business owners who oppose a $15 minimum wage. They sing a song about how higher wages would have “an unmistakable side effect: pricing the working poor out of the labor market.”

That’s the tune of an opinion column in New Jersey’s Star Ledger by Matthew Johnson: “I’m a young business owner. Raising the min. wage won’t help N.J.’s working poor.” (Johson “co-owns some family-run small businesses” but does not disclose what they are.)

His claim is the essence of economic hypocrisy in America: “For low-skill workers, the prospect of earning less than $70 for a day’s labor may seem daunting. However, the alternative is a prospect which is far worse.”

Maybe it’s time to go out of business!

In the classic style of a boss who believes he’s earned the right to be greedy because he took the risk of starting a business, Johnson suggests his employees would be worse off if he paid them more — because then he’d have to fire them because he can’t afford it!

I’ve got another take on this. For businesses whose very existence depends on paying less than a living wage, the alternative is that they should go out of business and let more capable, better-managed competitors take their place.

Faced with a $15 minimum wage, warns Johnson, “employers will be forced to make tough choices to remain competitive in our challenging environment.”

There’s no tougher choice in business than accepting failure — or figuring out how to deal with overwhelming market pressures, including the pressure faced by Applebee’s and Taco Bell and White Castle to hire the workers they need to stay in business.

But $8.75 can’t pay the rent. Nor can nacho fries. Those workers want more money! Just like market forces push living costs upwards, market forces will put Johnson and other poorly managed concerns out of business. (See These industries are more likely to screw you on pay.)

Healthy employers and healthy workers thriving together

Johnson needn’t worry about those workers he’d have to lay off. A better-managed competitor like Love2brew Homebrew Supply, also operated in New Jersey, will hire that talent, grow without sacrificing product quality or customer service — and the economy will be stronger as a result.

“We pay all of our employees at least $15 an hour — and it works,” Ron Rivers, founder and CEO of Love2brew, writes in another Star Ledger op-ed: I’m a small business owner, here’s why a $15 minimum wage works for us.

Rivers says the company hasn’t had to raise prices on its 1,500 products to cover higher wages.

“My team entered the home-brew industry with an understanding that a high level of service and customer support would set us apart from our competition.

“We see this as a critical component to meeting and often exceeding our customers’ expectations of excellent service… Raising our starting pay to over $15 an hour has supported our continued acceleration to a position of national leadership in our niche home-brew market… the results speak for themselves as our customers have been coming back for over seven years.”

Like opponents of the $15 minimum wage, advocates of such legislation recite their own saws. Rivers says, “No one earning minimum wage has much, if any, money to put back into the economy — not to eat out, go to the movies, drive down to the Shore for a weekend, or invest in a hobby like home-brewing.“

Paying higher wages is good, he claims. “Historical data help us understand that wage increases lead to more spending and higher overall employment levels.”

Somebody’s right and somebody’s wrong.

The role of government in the economy

There are of course nuances in this debate, and there may be businesses that can argue persuasively that $15 an hour is really a bad idea.

But if we step back historically, like Rivers does, and look at long-term economic and societal trends, it’s pretty clear: Wages keep going up right alongside the cost of doing business, improvements in technology, and the increasing quality of life we enjoy as a result.

When I read op-ed columns by young business owners like Matthew Johnson, I can’t wait for them to grow up. When Johnson proclaims, “It should not be up to government to decide who wins and who loses in this delicate economic equation,” he pretends he lives in a nation where economic equations do not depend on well-thought-out economic policies.

But America is too big to thrive without them. That’s why it’s pure bunk that government should not be involved in setting wages.

The pitchforks are coming

For my money, no one explains the big picture as well as rich guy Nick Hanauer, one of my favorite capitalists. Hanauer is a billionaire with a clear view of how capitalism really works — by plowing profits back into society. I urge you to watch his TED talk: Beware, fellow  plutocrats, the pitchforks are coming.

Hanauer is a staunch advocate for a $15 minimum wage, not just because he’s a philanthropist, but because he’s the plutocrat and capitalist so many small business people — like Matthew Johnson — aspire to be. He’s learned something they don’t know.

“Government does create prosperity and growth, by creating conditions that allow both entrepreneurs and their customers to thrive. Balancing the power of capitalists like me and workers isn’t bad for capitalism. It’s essential to it.

“Programs like a reasonable minimum wage, affordable health care, paid sick leave, and the progressive taxation necessary to pay for the important infrastructure necessary for the middle class like education, R&D — these are indispensable tools shrewd capitalists should embrace to drive growth, because no one benefits from it like us.”

Hanauer warns owners of great wealth, owners of businesses big and small, that social upheaval always starts with gross inequities in the distribution of wealth. And today, he says, we’re at a social and economic tipping point. The under-paid workers are restless. The pitchforks are coming.

Who really needs a $15 minimum wage?

I’m not really telling the owner of the three restaurants who submitted this week’s question to go out of business. I expect any dedicated business person to figure out how to run their business profitably — for themselves and for their employees. And I hope they can. But it’s up to them to pull it off — or go out of business.

I think a $15 minimum wage is crucial to America’s economic viability and long overdue. We all need it.

I don’t share Matthew Johnson’s cynical and — yes — greedy interpretation of capitalism. I don’t buy the proposition that some workers don’t deserve a living wage and should be grateful to earn less than $70 a day because to pay them more could put a business owner out of business.

It’s a far more parsimonious interpretation of capitalism that suggests a business which cannot afford to pay a $15 hourly wage should go out of business so that a healthier, better-managed one might take its place.

Our economy is just as dependent on wealthy labor as it is on wealthy management, the two combining to operate profitable businesses that can put more money back into the economy. There is no real growth in a society unless both owners and workers have wealth to re-invest in the growth of the entire nation.

(See Jobs plentiful! Pay is up! But, how are you doing?)

Okay, it’s your turn: Who really needs a $15 minimum wage? Who can live and prosper without it? Can businesses hire the workers they need, if they keep insisting on paying less? Would it really be better if businesses just went out of business if they can’t pay $15 an hour?

ADDENDUM January 15, 2019

Here and elsewhere in the national debate about the $15 per hour minimum wage, apologists for lower pay seem to rely on a silly fallacy. It goes like this:

$8.75 may not be enough in the big city, but in a small town in the Midwest a worker making $8.75 an hour might be able to afford an apartment nicer than city workers making 3 X $15 an hour could even begin to afford.

It’s just not true. Let’s flesh it out. What does $8.75 an hour buy? $8.75 works out to $350 gross income per week, $17,500 per year (assuming a 40-hour week and two weeks of vacation).

Depending on where we look (A, B, C), financial advisers suggest that one’s rent should be in the range of no more than 25% to 30% of their income. That gives the $8.75 wage earner between $364.58 and $437.50 to spend on rent.

Now let’s test the fallacy. Where in the United States can the $8.75 wage earner rent an apartment?

We’ll start with the median rent in America — in 2017 it was $1,012:

But let’s cut some slack. In 2016 it was $981:

But those are medians. Let’s look at the least expensive cities for renters. In this example, Toledo, Ohio is the lowest at $550:

Of course, some people don’t rent. They have a mortgage payment. Maybe they lost their job — they still have to pay the mortgage. Maybe all they can find is that $8.75 wage. While the median mortgage payment in 2017 was $1,022 per month, let’s look at a more conservative figure — for a first-time home buyer who spends less: $838 per month:

It seems that best case our $8.75 wage earner needs to come up $550 per month to live in the lowest-rent city in the country. Now let’s go back to what portion of that earner’s $17,500 per year salary is available to pay rent or a mortgage. Most generously, at 30% of total income, our earner has $437.50 available for rent or a mortgage.

At a $15 wage, that same worker would have $750 for rent. The chart of lowest-rent cities suggests there are three affordable places: Toledo, OH, Memphis, TN, and Glendale, AZ.

So, the fallacy about there being places where a person can get by earning $8.75 or $10 or even $15 is just that — a fallacy.

Don’t agree? Have data that proves me wrong? Please post it!

: :

  1. Wow. This is your worst post ever. Not once do you entertain the notion that different parts of the country may have different levels of “living wage”. Sure $15 may not be enough in the big city, but in a small town in the Midwest a worker making $10 an hour might be able to afford an apartment nicer than city workers making 3 times $15 dollars an hour could even begin to afford.

    You show a bias towards the new hot belief in federal laws for everyone. Or rather, laws for cities for everyone.

    Maybe instead of saying $15 for everyone, you could ask if the restaurant owner is paying a good wage for his area and I don’t know, productively talk about how he could increase wages, instead of wishing failure on him. Or maybe you could talk about how we should set up a tiered system that allows wages for part time under 18 workers to be paid less that that magic $15 because they in general aren’t paying all their own expenses.

    This post is disappointing and biased and nowhere near your standard quality.

    It’s also the cruelest response ever to a question for your blog. That new former reader won’t make that mistake again. In fact I think you likely scared off quite a few employers from asking you any hard questions in the future.

    Damn, I recommend your blog to students looking for jobs quite a lot.

    This post really shook my faith in you. Sorry to be so harsh.

    • @J: So if someone isn’t “paying all their own expenses” they should be paid less for doing the same work?

      If someone can find a cheaper apartment, their employer should keep the difference and cut their pay?

      Do you see what you’re saying? “Some” people don’t need as much money, so it’s okay to pay them less for the same work?

      This is exactly what the prevailing economic wisdom in our country says — even though technology has made where we live almost irrelevant: If you live in Biloxi, you should accept lower pay than the person who does the same job in San Francisco, because your expenses are lower in Biloxi.

      So the value of your work depends on where you are doing it, not on what your employer can get for it on the national or international market.

      Think about how ridiculous that is in a world where everyone competes and does business with everyone else with ease.

      That’s what’s wrong with our nation’s economy. That’s why growth is not happening in the leaps and bounds that new technology suggests it should.

      • Wow…Just…..Wow…..I’m dumbfounded by Nicks responses.

        Talk about going off the deep end.

        Nick…Your initial response and then this response are riff with ignorance and self-righteousness IMO. I’m incredibly disappointed in your lack of understanding/research.

        Companies pay employees to do a job…and they are paid at levels based on their knowledge, skill set and contribution. Different positions in a restaurant require different skills..thus $15 an hour for taking a food order and food delivery….does NOT equate to the same skill and responsibility of cooking and prepping the food. Plus…you are overlooking TIPS…unless the owner has a “No Tipping” policy. Many tips are cash and having known people who worked in the food industry…there are people who can make 10 times their wages in tips in one shift.

        Nick….You come off as never having never ever run a company. If so, please educate us on your past resume/experience when you actually ran/built yours or someone elses company.

        Your credibility just imploded with a nuclear force.

        “even though technology has made where we live almost irrelevant” Unless you can now beam meals across the country through the internet…. there ARE limits on what technology can do for local economies based on the individual industry…public restaurants in this case.

        My advice to the owner…don’t listen to Nick on this OR take it with a grain of salt. He clearly does not have to deal with narrow profit margins when considering his $225 an hour “talk to nick” fee.

        Honestly, my mind is blown…OR maybe this is just an early April fools joke.

        • @Peter: Please see the addendum I just posted to my column. It doesn’t matter what skills a job requires or what they’re worth — if the employer cannot find and hire workers because they cannot afford to live nearby.

          I think the problem here is that some people are trying so hard to adhere to social or political dogma that rationalization takes the place of rational thinking.

        • @Peter: PS – So what should the OP do to hire the workers the biz needs? My answer is to offer higher wages. What’s yours?

        • Just saying Peter. When you offer THE VERY LEAST you will never get the VERY BEST.

          Food for thought.

      • I know I’m late to the party.

        Nick said “If someone can find a cheaper apartment, their employer should keep the difference and cut their pay?”

        Hahahaha. Reminds me of: I once was told by a homeowner/roommate that he should increase my rent when he found out I was applying for a mortgage loan. He felt that since I had ‘money’, I could afford to pay him more. When he got a call from the mortgage processor verifying my rent, he said he was being nice because he could have lied to them in order to keep me as a tenant. He said it was in his best interest I remain paying rent to him…

    • $8.75/hr wage in a large city like Chicago will not go as far as $8.75/hr wage in a small town like Streator, Illinois (81 miles to the south of Chicago). True. But…

      I did a quick search for rents in Streator and they are around $550/month and up. Still a high rent for someone who only makes $8.75/hr. Unfortunately Streator, Illinois is begging for jobs and businesses. The glass factory closed years ago and the downtown has a lot of shuttered business. Streator is 16 miles to a somewhat larger town called Ottawa. Maybe there are jobs there.

      Go a little further away to a town called Odell, Il. and you can find an apartment for around $350/month. Now if you were able to find a $8.75/hr wage job near Odell maybe that would work for you but most likely this $8.75/hr wage job near Odell would have little advancement opportunities and may not even offer health insurance.

