A Living Wage

That has a nice ring to it. No wonder so many people have rallied around the term. It practically shouts “fairness”, doesn’t it?

So how will we make this noble goal a reality?

Well, first we should define it. Theories can afford to be vague, but when it comes to actually implementing something in the real world, some attention to detail is required.

A Living Wage is…well…the amount of money necessary to live comfortably. There. That sums it up nicely. It says everyone should have enough to live, but it also says “comfortably” so we’re not demanding an extravagant lifestyle. That sounds fair.

The next detail we have to work out is, how much money does it take to live comfortably, but not extravagantly? Is there an amount that would suffice for everyone? Well, no. We all have different needs.

We’re going to have to devise a measurement we can all agree is fair. How about a certain amount for each person? After all, we all have the same basic needs like food and shelter. Once we determine how much it takes for one person, we can easily see how much a household of two, three, four, or any number of people needs.

But the cost of food and shelter varies in different parts of the country. One number won’t satisfy the needs of everyone, so we’ll have to establish different Living Wages for different regions. In fact, we’ll need different numbers for different cities.

That shouldn’t be hard. There are lots of studies that tell us what the cost of living is just about everywhere in the US. We just need to use the data to establish how much the minimum wage should be in every city and town.

What about a national minimum wage? Well, that just won’t work. The amount needed in a big city like New York or San Francisco would pay for an extravagant lifestyle in a lot of other places. No, we need different minimum wages if we are truly going to ensure enough to live comfortably, but not extravagantly.

Well, that’s settled. Now the last step is to see how it will apply in a real-world setting. Let’s conduct a test in a hypothetical fast-food emporium. That’s the sort of place where minimum wage jobs are often found.

Our fictional burger joint has three line workers, an assistant manager and a manager. Management usually makes more than the workers, so we’ll just focus on those three who are making the burgers and fries. They’re all doing the same work, so they should get the same pay, right?

But wait. We already agreed that the amount one person needs has to be multiplied by the number of people in his or her household. The wage has to be enough to support the whole household, doesn’t it? We can’t expect kids to go out and get jobs.

One of the workers is a teenager working after school and living with his parents who have their own income. So he is only supporting himself, sort of (he doesn’t pay rent or utilities). Still, we have to pay him the minimum.

One of his coworkers is a single mom supporting herself and her two kids. Does she need three times as much? Maybe not, but she definitely needs more than a single person.

The third worker is a married man who supports his wife, three children and his aging parents. There are seven people in his household.

I see a problem, do you? We can’t insist that the employer pay each of these employees what they need. They are all doing the same work. If it is unfair to pay a woman less than a man for the same work, it must also be unfair to pay these people different wages.

Maybe I’m just not smart enough to solve this problem, but the only solution I see is to pay everyone enough to meet the needs of the neediest among them. I’m sure none of the employees will complain. The single mom will be very comfortable and the teenager will be able to afford every electronic gadget invented, and maybe a new car, too.

But, the man with the big family is getting a Living Wage while the other two are getting something that just might be considered an extravagant lifestyle. In our efforts to make this fair, it’s turned out to be not as fair as we’d hoped.

There’s another problem, too, although it might not be as obvious. The managers make more than the line workers because they have seniority and additional skills (at least I hope they do, or how did they get into management?) If the workers get a raise, doesn’t management need a raise, too? But what if the manager is single? His wage will be way more than the amount needed to meet his needs. We can’t cut his pay because he is entitled to make more than the people he manages.

And this dilemma won’t be limited to the few people working in this one store. It will affect the people who raise the beef, make the cheese, grow the wheat, bake the buns and the people who transport it all to the store. So the store owner will not just have to pay more in wages, he’ll also pay more for the food. His profits are going to be reduced a lot. So much so that he might be better off trading places with one of the line workers. Before that happens, he’ll probably raise the prices. If he doesn’t, he’ll go out of business and everyone will be unemployed.

If this happens everywhere, the cost of living will go up everywhere. That means we’ll have to adjust our Living Wage figures to match the increase. If we don’t, the Living Wage will no longer be a Living Wage.

Some have suggested linking it to the rate of inflation. That would put the necessary adjustments on autopilot. We’ll never have to deal with this again.

