Tag Archives: minimum wage

Big Mac Attack

In the face of walkouts by fast-food employees, and negative publicity over the “budgeting advice” provided by McDonalds to its workers, opponents of a higher minimum wage have  gone into high gear, warning that jobs will be lost and prices will rise precipitously if the minimum wage is increased.

What–they ask in ominous tones–would a Big Mac cost if the workers preparing and serving it made 15.00 an hour?

As it happens, we know the answer to that.

The Economist Magazine created and maintains a “Big Mac Index,” making it possible to compare the price of Big Macs in different countries with different wage scales. In Australia, where the minimum wage is 15.00 and the minimum wage for fast food workers is, for some reason, slightly higher–on July 1st, the fast food rate went up from $17.03 an hour to $17.98 an hour–a Big Mac costs 70 cents more than it does in the U.S.

Salvatore Babones is a senior lecturer in sociology and social policy at the University of Sydney in Sydney, Australia, and an associate fellow at the Institute for Policy Studies in Washington, D.C.. As he explained in a recent interview, 

What you get for that in Australia is you get to go to a fast food restaurant where you know that everybody behind the counter has full health insurance, everyone behind the counter gets a really good wage, they’re treated well, and they have, you know, options in life…

What about the argument that raising the minimum wage necessarily means fewer jobs?

There’s a theory that raising the minimum wage will result in fewer jobs. And that theory seems to make intuitive sense, that when wages are higher, you know, people hire fewer people. And in isolation that would be true. There’s an assumption economists like to make called ceteris paribus, which means all other things remaining equal, this would happen.

 But all other things are never equal. For example, if you raise the minimum wage, people make more money. That’s the first thing that’s not equal. As people make more money, they spend more, they pay more in taxes. The entire character of the economy changes.

As Babones points out, study after study confirms that no matter how “intuitively” persuasive the argument that raising the minimum wage will depress employment, it is an argument that has no empirical support. In the real world, it doesn’t work that way.

Interestingly, Australia was also the only rich country to dodge the Great Recession.

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Betraying the American Dream

When I was growing up, the accepted description of America was “land of opportunity.” It was commonly believed that the American Dream could be attained by anyone willing to work hard; social mobility was the name of the game.

Knowing that poverty isn’t necessarily permanent is hugely important in a capitalist system. Inequalities are inevitable, but they need not be paralyzing, they need not engender the sorts of simmering resentments that lead to social unrest, because they are seen as temporary and (fairly or unfairly) a reflection of the effort and entrepreneurship of the individual.

We are beginning to see what happens when it becomes apparent that Americans can no longer work themselves into the middle class. Thanks to short-sighted and mean-spirited public policies, such social mobility as previously characterized our economic system (it was probably never as obtainable as national mythology had it) is largely a thing of the past.

In a column addressing the need for high quality early childhood education, Gail Collins put it bluntly: “We have no bigger crisis as a nation than the class barrier. We’re near the bottom of the industrialized world when it comes to upward mobility. A child born to poor parents has a pathetic chance of growing up to be anything but poor. This isn’t the way things were supposed to be in the United States. But here we are.”

In his recent book on inequality, Nobel-prize winning economist Joseph Stiglitz underlined the current lack of social mobility in America–and its unpleasant consequences.

We have a problem, and it isn’t temporary, isn’t a result of the recent economic downturn. Social scientists have documented the characteristics of stable democracies–the attitudes and institutions that keep societies from erupting, that strengthen the social fabric rather than tearing it. A perception that the government “plays fair” and a belief in opportunity for advancement–a belief that effort and diligence will be rewarded–are among them.

In his State of the Union speech, President Obama proposed two measures–universal access to preschool and raising the minimum wage–that would begin, however modestly, to address the problem. There is ample research connecting early childhood education to later economic well-being. There is equally persuasive research rebutting the proposition that a higher minimum wage means fewer jobs. (The latter proposition seems so logical, I used to believe it was self-evident; a copious amount of research, however, shows otherwise.)

The “usual suspects” met the President’s proposals with their usual screams of “socialism.” Those usual suspects, however, should rethink their support of the status quo. When poor people lose hope–when the belief in the possibility of bettering their condition disappears, and they face the fact that social mobility is rapidly becoming a myth and the American Dream is out of reach–they become people with nothing to lose. Eventually, they take to the streets and threaten the comfortable.

What’s that old line? Pigs get fed, but hogs get slaughtered.

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