      So… when you offer THE VERY LEAST you will never get the VERY BEST.

  2. Thank you for explaining this so well, even if some people clearly don’t want to acknowledge it.

    If your business can’t make ends meet without taking advantage of desperate people with few options—if you can’t pay people what the work is actually worth, rather than what you think it ought to be worth—then you’re doing it wrong, and the industry will do just fine without your business’s contribution.

  3. I loved this post. The going rate for a 15 year old babysitter with little to no experience is 12$ an hour. That is the minimum, how do you expect to hire a dishwasher for less than a babysitter? I have found that the only way to get paid what you are worth is to only accept getting that pay. The letter writer is grossly undervaluing the services provided to his business by his workers. This is only going to get worse. Restaurants have survived on undervalued immigrant staff for decades.

    • babysitter VS dishwasher….


      Do you really want to make this pay/job comparison? OK.

      What are the skills and level of trust required between one job and the other?

      Babysitter must know CPR and have your trust that you will care for a living human-being. Must be attentive to the safety of the child and be 100% responsible for the feeding and changing of the baby/child.

      The other…have two hands and understand you wash first…then you dry….don’t drop/break the dishes.

      You REALLY didn’t think hard about this comparison…IMO.

      • Really Peter?

        I was a babysitter from ages 12 to 16. I have never learned CPR. My knowledge of CPR was never a requirement for any of my families. As a babysitter all I had to do was feed the kids dinner and put them to bed. Then I was allowed to watch TV or listen to music and then sleep until the parents returned home.

        I bet the parent’s never knew CPR. If I had a problem I could always call my mom.

        Your comparison doesn’t make sense.

  4. J has a good point. The wage needed in SanFran is much different than that in Shreveport LA.

    Another point I’d like to mention is the data provided in the post about the drop in 15-17 year olds (high schoolers)and 18-21 year olds (college). Many of these jobs in the past were not meant to provide a living wage. They were summer jobs or extra income for students. I worked at McDonalds in high school and there was no way it would be considered a living wage. In fact, I was living in the UK at the time, and they had a tiered system like J also mentions. It sucked to be paid less than my co-workers for the same amount of work, so I am not a big proponent for that system, but I can understand how it could help the business owners and society in general.

    Anyway, times have changed. Kids, for whatever reason, aren’t joining the workforce. My theory is that parents have promoted academics more due to the push for college attendance, and maybe even increased time in sports, but the effect is a lack of the true cheap student labor. (sidebar: my kids have worked as lifeguards making $12+/hour during the summer).

    Employers looking to fill their cheap/unskilled workforce demands are now forced to hire people who need a living wage. This is the conflict that didn’t exist when I was a teenager. This is simple supply/demand economics. Businesses need to find ways to afford this new expense (raise prices, become more efficient, etc.). I will say, that at $15/hr, even more automation will become likely (see the burger bot), but that is a different (and probably larger long term) issue.

    • You can find data on the minimum wage from the BLS at
      About 45% of the minimum wage jobs in their sample are for people over 25.
      (See table 1.)

      • “The estimates of workers paid at or below the federal minimum wage are based solely on the hourly wage respondents report (which does not include overtime pay, tips, or commissions)”

        does NOT include TIPS… Anyone who has worked in a restaurant knows you make more in TIPS ( Fast-food not included of course)

        “The survey is conducted monthly for the U.S. Bureau of Labor Statistics (BLS) by the U.S. Census Bureau using a scientifically selected national sample of about 60,000 eligible households in all 50 states and the District of Columbia.”

        Who of us has been home to answer one of these BLS surveys?

        Has anyone here ever responded to a a BLS survey. My point…only people who don’t screen their phone calls and are home during regular business hours… are the only ones counted in a BLS survey and I feel is NOT an accurate survey of the country.

        • 60,000 of 325 million? The odds that anyone here has gotten a call are rather slim. Anyhow sampling theory is quite sophisticated. Do you think they take the first 60,000 who answer, or use 60,000 who match national demographics.
          60,000 is an immense number for a sample. I assume they use that many people so that the subpopulations will get results with small sampling errors.
          As for servers, I rather suspect they ask for total income, including tips.
          Believe it or not, the people who do this kind of work aren’t stupid.

        • Someone needs to take a basic course in statistics.

          • “Someone needs to take a basic course in statistics”? Actually, a lot of people need it. But Nick C. is not one of them. He correctly provided both the mean and median of each relevant statistics so that we could even see how close they were to each other and make the correct conclusion from that.

            OTOH, the young usurper who is dragging my honorable name through the mud by using it while he writes propaganda for the greedy classes, has a clear need to learn basic statistics. Not one of his arguments holds water.

            But what he needs even more than a statistic course is some basic ethics. For he is clearly ethically challenged. No one could write the propaganda screed he wrote without first brutally strangling his own conscience — unless he really is clueless enough to believe it, in which case he should not only stop writing screed but get out of the business. While he is resting from his recent exit, he should read “The Worldly Philosophers” to correct some of his more major errors.

            • @TheRealMatthewJohnson :-)

              “Only in New Jersey.”

  5. I have always felt a lean, well paid, well trained army (or staff) will always win the day.
    Paying more also inherits the responsibility of retaining and training workers to be better prepared for their next job if needed. Employees and employers are both accountable to pay and perform up to that minimum wage. So maybe, less can be more.
    A standard wage throughout the country is not a bad idea. If you can make good money outside of the city and live relatively well, then others may be attracted to un-urban backwaters and find you can survive being employed in other establishments without having to work for Walmart. Maybe put some meth labs out of business.

    • @Tony: That’s an interesting observation I had not considered. Jobs that pay surprisingly high for a “backwater” area just might turn it into a more attractive place to live and work.

      I mean, look at Seattle. :-)

      Anyway, I don’t mean to joke, but it’s worth playing this out. Consider what’s happened in places like Idaho and Washington state — even California, if we compare pre-Silicon Valley days to today. Smart, successful businesses (gold rush general stores and saloons?) attracted more people and turned backwaters into vibrant communities.

  6. Two observations:

    1. In 1979, I worked for a few weeks in a restaurant, in the kitchen (I had to quit, unfortunately – yes, UNFORTUNATELY – because I was studying at the time and it was interfering with my course work). I was paid nearly double the minimum wage plus 10% of tips the wait staff collected. The catch? I had VERY tight standards I had to meet without exception in terms of preparing food for customers. Time, quality, presentation… Knowing I was getting double the going rate kept me moving. Pay the money, lay out clear standards, and watch people fall over themselves trying to deliver.

    2. I am an opponent of this whole tipping culture (this is not directed to the person that posed the question; it’s a general observation). It allows restaurant owners to advertise artificially low prices (20% – the amount of a tip, more or less) while paying wait staff an artificially low wage. And if the wait staff gets stiffed on a tip? Well, it’s the employee’s fault, right – for not providing good enough service (like THEY’RE the ones that took 45 minutes to cook a burger and fries!). It’s not the owner’s fault the employee will have to choose which bills to not pay this month…

    Do away with tipping and calculate ALL expenses in the cost of a meal. This silly tipping game is designed to benefit nobody but restaurant owners and it’s way past time to level the playing field.

    • @Tom: I grew up in a family with many restaurateurs. (Dinerateurs?) I’ve seen the business model up close. I’ve seen owners cook not just the meals, but the books. While some restaurants operate on the up and up, I think many succeed because they skim and they pay under the table. Profit margins are admittedly very narrow, so in many cases skimming and inadequate, tax-less compensation is the only way they survive. I’ve never seen this as anything to be proud of. Operating a crooked business often signals a lack of expertise and management skill. Unfortunately, this has come to be rationalized, and even legit restaurateurs buy into the idea that hash-slingers and wait staff don’t need good pay.

      I’m not suggesting the OP is a poor manager or that the business is crooked — I just don’t know, so I assume it’s legit, but that the OP perhaps has not figured out how to operate the way your old boss did. Your story makes the point, as does Rivers’ brewing supplies business: A good business can pay top dollar, make money, and be competitive.

      Of course, I’m in no way suggesting that food service companies are all mismanaged or crooked. Not at all. The over-riding point of this column is not that food service businesses are the problem. It’s just one example. Every business needs to take a hard look at how it pays its workers.

  7. First off, Less Government is Better. Safety is one thing,ie. food inspectors, can be a concern of government. While going to undergrad I worked in a restaurant. The owner was a Cornell graduate whose family had been in the business prior. As a sideshow and bar cook I made enough in three days (30 hours) to cover tuition and living in Buffalo in 89-92. We were always busy with staff having to turn tables quickly and reservations closing out days prior. This was when Buffalo had already stumbled into Rust Belt. Employees are your greatest asset and as a senior manager I wish to thank the Tiffany family for teaching me this. Thanks Dar.

  8. Amen to what J said. Employment should be voluntary on both sides. That’s the essence of a contract. The government should butt out. I’m working again after being retired, but my employer can’t afford to have me work full time because he’s obligated by law to provide medical coverage to anyone working 30 hours or more per week. I’m on Medicare and don’t need the company’s coverage, but the state doesn’t care. One size fits all.

    • “The government should butt out.”
      “I’m on Medicare”

      Do you even hear yourself talk?

  9. While I don’t want to be as harsh as some, I have to disagree as well on your premise of a $15.00 “living wage.” My question is simple – When did these typically-held-by-young-people-as-a-way-to-earn-some-extra-money jobs become synonymous with jobs designed to support a family of 4? I defy the average wait-staff person to declare that this is their full-time job and that they expect to make a life career of it. While some unfortunates may be unable to find anything better, I’ll wager the majority are just earning some extra money to help them out until they graduate / move out / whatever.

    I recall early in my career when enterprises like Six Flags were paying LESS than minimum wage due to the “seasonal help” laws. ALL the workers were kids and no one was supporting a family. Then the legislatures demanded parity and the started paying minimum wages. Guess who now started showing up in hot-pants and bad uniforms running rides and selling food – middle-aged people who needed the money and couldn’t get anything better.

    I restate that the typical fast-food / low-end restaurant / mass market retail sales jobs were NEVER designed to be full time jobs capable of supporting a family. That’s why the prices can be kept affordable. If the “minimum 15” laws take over in the states, or worse, become a federal mandate, people will need to expect to have their fast-food and restaurant prices double, and all other typically “cheap” services and products will increase in price accordingly. Then we will essentially become Western Europe, with the accompanying high prices, lack of tips (because patrons will no longer feel guilty about servers’ low wages) and rudeness, because servers no longer have to be nice to get paid more.

    • @Hank: I know you’d lose that wager.

      I come from a long line of restaurant and diner owners. For most people in the food biz (cooks, wait staff, dishwashers, floor-moppers, managers, cashiers) it’s a full-time job that has to support them and their families. I know. I’ve been around them. Go into a kitchen and talk to these people. While many such jobs might be held by young people who want pocket money, to suggest that “the majority” of such jobs are held to “earn some extra money” is just plain wrong. It’s a political fantasy.

      If you want to argue that a class of seasonal, temporary, part-time jobs for students and people with other sources of income should be defined, where lower than living wages can be paid, I’m happy to entertain that discussion. But if you believe everybody who works in a fast-food joint, at an amusement park, or at Walmart is doing it to earn pocket change, I think you’re absolutely wrong.

      A small biz owner and a commenter on this thread have already offered examples of businesses that pay healthy wages without raising prices. I think it’s far more a matter of how well a business is run, than how little they can get away with paying someone who’s desperate to pay their rent. My point is that businesses based on a model where employees are willing to accept “pocket change” wages so the owner can pocket disproportionate profits are not really businesses — they’re crooked rackets, to put it bluntly. They’re stealing with impunity. Just because there’s no law against it doesn’t make it right or acceptable.

      (By the way, your assertions about prices and servers in “Western Europe” are total nonsense. I’ve been there and have found them in general to do a better job and with a better attitude than servers in general in the U.S. I’ll say the European servers are in general much happier people than their US counter-parts — unequivocally. Tips are built into the menu — but I never noticed any real difference in the total cost of a meal compared to the U.S. Your comment about rudeness is really puzzling. How do you come up with that? Do you really think a restaurant in the US or Europe would not fire rude staff on the spot?)

      I’ve worked in high-tech, where good companies that make good products lose business to “how low can you go” competitors that produce inferior, defective products that quickly fail the customer. Those companies are also crooks of a sort. They hide artificially low costs under a shiny sales veneer. I’ve seen customers screwed by that lie again and again. We can argue “caveat emptor” and laugh at the suckered customer — and let legit businesses suffer along with them, while the law looks the other way. Or as a society we can establish standards of conduct that encourage good, legit, well-managed businesses and protect them (and consumers) from opportunistic shysters that game our social system. (It’s called the Federal Trade Commission.) It’s awfully easy to con a starving worker — so should we congratulate the biz owner that does it?