Problem solved? Almost. People on fixed incomes will just have to suck it up. And then there’s this:

The minimum wage worker is still making less than other people. In fact, they are still on the bottom rung of the ladder. Changing the minimum wage doesn’t change their relative status. The only way to actually improve their lot is for them to gain skills and knowledge, making them more valuable to employers. We don’t see too many doctors, lawyers, mechanics or plumbers working for minimum wage. We are willing to pay more for people with skills. Employers are, too.

If we really want to help people, shouldn’t we do everything we can to encourage them to better themselves instead of giving them a raise they didn’t earn? Wages are payment for services provided. They are earned by working. Wages are not something earned simply by living.

A Living Wage is a catchy slogan, but sometimes slogans only work in theory. Theories need to be proven. This one can’t be.

The Real Reason for High Unemployment

The simple answer is: a global economy.

But a lengthier explanation is due. As long as we, as a nation, import more than we export we will have enough goods to fill the needs of all of the populace without requiring the labor of all of the populace to produce those goods.

Some say it is because too many companies outsourced jobs. But whether an American company hires workers in a foreign land or buys and imports products from a foreign company, the result is the same. It still comes down to the imbalance between what is manufactured here and what is consumed here. Imports vs. exports.

Others blame automation, but that’s not new. The industrial revolution caused the loss of some jobs, but created others. In a closed economy, most everything was produced here, so most people were needed to manufacture whatever was in demand. But in a global economy, all of our labor is not needed to satisfy all of our needs. It’s a simple as that.

What isn’t simple is a viable solution.

We didn’t get to this point overnight. Nothing can be done that will reverse the trend overnight. If you drive your car in the wrong direction and eventually turn around, it will take you about as long to get back to where you started as it took to get to the wrong place.

A good starting point – the first step in turning around – would be to lower our corporate tax rate. It is currently higher than just about every other industrialized nation. We shouldn’t be surprised by the actions of some companies to avoid those taxes. The popular process is called a tax inversion.

It’s also been called unpatriotic – mostly by people who don’t understand business. A business must make a profit, otherwise it will go out of business. Unlike the government, which can make terrible decisions but never go out of business, companies must make decisions that ensure profitability. It has nothing to do with patriotism. If the company fails, it will be unable to employ anyone. Now THAT might be considered unpatriotic.

But if our federal tax rate was lower than other nations, our companies would be more competitive, which is good for their bottom lines. Lowering the tax rate just might reverse the trend toward inversions. Foreign companies might want to employ that trick to lower their taxes by relocating to the US.

The more we manufacture, the more we can export and the less we need to import. More manufacturing in the US would employ more Americans.

Balanced trade is the best cure for unemployment.

CHARITY: The difference between Socialism and Capitalism

Occasionally, we hear about an altruistic person who goes to a third world
country to help build houses for the poor, donating his or her labor. The media
and the socialist-minded among us applaud.

But how much help did that person provide? If the standard labor rate in that
poor country is $2.00 per day, they only gave $2.00. That person might earn
$200.00 per day in the US, but it doesn’t matter what that person is worth here
at home. There, they are only worth $2.00 per day.

A capitalist thinks differently. If the charitable person had stayed home,
earning $200.00 per day, and sent all of his wages to the poor country – still
essentially working for free – they could have hired 100 local people. That
would give 100 people the chance to earn a living, supporting themselves and
their families.

And those newly employed people could have built 100 times as many houses.

Another feel-good charitable act goes something like this: People are starving
in Asia and Africa, so let’s buy a bunch of bread and send it to them! That
sounds like a generous gesture, but…

The do-gooders are buying bread made at first-world prices. The same amount
of money could produce much more wheat and therefore more bread if it were
produced in the third-world nation, and doing that would allow starving people
to become self-sufficient.

But even that isn’t a great idea, because these are people who have always
relied on rice, not wheat. You may be making a lot of people sick! You are also
putting local rice farmers out of business. Who will buy their rice when free
food is available?

Trying to help others without understanding the culture, customs and
economics of the region inevitably causes more harm than good. Call it
unintended consequences. But those consequences are avoidable if the
charitable person would spend more time thinking like a capitalist and less time
feeling like a socialist.

Capitalism is the allocation of resources in a way that produces the greater
good. Successful capitalists are usually people who think. People who feel are
likely to become successful in other fields, like acting or singing or teaching.

And, since such people feel they are right, they teach others to feel the way
they do.

So much more could be accomplished if our academics taught people to think.