      In what US city can you rent a place to live, eat and commute to work on an $8.75/hour wage? For every student working for pocket money I can show you two or three dads or moms who are working to support their families. How long will America go, pretending the employer who’s screwing workers is some kind of hero?

      I think the point you may be trying to make is that we should shut up and enjoy low prices while we can, and let someone else pay the difference.

      • @Hank and @Nick, I think you are both right and wrong. Sure, not “EVERYBODY who works… is doing it to earn pocket change” but some are. Especially some of the seasonal (amusement park) hires. The bulk of the customer facing employees at our local amusement park are definitely a bunch of college kids having a great time (I know since my kids were talking to them about working there). So are the bulk of the lifeguards they have worked with. But, there are definitely some people working for a family income in restaurants.

        I am a strong believer in supply and demand, but also recognize the historic (and even existing) examples of employers taking advantage of workers that need SOME sort of income. I have little sympathy for a person who says they cannot find a skilled worker for $10/hr. The market is telling them something. There is a reason many restaurants are reducing their staff by having the customers order at the counter, and then they bring the food. Or, they prepare foods in packages (Pret A Manger, Itsu, Wasabi, etc.) that people then pay at the counter and the restaurant heats it up if needed. There are other ways than just rising prices to absorb the higher wages demanded by the market, usually by hiring fewer workers or lowering other costs. BUT, I also think that a cook at a fast food restaurant is generally less skilled than a cook at a TGIFridays than a cook at a nice restaurant. They should be paid what the free market demands, but realize there will be some jobs that do not cover the costs of raising a family. And we should not mandate that the minimum wage should allow an income to support a family of four (or whatever). Going back in time, 1990, min wage was $3.80. At 40 hours/week and 50 weeks/year, that gives you $7600, which was less than the poverty threshold for a family of four ($12,100). There are (and should be) jobs with wages that are for young single low skilled workers that don’t bust a business.

        Sidebar: While I have had good and bad service around the world, I would say one consistency is that the US restaurants serve more food for less money than European ones. Even with a tip, a meal in the US is generally cheaper. When my European friends come to visit, they are surprised on the amount of food and the associated cost. Some of it is due to taxes, some is due to the minimum wage, some is due to the ability for the US to locally source much of its food, etc.

        • @Pauley B: Sidebar:

          Hmm. More food. Excess. Gluttony. Obesity. Not sure how that “pays.” :-)

          I’ll trust that you really do find you pay more in Europe, though I haven’t had that experience. However, if you are paying more, can we allow that when we have dinner in Europe (especially when it’s outdoors), we tend to stay longer to socialize, watch people go by, and just hang out? How much is that worth? Does it make up for the higher cost?

      • @Nick: I was thinking about this article:

        I know a lot of people who are working in retail and restaurants who are trying to support themselves and/or their families. Many of them have second jobs, especially if the other jobs aren’t full time, or their spouses are also working two or three jobs. Too many of them have to rely on food stamps and other social services because despite being employed, the wages are too low, the hours not enough, the jobs not stable, to be self-supporting. So how is that working–people are working, but because rents have skyrocketed, groceries have gone up, they still can’t live. It isn’t just “kids” looking for mad money who work these jobs. The clerks I see at the supermarket and Wal-Mart are adults, and I see more older people, who said that they were let go, downsized, outsourced, and at their ages, retail is the only job they could get, and it doesn’t pay anywhere close to enough.

        If employers pay more, the employees will have more money. Right now a minimum wage job, even one that pays $15.00 per hour, won’t pay the rent anywhere in the US. That’s just rent–and it means workers don’t have enough money for transportation, clothing, food, health care, a costly repair (car, e.g.), etc. If people don’t have enough disposable income (anything they can spend beyond rent, food, utilities, etc.), the economy won’t grow. The economy grows when people have enough extra money to buy things they don’t need for bare bones survival.

        • @Marybeth: I’ve got no problem with drawing a distinction between jobs for adults and jobs for students. But it’s not easy to draw that distinction today because if an amusement park offers $7/hr and turns away all but kids, it gets slapped with a discrimination suit.

          So if we’re going to have a national (or even state-level) minimum wage law, can it draw such a distinction?

          Should a national law be entirely avoided so the amusement park operator can pay kids $7/hr with impunity?

          What troubles me is suggestions that “flipping burgers isn’t worth $15/hr.” Says who? If a burger joint can’t get workers, maybe the job is worth even more. What also troubles me is the suggestion that burger flipping can pay just $7/hr because only kids who don’t have anyone to support will take those jobs.

          Uh, no. That’s discriminatory. So what’s the solution?

          • @Nick: You have no argument from me! I think that it is disgraceful that some employers use the excuse that kids (or women) are just working for pocket money so they shouldn’t be paid more.

            To me, a minimum wage is just that, and it doesn’t make distinctions based on the age, sex, or whether employee has a family or himself to support. Nor should it make those distinctions. I know that some industries are exempted from paying the higher minimum wage–waiters only make $2.31 per hour, with the expectation that they will make up the difference in tips. I think this is shoddy too, because employers are shifting the burden of paying their own help onto their customers. I know that the profit margin is thin in the restaurant business, but really, who can live, much less eat, on $2.31 per hour? And not all customers are good tippers, even when a waiter provides excellent service. He can bust his butt and still not make enough. Farming is another industry that is exempt from paying the minimum wage, and the employees, too, work long, hard hours for very little.

            Yes, it IS discriminatory. I’ve thought about your question over these past few days. I think the solution is for employers to pay more when they can’t find workers to fill these jobs. It was fine when the market favored the employer but now that the market has swung the other way (favors job hunters), employers are stubbornly behaving as if the market were still favoring them.

            Great Q&A this week, and I loved the video clip. He said what I’ve long thought. It has happened in the past, and we don’t have to look further than the French and Russian Revolutions to know that we as a country shouldn’t want to let things get to the point where desperate people with nothing more to lose decide to take matters into their own hands in order to feed themselves and their families. It wasn’t a good outcome for the 18th century French aristocracy or for the Russian Tsar and his family.

    • Hank, in case you need a lesson in geography, “Western Europe” is everything between Italy and Norway (my home country), and between Ireland and Greece. Quite a heterogeneous bunch of countries and culture. Including service culture and general attitude.

      If you go to Iceland, you may find them somewhat “short”, no small-talk – not because of lack of tipping, but due to national character. Sweden on the other hand, is almost over-friendly, with service and smiles ingrained in their genes. Norway is somewhere in between.

      The French are known for being somewhat arrogant. The Dutch are very businessminded. In Germany, Ordnung muss sein. Italy and Spain, not so much order. There is some truth to these tired clichés, but in general, you will find most people in service businesses to be service minded everywhere – and rotten apples everywhere.

      Workers’ rights also vary in Europe. In Norway, everything is very well regulated (at least in theory). UK is more close to US. In Spain, lots of workers are on uncertain temp contracts with low pay. Etc.

      Basically, “bad service in Western Europe” is a meaningless generalization – and untrue.

      • @Karsten – Thanks for the country-by-country service guide! I’m not so well-traveled as you. But I disagree about France (Paris, at least). The few seemingly rude waiters I’ve encountered all folded into smiles and friendly chatter when I struck up conversations. I think some are leery of Americans, until they realize we’re all just trying to get by — and that we know how to start a friendly conversation.

        But your bottom line is the point: generalizations don’t get us anywhere.

    • Who is anyone to judge if someone is more deserving of a good wage because of their personal life choices or situation, or whether or not the person regards the job as a career path?

      What are you teaching young people if we treat them as an underclass simply because they are young? Isn’t paying for college or trying to earn money for a date, clothes, car, etc. count as much as anything else? Should all single people be paid less because they didn’t choose to bring more people into the world? Should people be required to state whether or not they “just need a little extra money” or if they regard the job as being on their career path?

      Every statement in your post is completely illogical. You go on to denigrate “middle-aged people” who “needed the money.” So who exactly do you think “deserves” a decent job or better pay? I suspect you are totally against the government mandating preferential hiring for any reason, yet you are suggesting adding many more reasons to hire or set pay levels on the basis of age, marital status, child status (ah, another reason to encourage poor people to have more kids!). And what’s wrong with Western Europe? Most intelligent people recognize those countries are the freest and healthiest in the world (The US actually ranks fairly low on the “freedom” scale compared to other developed nations–look it up).

  10. Never mind the legally mandated minimum wage. Let’s take a step back: Business owners who gripe about how much they’d have to pay to attract the workforce they want are violating, not anything legislated, but a natural law – the law of supply and demand.

    Most of the time, employers enjoy an asymmetrical power relationship with their employees. They have it, their employees don’t. That means they can pay what they want to pay and get away with it, because nobody else is paying more. It’s an employment cartel, and employers are accustomed to its benefits. Like all cartels they get to stop the law of supply and demand from operating.

    They call it “market-based pricing,” but what’s really going on is a tacit agreement regarding what they’ll offer in the way of wages. This suppresses competition for talent and keeps the price of labor artificially low.

    Right now, demand for labor exceeds supply enough to diminish the power of the employment cartel. Employees and job applicants have more power than those providing jobs, including the most important power in any negotiation – the power to walk away.

    Hurts, don’t it?

    • My first job out of college: The company paid for my out of town interview. The company paid to move me, including a professional moving company. On my first day of work, I was immediately covered by insurance and was a full employee of the company. They had a pension. Unfortunately, the company had a very big layoff and I was let go. I don’t regret my life since, but I would be two years away from retirement had I been able to keep that job. The year was 1989 that I graduated college.

      About 5 years ago, I told someone about my first job out of college and all the benefits. “Companies don’t do that anymore. You have to wait 3 months for insurance, and it’s always contract-to-hire. This is the new normal. Get over it.”

      REALLY??? Then tell me, why did I just get a job offer that not only met but exceeded the benefits listed above? I was offered a modest but helpful sign-on bonus. They are offering some additional money to help me get settled. (I will be turning it down for personal reasons, including the fact that my wife would not be able to find a job in the new city.) This may not have anything to do with minimum wage, but I share this story as it illustrates that if an employer needs an employee badly enough, they will do what it takes to get that person on board.

      • @Kevin: As Bob Lewis suggests, and as Ron Rivers demonstrates, employers that really want to hire good workers quickly can do it by paying what the market demands. When there seems to be a shortage of something, its market price goes up.

        Funny how loads of people claim that doesn’t hold in the labor market.

    • @Bob: Hurts, it do.

    • “Never mind the legally mandated minimum wage. Let’s take a step back: Business owners who gripe about how much they’d have to pay to attract the workforce they want are violating, not anything legislated, but a natural law – the law of supply and demand.”

      As I was thinking about Nick’s post, this thought had come to mind. It’s not just a minimum wage issue, but can be seen across many types of jobs/income.

      I have been offered employment by and worked at companies that had unreasonable expectations regarding what they could get for the amount they were willing paid. I once took a job with a company that did this because I was out of work at the time, and it certainly paid better than unemployment. I was only there 6 months for semi obvious reasons. Here’s the kicker: After I left, they had advertised the job for roughly 6 months after I left and they kept tweaking the “Job Title” likely because no one who would qualify would take the salary unless they were in transition like I was. No one ended up getting hired.

      • Similar situation for me. I was recruited by a company to turn around a function that was not meeting its federal compliance requirements at great legal risk to the employer. I had performed the same work for a similarly-situated firm in the same line of business. During the hire process it was agreed that I would bring in software that would both track all the moving parts and prepare much of the required correspondence. I recommended an excellent product (at 30K a year for the license) which I had used in the previous job. The people who hired me agreed that software was essential for the job to be handled by one person. I took the job only to find out that only $3K was in the budget and that they had already committed to purchasing a bare bones software product which did not produce routine correspondence and created more work than it actually performed. I asked nicely for the better system or for someone to handle routine clerical work but was repeatedly denied. I often felt like that that Mickey Mouse cartoon trying to catch the mops and buckets as they multiplied Seven months later, to my great relief, they let me go saying that I should be able to handle the workload. They hired a replacement (poor thing!) but six months later ran an ad for an admin person whose duties included manually producing the routine correspondence that the proper software would handle in a flash.

  11. I have often noticed that so-called “business friendly” states or cities are often “employee hostile.” I live in California, and it costs a lot to live here. We are on the coast, so as for buying a house, forget it. As expensive as our apartment is, the rent is 22% of our combined salaries. In all fairness, we have jobs that require college degrees. Even though I cry each month that I write the rent check, I also realize that California with its expensive living and high taxes is also a place where there is opportunity.

    A gentleman from a circuit board manufacturing company came to make a presentation to us. I saw a map of locations and noticed that the west coast was noticeably absent. He said that they will never have a location in California due to all the expenses. Last time I checked, there are many companies thriving here. Is he missing opportunities? We will never find out. They are not making circuit boards for us.

    This brings me to the $15 minimum wage. Rather than being a fixed number, the minimum wage should be fixed to some metric that varies with inflation. To be fair, the restaurant business operates on a very thin margin. A woman I know who is in charge of our local restaurant inspections told me there is no way she would want to be in that business. My grandmother owned a restaurant (a cafe in the middle of nowhere in Colorado) – she would get up at 5:30 in the morning and go to bed at 11:00 at night. She hired maybe one person. No, I don’t think I would want to be in the restaurant business either.

    • A lot of circuit board companies moved their fabrication operations to China. Push the problem over seas. Don’t think it will work for food.

    • @Kevin: As I’ve noted in other comments I posted above, I know margins in the restaurant biz are very thin. But that circuit-board vendor you passed on seems to suffer from the same problem. How does the vendor you went with pull it off in CA? How do many well-run restaurants pull it off?

      I get your point about considering exceptions to a national $15 minimum wage, but I don’t think the criterion should be the margins of a business. Why shouldn’t it be the cost of rent for workers? In a resource-limited business, do we make the resource or the business figure out how to make do?

  12. Thank you for stepping up. I’m tired of business owners building their business on the backs of underpaid employees. $8.75 hasn’t been a usable wage for anybody but the most hapless teenagers in quite some time, no matter what part of the country you’re in. That’s barely over what’s been the Federal Minimum Wage for the last decade. Has anything else stayed that static for so long? And folks wonder why the people waiting on them at these low-pay establishments don’t seem particularly enthusiastic about their jobs? Please!


  13. When employees are decently paid, they feel better about themselves, are happier with their job and will do better work. That translates to offering a better product/service which means happier customers that will return and freely advertise for you in one of the most effective ways – word of mouth. That’s the big picture that many employers fail to see.

    Some of my background is in sales. It always boggles my mind when companies do not understand the basic math of paying their marketing/sales reps. Here’s the simple formula: If they’re cutting huge commission checks to their reps, they…should…be…ecstatic!

    So many times I’ve heard about (and experienced myself) incidents where marketing and sales reps have had to fight to get commissions paid, or even employers who balked at paying commissions on big sales. What don’t these people understand? The math is simple. If a marketing and sales rep – who by the way, is making a fraction of the total sale – is raking in a load of money in commissions, that means they’re making their company tons more! Yes, writing high commission checks is a good thing.

    But regardless of the industry, I sincerely believe that short-sided greed comes into play here. Some business owners can’t see past the check they’re writing and refuse to understand the good it represents for the company. All those companies are just “stepping over a dollar to pick up a dime”.

    • @Mark: I wish others would read your comment 3 times and understand it. It’s not just food servers’ wages that employers talk bunk about and expect their customers (and everyone else) to swallow the malarkey.

      Sales is another perfect example of employers behaving irrationally, stupidly — and greedily. I’ve got my own example. I took a sales management job after I was offered two comp choices: A good base salary and a small commission, or no base salary and a very high commission rate. I considered this carefully and decided if I didn’t believe I could deliver phenomenal sales numbers, why would I take the job at all? So I took the 100% commission deal with the highest possible payout, because I had calculated the risks and felt I could beat them. The VP that hired me shook my hand, welcomed me on board, and exclaimed that there was only one other sales person in the company on the 100% commission plan – him.

      I blew away the sales targets and earned a boatload of commissions the first year. At the annual sales meeting the VP proudly announced that the sales division I managed turned in the company’s best performance, after always coming in dead last before I took over.

      Here’s what’s relevant to our topic. Like all sales managers, I was given a certain percentage of profits from which to pay myself and my sales team. Most managers kept the bulk of that and paid their sales people well, but not extraordinarily. I chose to spread the wealth. My team was stunned at how much I shared with them. One guy, long considered the laziest in the company, started working longer hours than anyone — and his total comp more than doubled. The VP had been right — the 100% commission plan was the best! And I was right, too. Everyone was making out very well!

      Then management decided I was making too much money. Never mind that my pay was a percentage of what I brought in. When I made the company more money, I made more money. Didn’t matter. They called me into the executive offices during the Christmas Eve party. My commission plan was trashed. My comp was cut dramatically. Soon they turned my sales operation over to another manager so he could run it as part of his operation with a marginal boost in his comp.

      You can guess what happened. The other manager had no idea how to sell to our customers. He didn’t fight when my old sales team had their comp cut. My old sales people quit one by one. I took over another operation of the company while I considered my options. Then I quit. My old sales operation was dissolved and the company ceded my customers to the competition. The revenue and profits disappeared.

      But they were no longer paying me what they considered an exorbitant compensation.

      So, Mark, I agree with you. Greed is always stupid. So it is with many employers. I think people who defend “Pay them less!” believe business is a zero-sum game. Stupid.

      Here’s what I think I’ve learned in my career. When you encounter a greedy business person, you’re looking at a failure who nonetheless insists on keeping their “share.” Because they’ve stopped producing more, the only way to get more is to take more of someone else’s. They become risk averse. If they’re in a position of power, they shift the risk to others, who are not in a good position to oppose them. I think that’s what’s happening with wages today.

      The other thing I’ve learned: When you’re working with someone greedy, leave. Find a way. You owe it to yourself.

    • “When employees are decently paid, they feel better about themselves, are happier with their job and will do better work.”

      Funny how so many companies cannot see this blinding flash of the obvious!

  14. He is missing something in the restaurant biz. He needs a fundamental rethink of his business model, something that complies with supply and demand. As a customer I look at total price after adding in tips.
    Where did this “tips” idea come from…last century… can’t pay a living wage so push it onto the worker to boost it. There are a lot who close their doors. they come and go with the spring mushrooms.

  15. In Silicon Valley, most fast food and other low end places pay at least $13 or more/hour, even if not required by law. Those who pay less usually have undocumented workers who they have leverage over.

    And somehow they stay in business.

    Similar in NYC, San Francisco.

    • Just a little more.

      Prices tend to be a bit higher because of this, but cheap burgers on the backs of badly underpaid staff is a goal I’m interested in.

    • They stay in business because where else can they charge 25 dollars for avocado toast to techies who spend lavishly thinking their stock options will be worth something in the future and they typically will get laid off before an IPO so their options revert back to the company and the books look better pre-ipo.

  16. Nick,

    Yes, a harsh column, but the truth (often) hurts. The answer to the question posed by many (how did we get to this?) has to do with the economy in the last decade. Ever since the Great Recession, employers have gotten accustomed to having the upper hand. Jobs were scarce, and just a whiff of a hint of “layoff” from your boss sent employees scrambling. Although the economy has fully recovered and we’re now facing a “talent shortage,” the fear and paranoia continue. I have no idea why. But there are many older workers who have just given up trying to find a job.

    As a result, as many readers have pointed out, the jobs we had as kids are now being filled by adults. So maybe the low participation rates of high school and college kids are due to the fact that they’re being pushed out by adults. What employer wants to bet on a nonchalant 17 year old when they can hire a desperate 43 year old? Who will be more committed?

    As you and other readers hint, it appears we are reaching the limits of Capitalism in this country. The system is great on paper, but the reality can get exceeding ugly.

    • @Larry B: Interesting analysis. So maybe it means the low participation of high school and college kids is due to their intelligence: They’re too smart to take jobs that don’t pay enough! Maybe the problem is with adults filling those jobs — but perhaps those adults face pressure to TRY to feed their kids…

      • Somewhat recently I watched a video talking about Generation Z being a lot more likely to work for themselves. If this is true, that sounds like where all our slave labor is going.

        • @Al: When employers can’t fill jobs because they don’t pay a living wage, the labor/workers don’t just disappear. As others have pointed out, some require social assistance (aka, a tax on society). Some give up. But as you suggest, I think most — and not just Gen Z — find other ways to make money, including working for themselves.

          That diminishes the labor pool. That’s the real “talent shortage” employers complain about. I’m open to debate and other explanations, but I think this tells us employers who refuse to pay enough so that workers can afford rent are causing their own problem.

  17. @Nick: To clarify – I am very much in favor of a $15 minimum wage, but my tying it to inflation means that I think it should go even higher as inflation warrants. In fact, on the west coast where I live I think the minimum wage should be even higher than that! I’m talking $20 per hour as a minimum. In New York or San Francisco, I believe it needs to be even higher than what I’m suggesting. $30 per hour maybe? I’m not kidding.

    • @Kevin: Maybe I’m missing something when I read some of the defense of lower pay. If one’s wages are insufficient to permit the person to pay for shelter, how are they going to take or keep the job?

      I know you’re not kidding. I’m not kidding, either. :-) I agree with you.

  18. On the teenager “pocket money” concept:

    Lots of those kids aren’t working so they can pack their high school schedules with AP classes and clubs and sports to optimize their college experience by getting into a good school and possibly graduating early. Once they get college, more of them work – either unpaid for professional opportunities or paid work for their expenses.

    When I was in college in the early 80s, it was possible to save enough to pay a semester’s tuition at even an elite college by working during the semesters and summers. It’s impossible now except at a state college. A nearby elite college is $72,189 per year with room and board. The local state college is $26,100. Even with financial aid, students are looking to maximize their earnings and will hop to a higher paying job.

    And the teens who work and aren’t planning on college are likely supporting themselves or helping to support their families. A careful but not bottom budget shopper might spend $50/week/person on food. In most places, an apartment will be at least $500/bedroom, if not several times that. If you follow the old standby that housing costs should be 25% of income, even a full-time minimum wage job won’t get you a balanced life with any healthcare or funds for fun. And while the world doesn’t owe that to anyone, most people will chose an employer that gets them as close as they can to that ideal…factoring in work environment and manageable stress levels, time to see family etc.

    • @Lynne: Maybe students are not taking those jobs because they feel that economically they’re better off living with mom and dad longer and going to school so they can avoid such low-paying jobs later, when they have mortgages and families to support?

      Maybe those kids are the canary in the coal mine. Maybe they’re the clearest signal that employers are getting greedy and paying too little. Ah, this gets complicated!

      The bottom line is, people can press the idea that “these jobs aren’t worth higher pay!”, but those employers still can’t fill those jobs.

  19. “There is no real growth in a society unless both owners and workers have wealth to re-invest in the growth of the entire nation.”

    Jeez, Nick, I’ve seen ledes buried. But seldom to the very last line. Spot-on,the whole piece.Been readin your stuff for 20+ years (has it really been that long or is my memory playing tricks?) You’ve never been more right. Well done. Thanks for the macro-econ lesson, buried lede notwithstanding.

    • @John: Thanks. You’re right. I find that by the time I get to the end of writing a longer article, the main idea finally boils down to one sentence. At the end of the article. And I leave it there — I bury the lede — because by that time I’m fried and can’t edit any more!

      Anyway, I take what you said as a high compliment. Thanks! And you’re right – that really is the lede!

      (For those who don’t know the term “lede” please Google it. It’s interesting!)

  20. Nick, everything you said. Give workers a chance to lead a dignified life, professionally and personally. It’s economically smart and the right thing to do. If you can’t afford a decent minimum wage then your business is not viable. Customers know that tips are a large part – sometimes the largest part – of a server’s wages. (Server wage in TN is $2.31 an hour and the employer does not have to pay anything if your tips exceed minimum wage!). So we all tip 20% (see above note about underpricing product on menu) and what has happened is the restaurant owner has just shifted his wage responsibility onto the customer. There’s a special place in hell for this, I hope.

    • @Lauren: You just put the cap on the bottle. “There’s a special place in hell for business owners that pass their costs onto customers and employees.”

      What happened to running “a truly viable business??”

  21. Don’t get me started. In my present job (steel detailer) over the course of the past year I have managed to work my way up to the comparatively princely sum of $15/hr – which has less purchasing power than the $15/hr I started off with TWENTY YEARS AGO at the glue factory.

    Meanwhile, a few months ago the owner traded in his 2-3 year old Bentley for a new one. He also has a Rolls and a Dodge pickup (newer model, not a beater).

    Clearly he can afford to pay us better, but he doesn’t. Bonuses, and that’s it. We’re all on the clock, and if we don’t work a full day before or after a holiday, he will screw us out of holiday pay – no exceptions. Even if you work 7 hours instead of 8.

    I’m not a schlub. I’ve got degrees in STEM and am not stupid (except when it comes to finding jobs – either stupid or bad luck in that case).

    Needless to say, I’m continuing to look for a better job with better compensation.

    • @Askeladd: I suppose the question is, when will the owner not be able to keep workers because they can’t afford to stay?

      • “Churn and burn” must be his motto. He won’t get the message even if hit over the head with a clue-by-four – not as long as he can find workers of a particular ethnicity who are willing to work for peanuts.

        • @Askeladd: I had a retail job whose owners had the same philosophy. They never gave raises, paid minimum wage (the majority of those working there were full time, and paid no benefits), and there was constant turnover. The manager was fantastic, one of the best bosses I’ve ever had, but she was frustrated by the constant turnover. She begged and pleaded with the owners to give yearly raises, to pay the help more, but they refused, saying that they loved turnover because it meant that they never had to pay more than the federally mandated minimum.

          It was one of the jobs I worked while I was in college, and I, too, didn’t stay, because I found someone else who would pay me more. The company went out of business, and I’d often wondered if it would have lasted had they paid their help more.

          • @Marybeth: What you’re describing — artificially low pay — is referred to by a manager friend of mine as junk profitability.

  22. A word about the tipping business model. Both of my daughters have occasionally worked as waitstaff while in high school, college and post-graduation, and people can be just disgusting. Like the table of six that runs up a $120 tab and leaves $2 and some change.

    My daughter who lives in a small town was recently working in a brewpub and two middle-aged men come in, stayed for two hours and a $50 tab, and as one is paying the bill he says to her “Just so you know, I don’t believe in tipping.” My daughter says “Just so you know I make $6 an hour.” Jackass replies “That should be enough.”

    We live in the post-shame era.

    • @Patrick: I’m not sure it’s lack of shame that’s the problem. Rationalization is the problem.

  23. Nick,
    I think this is your best and gutsiest post ever – and I’ve been reading ATH for a long time.
    Amazing how some business owners excuse low wages by appealing to the free market and saying that it isn’t their problem if their employees can’t survive on the pay – and then whine when the free market is telling them that they aren’t paying enough. No worker should feel obligated to get less to make the boss more money – the boss is unlikely to pay the worker more out of the goodness of his heart when he makes more.
    While it is true that different parts of the country have different wage requirements, that the writer is not able to hire people seems to show his are too low, no matter if he is in Biloxi or the Bay Area.
    One thing not mentioned so far is turnover. I wonder how much it costs the writer to train new people when his employees jump ship as soon as they find a job which pays decently. But he isn’t the only one who fails to account for that factor.

    • Good point. A company who doesn’t pay workers well is just shooting themselves in the foot. The costs to find and retrain each new employee are in the thousands. The cost of unhappy customers due to unhappy employees is even higher. It’s just a lose-lose way of doing business.

    • @Scott: Thank you. You crystalized the point quite well:

      “Amazing how some business owners excuse low wages by appealing to the free market and saying that it isn’t their problem if their employees can’t survive on the pay – and then whine when the free market is telling them that they aren’t paying enough.

      Best explanation of “talent shortage” I’ve seen!

    • Word!

    • @Scott: Train?? Surely u jest. ;)

  24. I want to follow up to both you and Mr. Lewis.

    Both of your responses to this restaurant owner were basically, “if you can’t pay people more, you don’t deserve to be in business.” You basically de-facto assume any boss paying less than $15/hour is a greedy bastard.

    But I have to say again, that I think a $15 nationwide minimum wage will basically close nearly every mom and pop diner in the nation in communities of 5000 or less. Hell, I doubt mom and pop in some of these places are even pulling in $15 an hour, but they own their own business in towns they love. Your stance to me seems to be, tough, they should close shop and move to the city.

    We have a system to manage this which is called federalism and we have it because different parts of the country are different. Your admintion that $15 is a good number nationwide is potentially fueled by arrogance and that’s just as dangerous as the real greed that you are angry about.

    My sons first job out of college does not pay $15/hour, but in the small town he is in he makes enough to afford an apartment that is very nice (it would cost thousands a month in Silicon Valley) and he’s getting great experience that will allow him to get jobs in a larger cities that would not give him the time of day with no experience. I feel that $15 /hour is going to really damage these foot in the door first time employment opportunities.

    Oh and to respond to Bob Lewis directly, instead of telling the restaurant owner “tough luck on finding people”, maybe you could, I don’t know, consult with him about how he could put in self service iPad kiosks for ordering and cut his wait staff needs in half while paying them more. You could use your skills to help, instead of ridiculing someone who, for whatever reason, can’t balance the books currently and pay $15 an hour.

    In the end it’s the ridicule and the “screw the evil greedy bastards tone” that bugs me. On the other end of this problem are some honest business owners who may want to pay $15 /hour but maybe they need help with employee efficiency methods or automation to get there.

    I think assuming greed in all cases is not fair, I mean it’s not like all these resturanteers are running job boards or something.

    • @J: The question asked by the OP is, what can they do to hire the workers they need? My answer is pay higher wages. What’s yours?

  25. I have to respectfully disagree with this post, Nick. For starters we have no idea what kind of restaurant he has, or the location of it. For all I know he could have a Gordon Ramsey’s Kitchen Nightmares type eatery.(For those who don’t know, that show had Ramsey going into struggling restaurants, which means filthy kitchens in most cases, and helping them improve their business). I wouldn’t presume to know the circumstances of his situation.

    I’ve come to the conclusion that our problems with employment, and ridiculous hiring process we’ve all gone through has a lot to do with government, and its bureaucratic intrusion in the economy. I would not want a politician, who has not held a real in decades, determining wage policy. It’s a broader issue at play.

    If I’m an employer, I should be able to determine what wage I would want to give for a specific job. That’s my decision as a business owner. If I am not getting quality candidates, then I would have to readjust the position and the amount of the wage.

    If I am an employee looking for work in the restaurant business, and if hired, I should determine my needs and if the wage given is good for me and the goals I want to accomplish.

    My concern is when you say government should set wages. By whose standard? Many industries are seasonal. And many industries have changed due to improvements in technology and innovation. $15 may work in one industry, but what about others? Why not increase the minimum wage to 20, 25, or 30 dollars? Again who makes the decision? A politician, Congress, business owners?

    Licensing laws are now becoming a serious hindrance to everyone, especially the poor and minorities. I don’t think you realize the distortions in economy are directly related to government intrusion.

    Just to let you all know minimum wage laws were crucial to maintaining the Aparteid regime in South Africa. The white minority did not want industry competition from black and other ethnic groups. This kept their hold on power
    and maintained a racist political system. As you all can the consequences of Aparteid are still being felt today. The country is a mess, and a reverse racism is in play now.

    For those who want to learn more about economics without being bogged down by obtuse jargon and meaningless graphs read anything from Thomas Sowell and also read Economics In One Lesson by Henry Hazlitt. I think those individuals will clear up a lot of confusion I see in this post.

    • @SAG:

      “If I’m an employer, I should be able to determine what wage I would want to give for a specific job. That’s my decision as a business owner. If I am not getting quality candidates, then I would have to readjust the position and the amount of the wage.

      I think that’s exactly what I’m saying. We agree. That employer has to adjust wages up to fill the jobs.

      Yet what’s happening across the country is that employers (1) are NOT filling jobs, (2) are complaining there aren’t enough workers available, (3) but still refuse to pay market rates to get the workers they need.

      That’s known as idiotic, wishful thinking — and blaming someone else.

      As for government’s role in setting wages, when did we abolish government as the tool citizens use to make it possible for us all to live together under reasonable, healthy conditions? I really don’t get it when people say “I want government to stay out of this or that!”

      Really. Then let’s stop government from painting yellow lines down highways to keep 65MPH cars from hitting one another. That interferes with our freedom to drive where we want. Let’s stop government from arresting crooks who steal from us. Let’s stop government from regulating how medicine is packed in capsules — I mean, whose business is it whether one pharma company saves money by not keeping its facilities clean? Government’s? That pharma company should be free to run its biz any way it wants — let dead customers vote with their wallets if they don’t want contaminated meds!

      See how silly it gets, SAG? Maybe OSHA should stop safety checks. Maybe the IRS should stop making sure employers withhold the proper amount of income tax. Maybe the DOL should stop ensuring employers don’t abuse employees.

      Where does it go?

      “Again who makes the decision? A politician, Congress, business owners?”

      Remember one thing: politicians and Congress and government ARE US.

    • @SAG: I respectfully disagree re the government’s role. I do think that businesses should be able to set the jobs and wages, and candidates have the right to turn down said jobs and wages if they’re not enough.

      Government’s role should be as a watchdog (for abuse, for ensuring that there are minimum standards for safety, etc.) and to look out for citizens. Government and us taxpayers have a vested interest in businesses that don’t pay their employees enough to live on because those businesses have shifted the burden onto the government/taxpayers. It means that more people need §8 housing (rental assistance), SNAP (food stamps), heating assistance, Medicaid, and more. If want the government less involved in people’s lives and if you want less people on government assistance, then businesses need to pay more in wages and salaries.

      • >t means that more people need §8 housing (rental assistance), SNAP (food stamps), heating assistance, Medicaid, and more.

        I’ve seen it suggested that the minimum wage should be set somewhere above whatever safety nets are available. This would encourage people to get off welfare (i.e. They wouldn’t loose most/all of their benefits for doing the right thing) and companies could no longer skirt their responsibility for paying their workers fairly.

      • Government intervention in cases where workers are underpaid may be justified for several reasons. But as Marybeth points out, a key reason is to protect all taxpayers from the cost of supporting unemployed and under-employed and underpaid workers — by stopping employers from creating a class of workers who can’t afford to meet their own costs of living.

        Opponents of a living wage seem to refuse to face the reality that many people will ACCEPT inadequate pay when they believe they have no choice but to accept anything they can get. And many employers take advantage of such people, expecting taxpayers to take up the slack. That’s a form of thievery. That’s why taxpayers and society at large expect and require government (which is how society at large takes care of stuff like this) to intervene.

  26. Pay more. Raise prices. I’m not a rich man and don’t make a fortune by any means, however, I like going to a well-run place to eat. I will pay more for a clean environment, quality service and quality food. Most people will. If you can’t make it work sell the business and take a job.

  27. Nick, did you miss the part in my post where I said that maybe the answer is iPad ordering kiosks or some other method of increasing efficiency and needing fewer workers?

    I actually did suggest something!!

    • @J: I didn’t miss that. It’s a good idea. Funny how you see that reducing the need for workers. I’d see it as a way to free up workers to produce more profit for me by performing other tasks — so I could afford to pay enough to get more workers on board. :-)

      • Well, Nick, since his problem was he can’t find workers, reducing his need for workers is an option.

        I still think you were misguided in this post. You had a question where you could have championed the fact that wage pressure is mounting and people can ask for more money now, instead you went with “there outta be a law” and a one size fits all law at that. Your rebuttal that $15 isn’t enough for rent in a lot of places doesn’t counter my point because in San Francisco and New York for $15 an hour workers paid minimum wage will be able to afford a nice cardboard box. I actually wouldn’t argue with you saying that maybe SF and NY need $25-30 minimum wages. But in my small rural state, $15/hour, like I said before will likely close every mom and pop diner (or bakery or whatever) in every town under 5,000 people. That’s a lot of peripheral damage for something that won’t even come close to helping low income workers in big cities.

        I just think you had a chance to trumpet “wage pressure is mounting, its becoming a worker’s market” instead of saying “you should be forced by government to pay $15/hour and if you can’t then screw you.

        I think we should celebrate wages rising, I think the government mandating how they rise nationwide with a one size fits all policy, would likely stop that natural rising, and maybe cause unintended increases in unemployment.

        • Wouldn’t more pay to employees ensure they have more money to spend at those Mom & Pops establishments potentially bolstering their business? The money doesn’t vanish. Or are you concerned that customers would rather spend their money at a corporate run business instead because their large size would let them keep their prices artificially low (aka the Walmart effect)? Possibly the increased wages would remove some of the pressure to pay the lowest possible price for everything?

          Just some thoughts.

          Ever since I was educated in accounting and finance I have been of the mind that if your business plan doesn’t include paying employees you need a better business plan. We abolished slave labor ages ago… except in prisons. The free market is a brutal place.

          • @Administrative AI: You’ve made the logical argument, and it is a truism. When middle class and poor employees make more money, they plow it back into the economy. It goes towards rent, food, utilities, and expenses. More money in their pockets mean they have more “disposable” income (that which isn’t spent on bare necessities), which means greater profits for the stores and restaurants where they shop. And that’s a good thing!

            But too many businesses are not looking ahead to when those people will have more money to spend on their products. They’re greedy. They want higher profits but don’t want to pay workers more so workers could spend more money. My grandmother had an old-fashioned saying for this: “They’re penny-wise and pound foolish”.

        • @J: That’s where we disagree. I think government (translation, millions of individual citizens acting in concert) has a legitimate role to intervene when wage levels don’t make sense.

          I didn’t suggest “screwing” any business or business owner. I pointed out a stark reality of capitalism: Not every business is capable of surviving. All I’m pointing out is that those that cannot afford to pay wages that enable workers to pay rent should not be encouraged to continue hiring people at artificially low pay.

          I asked you this twice, and I’ll ask again. Show me evidence of cities and towns where a worker can afford to pay rent on $8.75 an hour. Because again and again you claim there are such places.

    • @J: One of the local supermarkets and one of the Wal-Marts in my area have four lanes with registers set aside for customers to self checkout. That eliminates the need to hire, or at least schedule, cashiers but what both stores have done is have at least one, sometimes two, cashiers on duty so when people get stuck, when something doesn’t scan, when the coupon doesn’t work, etc., there are staff to “help”. Oh, and you also bag your own items.

      So even self-service isn’t completely self-service; workers are still needed, just not as many. And if there’s a problem and people give up, then they go to the lanes where there is a cashier, causing backlogs there. I’ve used it when I’ve only had a couple of items and when there’s no express (fewer than 20 items) lane but otherwise I use the regular lanes. I look at it as helping cashiers keep their jobs, and I’ve written to corporate to complain about their practice of understaffing on busy days at busy times. One of cashiers at the supermarket says their goal is elimination of cashiers (they’re being cheap), and the only way things will change is if enough people complain about the wait time.

      Complete automation is not always the answer. How will the company respond if there is no one to help customers when they get stuck or confused? I’ve seen students walk away and give up when they got frustrated, and my elderly mother reacts the same way, preferring to deal with a human being. For every person who prefers to do these transactions online, I bet there is at least one person who hates it. And if the company needs to hire someone to babysit the self service, then they’re not exactly eliminating the position.

  28. > If your business can’t afford to pay a minimum $15 an hour wage, your business cannot afford to exist


    I absolutely love this post.

    Does anyone else ever notice how these business owners never seem to consider cutting their own pay? (My sympathy goes out to those owners who aren’t getting paid all that much either, but to expand on the line I quoted, if your business can’t afford to pay you enough to get by without your employees subsidizing it with a low wage, your business cannot afford to exist either.)

  29. I see some of this discussion becoming a debate about government involvement. I do not want to infuse politics, so I will post my statement:

    I believe in a free market economy as much as anyone, and I also believe that it is government’s job to prevent the abuses of over the top capitalism. It is something that should always be debated to keep a proper balance. Furthermore, I also think that government’s job is to provide those things where the profit motive does not work. For example, I think health care should not be part of the capitalist model – if you are sick or hurt, you need health care NOW. At the same time, I have no problem with medical device and pharmaceutical companies being for profit. For example, I once sent an ambulance away when a family member needed health care since I would have been stuck with a $2000 bill for transport.

    • @Kevin: Sometimes government’s involvement inspires private business to do a better job AND earn better profits. Balance happens after there’s some friction in the back and forth process of making adjustments…

      I’m a dyed-in-the-wool capitalist, like Nick Hanauer. (See the TED video I referred to.) Smart capitalists don’t necessarily object to government’s role in the economy. They welcome it because they know anybody making money can get out of hand — just as government can.

  30. This is in my wheelhouse. I consult to a variety of small business owners, some of which are independent restaurants. The real issue is this nimrod who doesn’t want to pay $15 per hour is budding heads against the marketplace, the real determiner of everything. If you can’t compete, you won’t be in the marketplace. The national trend is higher wages not just in the foodservice sector but others as well. What our nimrod restaurant owner doesn’t reveal is how much of a markup he puts on his food items. In general the amount is 4.5-5.5x cost-of-goods-sold(COGS). The resulting margin is after expense profit. Factors to determining margin include debt, personal wage, marketing expenses (promos/discounts & advertising). Question for Mr. Nimrod, What do you pay yourself? Are you willing to take $8.75 hr to keep your business open? Forget this bullshit about government, etc. It’s the process of how the marketplace really works that determines who stays and who goes. If you can’t or don’t want to accept the conditions imposed by the marketplace, become an employee and shut-up and accept what you are dealt. I’ve had foodservice owners bow their necks on marketplace trends and developments and they either close or sell off to someone who has awareness of how the marketplace works and has a plan to operate within its dictates. Mr. Nimrod forget this political correctness bullshit and become a player or sellout. To all you agree with Mr. Nimrod, get in the marketplace and find out first-hand what it takes to really compete and achieve sustainability.

    • Ta-DA!

      Thanks. What you explained is how business people think when their goal is to make a business successful, profitable, and competitive on all fronts. There’s no room for excuses and political messages. Success comes from figuring out how to make money under market conditions.

      This column started with someone who could not hire the necessary workers. Workers take jobs for money. When workers are scarce, employers who pay more get them. The rest go out of business.

      But there’s a problem: Hunger.

      Hungry humans will hurt themselves to get food. They will take jobs that pay less than food costs and they will survive as long as they can on less food. The longer that goes on, the bigger the problems (and costs) are for society as a whole. Eventually, those humans get sick, they die — or start stealing. Hey, ya gotta eat.

      When we all decided to live together as a society, we decided to have rules that minimized unnecessary costs to the group — costs like sickness, hunger, crime.

      You can interpolate for yourself to see how we got to a minimum wage. The minimum wage arises from the same cold calculations you do for your clients to help them succeed.

      Yah, sorry I got onto some kind of philosophy of economics and society, but discussions like this are great. They force us to start reducing the issues to the basics.

  31. Thanks Nick – your analysis is very cogent and many of your readers seem to agree with it which makes me hopeful. What value for the community or nation is a business that doesn’t provide a worthwhile product or service delivered by people who enjoy the work AND earn a living wage? Thanks for your point of view around these critical employment and recruiting issues!

  32. Nick, do I hear plantation owners hollering, “We wouldn’t have a viable business model if we had to pay the workers”? If reliance upon maintaining a vast subsistence caste is the only way such merchants are viable, their identity is a fraud; they’re not entrepreneurs, they’re imposters. You almost expect such entitlement to scream, “We could be out of the red this year if legislation would just convert free range labor to private capital.”

    Weeding out weak businesses reallocates resources and market share to healthy, sustainable businesses. Perhaps if we teach entrepreneurialism during the K-12 years, this would increase our pool of entrepreneurs, and with increased competition businesses would be run by higher quality talent capable of planning, building, adapting, and growing.

    • @Phil — Capitalism is scary shite, isn’t it???!!

      • Some entrepreneurs may want to improve standard practices but they’re held in place by the competitive landscape. “If this increases the costs that I pass along to the consumer, sales will flow to competitors, I’ll be out of business, and my employees will be job shopping again.” So they’re calculating where along the curve the sweet spot lies for cost of retention vs. service and quality gains from that retention.

        This is where legislation helps create a level playing field. But that might not extend to the next county, state, or country. The local cost of living becomes a form of tax that is passed through to the consumer, making regional labor less or more competitive. More costly metros weed out all but the high value labor that can afford to live there; these industries come to define that region. As the scope broadens, protectionism comes into play. The messiness never seems to go away, it just changes forums.

        • @Phil: Nobody who’s honest about the challenge said this was easy.

    • Heck, @Phil, the Civil War was at least partially about plantation owners saying that if you paid the slaves and had to treat them right their business model would collapse.

      • @Scott: I think you win the prize for the most succinct example of why inadequate wages are a dumb, indefensible, fraudulent practice.

    • Excellent!

  33. Henry Ford paid his employees the outrageous salary of $5.00 per day in the early 20th century. Other businesses were appalled–but Ford had figured out that if he paid his workers more, they’d be able to afford to buy the cars they were manufacturing. What a concept. And, it would be good for Ford if more people could afford to buy his cars.

    The problem with only the top 1% getting the benefit of the economy is that a small handful of people can’t sustain an economy. Bill Gates can only buy so many boats, fancy watches, and houses. It would be better to spread the wealth a bit, which would be good for business (profits) in the long run. This is what too many business owners have forgotten.

    • Watch the Nick Hanauer TED video I referenced.

    • Marybeth,

      Just for the record: Ford did not really pay his employees better to enable them to buy cars. He did so because assembly line work was very repetitive and exhausting, and he had a huge turnover. So he raised salaries to make people stay, and thus reduce costs for training and hiring, and increase productivity. A lesson there for restaurant owners as well :)

  34. Cheers and applause to you Nick. It takes guts to tell the truth and point out the disparity between the cost of living and the minimum wage. This post is very well timed, as I’ve been contemplating the destructiveness of systems of oppression. Under oppressive regimes, no one is safe. Not even the privileged class.

    • @Jane: I think Nick Hanauer agrees with you.

  35. It is funny how employers can justify low pay with “the market is always right”, but then fail to recognize that the market is right also when Mr Market tells them they have to pay more to attract employees…

    • @Karsten: I love succinct “bottom lines!”

  36. I am Norwegian. If you go into a Norwegian Starbucks. you will find that there are far fewer staff behind the counter than in the US or UK. Because their salaries are higher, due to negotiations between nationwide employer and labor unions.

    As a result, Starbucks here needs to focus on being efficient, slim, no dead meat, good organization. If labor is cheap, there is less incentive to be efficient. (My worst experience at this was at a Costa Coffee at Gatwick airport, which spent 20 minutes after I had ordered on malin two lattes and a smoothie, due to cahotic organization).

    True, this means fewer McJobs. Which means that businesses increase productivity per employee, and the other can go to fill other productive jobs. Basically; high salaries increase productivity. Norway is one of the most expensive countries on Earth, but also one of the wealthiest – the reason is not only oil, but that high salaries has been an incentive to automation and productivity increase.

    Funnily (or tragically), we also have a counterexample: Since the EU opened borders for work immigration from Eastern Europe, immigrant workers have flooded the construction sector. Because authority oversight was for a long time neglected, this established an “underground sector” of underpaid temp workers, often paid “black” and even with ties to organised crime. As a result productivity per employee in that sector has plunged; e.g. some companies use cheap labor to carry materials up stairs, instead of using a lift.

    Bottom line: High pay leads to high productivity.

    • . . . and higher quality. Cheap construction is cheap construction.

  37. Since the early 1908s at least, overall American salary growth has lagged the growth in productivity (which mainly stems from technology).

    I daresay this is a main reason for the financial crisis that burst in 2007. Because much of the increase in productivity has found its way to the upper percents (highest paid and shareholders), these have got more money than they can spend, which they in turn have invested in the stock market (making bubbles) and in debt: The rich have basically lent the money back to the poor and the middle class, which have then spent it to keep up with the Joneses. Until the bubble burst, and everyone sist deep in debt.

    Would it not be better if Joe Average got a bigger chunk of the productivity increase from the start? It would make a happier, more equal people, and a much more sound economy.

  38. Nick – a very brave and (generally) accurate analysis. Just a couple of points for everyone to consider. Humans are generally very good at doing varied tasks, not so much singular/repetitive tasks (see research on the industrial revolution). Henry Ford’s assembly line not withstanding, most industrial applications of human resources still try to shoehorn humans into jobs that would be much better performed (for the business owner) by automation. So most of the entry-level/non-skilled employment currently being discussed should probably be replaced by automation, not a government-mandated increased cost of doing business. I say most because there will always be some room for non-skilled persons (e.g., teenagers, immigrants, former convicts, etc.) to learn new general employment skills and prove themselves to future employers. Employers who are only willing to pay extremely low wages just need to understand that their staff will be spinning that revolving door so fast that their managers’ time will be spent mostly on re-filling low-wage positions.

    By the same token, much of the hand-wringing about the lack of “talented skill” fails to recognize that those specific “skills” are generally developed on-the-job and are very specific to the hiring firm. If you are fortunate to find a candidate who is skilled in exactly the skillset needed, the salary level will not be minimal so offering low wages for said positions is a non-starter. It would therefore be much more productive if those firms would hire employees with the general/baseline skills needed, recognizing that it would be up to the firms to teach those specifically-needed skills (which will change over time and with different customers/needs). These employees (and subsequent internal training) will not be inexpensive, but it will be a better answer to employee talent than currently exists. Such a firm will quickly develop a positive work environment where current employees will recommend them to their friends, relatives and others with whom they would want to work.

    • @DCE: There is sometimes compensation for low wages in the form of on-the-job training. That has beefed up the talent pool in the past.

      But as Wharton researcher Peter Cappelli has demonstrated (search his name on this website), employers cut back on that drastically in the past couple of decades. (Cf. a comment above about business owners that keep the profits of higher productivity rather than plow it back into their businesses and workers.) It’s called greed. It’s called poor management.

  39. Thanks Nick! I also love Hanauer.

    If a business wants to offset the cost of housing and food for working people onto the rest of us by taxing us to pay for food stamps, that’s the business using the government to subsidize low wages.

    • @Becky: BINGO!

      What does the “Less government!” contingent say about that?

      • All I’m saying is that $15/hour will damage rural businesses that have drastically lower costs (and their employees have drastically lower costs too).

        The minimum wage should be managed state by state, some states can go higher than 15 and some lower. A federally mandated $15/hour won’t help enough in high cost area and will damage businesses (catastrophically) in low cost areas. Federal minimum wages are the WORST option.

        I’m not against government setting minimum wages I’m against the FEDERAL government doing it.

        • @J: “rural businesses that have drastically lower costs (and their employees have drastically lower costs too)”

          I think this is my 4th request for the same evidence: Show me some cities or towns where $8.75 pays the rent. You keep claiming there are such places. Until you do, I see nothing to support your opposition to a national minimum wage. I sense you just have a fundamental objection to the federal government regulating business and the economy in any way. Do I have that right?

          • Dammit, Nick, How bout this. Show me a big city where $15 can rent ANYTHING to live in…..

            So you’re telling me I’m a big meanie because no one can afford a place in the US at $8.75 an hour while telling me your a big hero for standing up for $15 minimum wages in big cities where those people will still not be able to find anywhere to live at all for that level of pay.

            I have really really admired you and your blog, but your tone to me in this whole conversation has been crass and condescending.

            I’m not even really disagreeing with you. Maybe I should ask YOU, why are you against having minimum wages in big cities less than $30/hour, don’t you care??

            One size fits all is not the best way of doing things. All I’m saying is that one size fits all minimum wages will have unintended consequences that will harm the good that one is trying to accomplish.

            • @J: My goal in every column is to raise an issue that matters to stimulate smart, useful discussion and ideas. I offer strong opinions and I try to spark debate. I’m not opposed to any suggestions, and I’d keel over if we ever saw a national $15 min wage. Slice and dice the nation in a defensible way to enable employers to fill jobs and workers to live under reasonable conditions? I’m all for it.

              But do I oppose federal government regulations under certain circumstances? Nope. I think it’s sometimes necessary.

              Is business the backbone of the nation and should it be largely free to operate unfettered? Absolutely. But do business owners consistently demonstrate an honest capitalist effort to share the profits and success with workers who help produce the profits? Gimme a break — I’ve been around a long time, and I don’t think I’ve ever seen a time in this country where greed is ripping apart the economy and our society. We can generously say that what many employers are doing is having “unintended consequences” — then we still have to do something about it. That’s what our government is for.

              What are some good ways to ensure healthy profits, healthy businesses, rewards for owners and investors, and for workers? $8.75 an hour ain’t one of them. $15 may not be, either. But total laissez faire isn’t, either.

  40. When a business does not pay a living wage, these costs are placed on society as a whole. Why should a full time worker have to apply for food stamps and subsidized housing and other assistance? These costs fall on all of us. We, in affect are subsidizing the business that won’t pay the living wage. This is corporate welfare. By demanding a living wage, we can use these resources for those who will genuinely need them in the future; a true safety net. If we continue this trend, eventually there will be no one that can afford to buy any of your products or services. You boost the overall economy by paying a living wage and employing workers that can afford what your and other businesses produce.

    • Dan + Becky = Truth. Scary truth.

  41. I think the overall premise of the article (“If you aren’t willing to pay a fair market rate, you shouldn’t be in business.”) is correct, but the specific conclusion (“If you don’t offer $15/hr, you shouldn’t be in business.”) is flawed. In some areas, less than $15/hr would be good, whereas, in others, it would get you a cardboard box under a highway.

    • @Mongoose: This is not a loaded question: What’s an example of such an area where less than $15 would be good? Please check the addendum I posted to my article.

      • I specifically mention that in my posts. In rural cities of fewer than 5,000 people (there are thousands of these towns in middle America) $15/hour would be more than enough to afford housing. Your stats don’t go down that far, but the damage to those rural businesses would be catastrophic.

        Again, maybe we should try federalism and let states and cities decide the wage and not base everything on a random city in Ohio. (state and city governments in Ohio excepted of course, they should decide based on their stats.)

        • @J: I respectfully disagree. I live in a rural area (my town is well under your population of 5,000) and the cheapest rents for a one bedroom apartment are $1,295 per month, not including utilities. $15.00 minimum wage isn’t enough to rent an apartment without government assistance, or several roommates who work different shifts so you can rotate who gets the bedroom.

          A $15.00 minimum wage would be a good start in my area, but if they really want to get people off government assistance, it needs to be higher.

          Incidently, rents in the next city are higher–closer to $1800 per month for a one bedroom. Pay isn’t higher, there’s a lack of good public transportation so if you go for the less expensive housing, then you have the huge expense of needing a car.

          • @Marybeth, where the heck do you live? There are small (and even medium) towns in my state where you can find a one bedroom for $325/month.

            • @J: I live in Western Massachusetts. The town is small, has no public transportation, and rents are high, though not as high as they are in the next nearest city. You can’t rent the tub in a bathroom anywhere for $325 per month, and haven’t been able to so for quite some time.

            • J, I live in the northern part of Idaho where it’s not unusual for three families to live in one home because they can’t afford first, last and a deposit. Affordable housing is a joke. Try to find a three-bedroom house for under $1,300 a month. Idaho is a right to work state, pays $7.25 an hour minimum wage, restaurant workers get $2 an hour (doesn’t go far in the off-seasons, which are six months out of year because the weather turns to crap October through April). Some affordable apartments have been built in my town, but the waiting list is really long. Idaho has a gap in its health insurance so the state’s citizens voted to correct that problem – however our legislators are arguing for an employment piece to be added – makes a lot of sense when you can’t get a job. Rather than viewing things from your own lens, you might want to look further afield. Many people here work multiple jobs, work for employers who don’t offer health insurance, and can’t afford insurance on their own. But since opportunities for jobs are limited, employers pay as little as possible. I worked for a publishing company for years that paid as little as possible (reporters at his flagship made $8.25 an hour) and yet the owner of the company could afford to have a yacht built and a home that needed the power equivalent of four Wal-marts to operate. When the economy took a nose-dive he also decided to quit matching the 3 percent employee contribution. At the same time, the owner’s son was lighting off expensive fireworks at his lakehouse every night. He’s closed several of his businesses and several others aren’t doing so well. If he’d have invested in adding staff and paying them a living wage rather than following big publishing companies method of treating staff like liabilities, they’d be doing much better. The problem was they were and are greedy. They could not handle the competition that came with desktop publishing and the internet.
              During that downturn, employers used fear of job loss to consolidate jobs, make workers work longer hours without additional pay, eliminate benefits and refuse to raise pay, yet many continued to increase profits. That former employer of mine used it as an excuse to eliminate the jobs of many mid-level managers, and not replace the positions of those that left, often consolidating three and four positions into one and heaping more work on salaried employees without increased pay. Oddly enough, that same company which was notorious for not promoting women in key positions, now has women in many of those key, consolidated positions. Any guesses as to whether they’re getting paid more than a male counterpart would be paid under the same circumstances?
              Three days after the new president took office, new labor rules were set to kick in which would have required hire wages in the publishing industry, which had gotten away with paying subpar wages for too long while earning 25-30 percent profits year after year. It is necessary for government to step in when employers take advantage of people, especially when government and we the people foot that bill because of increased social costs as other people have noted. In my town, we too have a shortage of restaurant workers. One employer was actually paying rent for a couple workers because they couldn’t afford the first, last and deposit. I’m not sure $15 an hour minimum wage would help that, but it would be a start. More than half of people who live in my community are retired, a number of them with lots of money to spend having left higher cost of living states like California. Any guesses as to what that has done to the cost of real estate and property taxes? These same people don’t want to pay for school funding, even though we have at least two schools in our community where 80 percent of the students qualify for free and reduced lunches. A number of years ago a temporary governor (now serving in the U.S. Senate, Jim Risch), convinced Idahoans to no longer fund part of its education system through a state-wide property tax. As a result, almost every school district in this state (112 I believe), has to run a levy every two years to cover expenses. Most districts don’t have enough money in reserve to withstand an emergency of more than a day or two (and yes, excess snow on building roofs counts as an emergency). Idaho is a perfect example of why low pay does not boost an economy. State leadership is baffled as to why so few students go on to college and why those who do don’t stay in Idaho once they’ve earned their degrees. Sure, we have the lowest unemployment in country, but in my community the Labor Department doesn’t even provide job training of any kind. In Spain, there is a large business conglomerate that was started in Basque country by a priest after Franco tried to destroy the Basques. Mondragon now employs 73,000 people in 100-plus cooperatives. The highest paid worker makes no more than five times the lowest paid worker. I’ve included a link here by an American who visited there. The observations are interesting.

              Author Daniel Pink wrote in a column that he believed the Affordable Health Care Act would change how Americans thought about work, that it would make it difficult for employers to get the workers they needed because workers, now under no obligation to terrible, mediocre or abusive employers, would no longer need that relationship, and could work for themselves. A poor economy, and the attempted erosion of this new system, plus leftover fear generated by that economic crisis, put a big hex on those changes. Oddly, those who argue in favor of a free market don’t do well when that same market comes knocking on their own doors.
              Oh and your suggestion of installing kiosks for ordering food, ha ha. How much do you think that will cost? That technology will need to be secure, maintained and its software updated. When a 5-year-old kid throws up on it, will it need to be replaced. My former employer thought computers would replace workers, when in actuality one person ended up doing the work of three), but those computers, software, licenses and the need for workers with more advanced skills cost more. If people like that mom and pop restaurant, they will like it even more when they find out the owners are paying their employees a living wage. They might need to add a few tables. I’d also go so far as to suggest not doing business with those companies that don’t pay a living wage. There’s no reason to reward bad behavior. One of the reasons I prefer buying groceries at Costco to Wal-Mart is that Costco pays and treats its employees far better.

        • @J: 5th time I’m asking you. Please back up your repeated canard that there are places where currently low wages are enough to pay rent.

          Are you now saying a $15 minimum wage is a good idea?

          Show us cities and towns where $8.75 pays the rent.

          • Nick, please stop. I’ve been an avid fan, reader, and promoter of your blog for years. I’ve told more that 100 people about your blog.

            I don’t want to go into details about where I live an who I am in an internet comment section. I highly value the ability to post anonymously when discussing contentious issues. And in fact I believe its also very important for the question submitters here too.

            I don’t want to do a full economic analysis here. I’m just saying that even well intentioned mandates can have negative consequences. I think too many here are thinking a $15 minimum wage will fix things, but it won’t. There are places people need to make MORE than that, and many many people do. But some jobs just don’t have that kind of value. And perhaps we need a workforce that doesn’t need to make full monthly rent payments that will do those jobs (students, teens, spouses brining in extra income part time, or second jobs for extra money) or I suppose, like you said initially all the companies that have work that isn’t valued at $15/hour would just stop doing that work and those services or goods would just not be part of the marketplace.

            I’m just stunned at how crass you were on this post and with this answer, and in your responses to me.

            Don’t ask me again to debate this in only your terms and in only narrow cases.

            Government mandates have consequences, all I’m arguing for is federalism and regional control of wages over a one size fits all national policy. I really don’t care about finding a $8.75/hr affordable apartment somewhere, because your not arguing for paying more that $15/hour in areas where there are no affordable places to live at that price.

            This is the last I’m going to say about this. I’ll keep reading your blog hoping to see posts I like better than this one.

  42. The minimum wage maybe well-intentioned, but it is very misguided. It can easily create an army of economic serfs as the workers actually effected by minimum wage laws would resort to working less than the amount mandated by the state in the Black Market and would be more vulnerable against exploitation and below needed pay due to having no legal recourse against an abusive employer. The best way to help workers avoid being paid below needed amounts and ones who currently are, would be to educate them in the lessons of the Fearless Job Hunting Books; without that knowledge, they are vulnerable to the predations of HR and greedy employers.

  43. Even supposing we did this, what is to stop the companies from hiring more illegals, using more temp agencies (which, even if they weren’t somehow exempt from the minimum wage laws, could be used to cut out all benefits and health plans), or simply using automation?

    I agree that the issues of employers trying to cut corners (including importing cheap labor H-1Bs or illegals or using temp agencies) is a problem, as is the rising cost of living making the low-skilled jobs that used to be enough to survive on not so survivable anymore.

    However, I think the idea of saying “If we just raise the minimum wage to $15/hr, it will all be fixed.” is silly. We’ve done wage raising in the past and it still is getting harder and harder to survive.

    Besides, while rural areas seem to only have low-skilled jobs that don’t pay well (except nursing and perhaps truck driving, which I see a lot of ads for around here) thanks to manufacturing going overseas and farming getting harder to survive (as a career) on, yet big cities also have high competition (including with imported H-1Bs!) as well as very high (in some cases) costs of living, that make it hard to get in on the ground level and make it easy to want to chuck out the more experienced workers in exchange for cheaper younger and/or foreign labor.

    Your posts generally have pointed out many of these other problems with the system as being part of the problem, so this weird post of blaming a bunch on not having a $15/hr minimum wage seems rather subpar.

    • For instance, if $8.75/hr was insultingly low for a position, then why not just your the Ask the Headhunter negotiating tips to turn down these jobs and thus let the companies that are too cheap go out of business WITHOUT some government law raising the minimum wage to $15/hr?

      • We should just get rid of government altogether. No pesky laws to limit anyone’s behaviour. You might enjoy the first 24 hours, but then civilization collapses and you are on your own.

        You see, thousands of years ago smart people who wanted a safe and fair society for their loved ones and to do business decided that it was a good idea to have some rules.

        • @William: The best explanation about how laws and government arose in society was offered by Lenny Bruce. (I’m serious.) This recording is 45 minutes long, but all you need to listen to is a short section that begins at 8:00.

          I’d love to know your take on this. Enjoy!

    • @Mongoose Lover: “I think the idea of saying “If we just raise the minimum wage to $15/hr, it will all be fixed.” is silly.”

      I don’t think anyone (not I) suggested it’s going to fix “all.” It’s one important component in the economic equation. Do you believe that without certain government regulation employers would do the right thing with pay on their own, in every industry sector?

      I’m not a believer in the idea that if you can’t fix it all then nothing is worth trying to fix. To me that’s a cop-out. What’s that old saying, One mouse at a time, like a cat.

  44. About a year ago, I bought a poor-performing staffing company focused on light industrial and admin jobs in a smaller Midwestern town. The previous owner was struggling to keep recruiters (paid $12-$13/hour) and the business was barely breaking even. First thing I did was to raise everyone to a minimum of $15/hour, which meant that my cost structure was higher and I was losing money. We’ve made a number of changes, including hiring internal staff who are committed to the idea of matching the right people to the right jobs so they are hired on in 90 days.

    Last week we had our highest billing week since I bought the business. It works to pay people well, especially when you develop a strong business model where there’s a solid market.

  45. Nic,

    As a card carrying capitalist all I can say is thank you. In my opinion you’re brought to light market failures that need corrective forces applied by an entity that can drive the significant changes required. And I’m not loath to say that entity is the Federal government, a sentiment that one would expect a capitalist to feel given the stereotypes associated.

    The environmentalists changed our collective thinking on pollution in the 70s when they brought to light the externalities that supported pollution. Once an economic activity — strip mining for example — was forced by the government to include all associated costs (returning the land to a pre mining state), pollution became the responsibility of both the producer and consumer of the electricity generated from the mined coal. Currently in our labor markets are two externalities suppressing wages: Chinese manufacturing, illegal immigration.

    Having lived in south Florida as a home owner for 10 years, I experienced the almost 100% use of immigrants (some legal, most undumented) in the trades. Plumbers and electricians, trades protected by apprenticeship systems, were 100% citizen workers. Everything else needed to build, maintain, or renovate physical structures used immigrant labor paid at $10/hour. And for those now wondering how these folks found housing, when 10 men are living in a 2 bedroom house, things get cheaper. Citizens would not ‘lower’ themselves to take these jobs because under no working definition I know of does being middle class come with 3rd world dorm room existence. Thus the price of getting a new roof, adding a bedroom, etc., is artificially low because the costs associated with this labor model are born by others (tax payers in general). We all know not every child is college material but a formerly honorable way of working and creating a middle class life is now choked out by the undocumented worker. And because these workers have zero ability to lobby for better pay and working conditions, the game continues, which leads to the Chinese issue.

    Simply put there is zero chance long term that we can compete with 1 billion workers enslaved by its government to accept pay and conditions the west left behind 100 years ago. What’s happening in China is similar to what I outlined above taken to an extreme. The externalized costs associated with cheap Chinese goods are large and growing (rampant ip theft, world covering pollution, military expenses to keep sea lanes open and Taiwan ‘free’, rust belt expenses relayed to shortened life expectancy, opioid addictions).

    In my opinion to argue over whether the minimum wage should be set by the government to $15/hour is to treat the symptom and not the underlying condition. Wages in the US are artificially depressed by externalities that only the Federal government can address.

    The US middle class represents a store of national treasure that must be protected from the predatory actions of both internal and external market players. Whether we have the will to do so remains unknown.

    • @Jeff: Comments like yours (and others) that explore the bigger picture are why I write about specific topics like this one. Wages are indeed a symptom of much bigger, more complex problems. But we’ve gotta start somewhere, and when I see 10 people living in an apartment so some contractor can make a “competitive” bid on a job, I want to start there.

  46. Terrific post. Really glad you have debunked so well the tired old arguments against a decent living wage.

    Another way of looking at the situation is, “Do you want $8.75-an-hour workers or do you want $15-an-hour workers.” Meaning, YOU GET WHAT YOU PAY FOR.

    That restaurant owner would have far fewer employee-related headaches and have employees who would work far more productively if he were to hire from the $15-an-hour pool.

  47. What’s to stop companies from cutting hours if you raise the per-hour pay with a government mandate?

    • Probably the fact that the work won’t get done.

  48. Everyone – stand back a second. Here in California, In n Out Burgers starts people off at $13 an hour and you can work your way up to $160,000 a year managing one of their places, WITHOUT A COLLEGE DEGREE.

    Now that we all fell over in shock.

    There is one where I live NW of LA that always is jammed. Part of it might be it is the only In n Out around for miles. It serves a decent hamburger, (I am not crazy about their fries and shakes). Yet we are surrounded by all the other burger / taco / chinese …. etc chains to can think of. Yet there are always lines of cars trying to get in to the In n Out.

    Obviously the demand is there, and they are making money. So if a restaurant cannot afford $15, well maybe they need to think about getting an In n Out franchise. It comes down to demand because you are better and BTW those employees don’t get tips.

    On the other hand, the person who initially asked the question needs to reevaluate their goals like you said Nick. If it is a great restaurant, nice sit down service, then $8.75 might work because you would probably make 2 times that in TIP’s. And if you develop regulars, maybe more. However, it doesn’t sound like that. So I agree with Nicks statements.

    But the problem as I see it is, a restaurant has very specific times and days. A Monday morning breakfast crowd will not generate tips like a Friday or Sat night dinner crowd where a waiter could service 2 – 3 tables and generate $30+ per hour in tips from 8pm – 2am.

    BTW, I was working at an Electronics Contract Manufacturing Facility, and one of our hourly employees, making around $16 an hour (with benefits) quit to supervise the workers in the strawberry fields directly across the street (he was bi lingual). Because even $16/hr + benefits did not come close to a living wage for him in our area, where a decent single bedroom apt (without bars on the windows) costs $1,600 – $2,000+ a month.

  49. I just read this post in an economics blog about the book “Economism: Bad Economics and the Rise of Inequality”

    The blog writer writes:

    “I just finished reading a great book that substantially changed how I think about economics – “Economism: Bad Economics and the Rise of Inequality” by James Kwak. In a nutshell, the book describes “economism” – which has also been called “Econ 101ism”. It is the over-reliance on basic microeconomic principles (the kind I teach in my principles of microeconomics course) and the failure to realize (or admit) that the predictions and prescriptions of these simple models often fail in the real world.”

    “One of the most popular examples of an Econ 101ism argument is the argument against increasing the minimum wage. We all know from principles that an increase in the minimum wage will hurt the very people that it is supposed to help, because it will create a surplus in the labor market, i.e. unemployment. We can even prove that it’s true with a nifty graph! But, it’s probably not true.”


    The book explains how basic models in econ 101 classes are being used, primarily but not exclusively, by libertarians and conservatives to argue for deregulation, small government, and laissez-faire economic policies.

    The point being that a lot of people are arguing against a higher minimum wage out of the mistaken belief that it will ultimately harm workers, and that argument, and the last 70 years of econ 101 classes, is making easier for employers to fight against raising wages or a higher minimum wage.

    There’s also this article about how workers are ghosting their employers. If there’s ever an argument that you need to do more for employees, it would be the prospect of them simply not showing up anymore because they don’t care and can get away with it.

    If you’re a restaurant owner, I imagine the only thing worse than not being able to find workers is not knowing if they’ll show up to work after you’ve hired them.

  50. I firmly believe that ANY job that society deems necessary should pay a wage which allows the employee to pay his living expenses and live a life of dignity. It is impossible to live on the minimum wage in this country, and no one should have to.

    Without workers, these companies would have zero profits, but the same companies do not want to pay a fair share to the worker. It is simply greed. Trumps “tax cut” was supposed to put more money in workers pockets, but we all saw who pocketed the money.

    I have always told my children that ANY business who can not or will not pay a living wage should go out of business. I totally agree with Nick.

  51. Ill be honest I didnt read past the first para, but I agree. Employers are part of our community not above and beyond it. One cannot expect any non-authoritarian society to be arranged around one group, it is a balance. If a society, which is largely made up of employees, says to employers that in order to operate amongst us you must pay such and such and comply with such and such a law; that’s the way it has to be. When the balance tips the other way, because we need business, then it will be your turn to be listened to again.

  52. We need immigrant labor, because the (usually illegal) immigrants do the “backbreaking work no Americans will do”.

    Like, say, agricultural work.

    Thing is, when the crop is, say, trees, they don’t seem to have a problem finding Americans willing to do the work.

    As opposed to, say, picking lettuce.

    Backbreaking work? Not to minimize lettuce picking, but that’s a sore back.

    Harvesting trees will literally break your back. Or arms, or legs.

    Seems to me, the only difference is the pay.

  53. All the arguments against raising wages amounts to, “Keep your head down stupid peasant”. Every single time I see an article detailing the ways raising the minimum wage is hurting the people it’s supposed to help, I can’t help but notice that there’s no mention of how it will hurt businesses in the longer term.

    How many times do people walk into stores to look at new merchandise with only thrift store cash to spend? Too often. Workers are also potential customers. A person with $5 can’t do business if the cheapest item available starts at $10. Owner or manager then sends the workers home because no one’s a “real buyer”. No shit. Because every other business owner thinks that just like you, wage-starved people magically have reserves of cash to spend and can’t help but spend it providing for your living.

    If Americans get too uppity about expecting to earn an actual living, they’ll just be replaced by robots, AI, or immigrants. Yep, and within a generation you’ll be obsolete too. In the meantime cut out a massive percentage of the workforce out, and what do you DO with all of them? Let’s throw millions out of the economic cycle, make them homeless, hungry, and without healthcare, but expect your business to expand?

    If you are a business owner, it’s your business. But if you can’t do all the work yourself, and you need someone else to help you, pay them a living wage. And please shut up about kids being priced out of the workforce because they’re not worth it until you can document any single business that only operates running only school kids plus one manager who is making $15/hour (or better if your area is higher cost of living).

    If you can’t pay grown-up wages, then the problem is a failed business model that has been propped up for far too long. It’s based on exploitation, and no longer has a place in this country. Other countries can pay people a living wage. We can too. Every individual “reason” why one business “can’t” or why the USA can’t has become nothing more than a mindless excuse.

    I’ve always believed in going above and beyond any job description because you prove yourself by doing more than what is required. No more. I quite frankly don’t trust my livelihood to any “employer”. I had a bad spell that I wouldn’t have believed possible if I hadn’t lived it myself. Every single “employer” or potential tried to throw me misinformation, broken promises and outright lies. The thing about treating peasants like, well, peasants, is that there are a hell of a lot of them. Browse some news sometimes about all the strikes even when it’s been illegal and it’s clear the that the “peasants” are not keeping their heads down. Pay people enough to live on, or turn out the lights and shut your doors. Your business does not have more of a right to exist than the households of every person that works for you. There are no more stupid peasants.

    • @Michael V: You put it very well. “If you can’t pay grown-up wages, then the problem is a failed business model that has been propped up for far too long.

      It’s called greed.

  54. Anyone looking to make a living wage bellow a Manager position from Taco Bell, McDonald’s, or the mom and pop store is looking in the wrong job pool. Construction and various trade positions are the best way to make a living wage at entry level and will always afford opportunities to increase as your skills increase. And there is a growing need for skilled workers. So perhaps instead of mandating that every small business in every state change there business model (including every state in which the living wage is actually lower than $15 per hour like Mississippi, Arkansas, or South Dakota have to then make up money where it doesn’t exist) let the local markets, business owners and employees determine what is fair for them, not Washington D.C. I know I won’t perform my job for less than my current compensation, but I didn’t start here.