Former head of CKE restaurants/former Trump cabinet member Andy Puzder representing Prager U, is seen here attempting to convince us why businesses shouldn’t be paying their employees a wage they can live on. Rather he’d prefer if you and I as taxpayers provide that additional money to them, in the form of welfare benefits.
But of course, his actual argument is less blunt and much more abstract, speaking to the notion of raising the minimum wage to $15 an hour and fully insisting that the economy will suffer if implemented. See the video here.
This claim is not only without substance, it runs counter what we’ve actually seen when the minimum wage had been raised. Not once in the entire course of American history had we experienced an economic meltdown or rapid business collapse once the minimum wage had been increased. Instead, these raises instigated growth by putting money in the hands of working and middle class consumers – the actual drivers of the economy.
See the historical increases of the minimum wage that led to some of our most prosperous economies:
Note the adjustments to the minimum wage prior, and the lack thereof during the Reagan administration. The $3.35 minimum wage that was in place when he took office was not raised a single time in his entire eight years as president.
This translated to a massive $8.71 to $6.38 decrease in inflation-adjusted real dollar spending power for working and middle-class Americans from 1981 to 1989. It also contributed to the birth of the new family unit in which both parents were now part of the workforce, as a single earner’s paycheck was no longer suffice.
Combined with other Reagan-era modifications that benefited the wealthy such as stock compensation to CEO’s, anti-union positioning, loosening the rules for private equity and mergers and acquisitions, and the Second Great Republican Tax Scam, the pressure points were in place to create today’s struggling working class.
The data showing the historic increases of the minimum wage and strengthening of the economy is verifiable, and runs in contrast with several of the questionable hypotheticals used by Puzder.
On to the specifics:
Andy Puzder: “The current call is for a national $15-an-hour minimum wage – more than double the current federal rate of $7.25.”
Yes – but this is not unprecedented. The minimum wage was nearly doubled in 1950 under Republican Dwight Eisenhower. This initiated a several-decade timespan that became the most prosperous era in U.S. history with an economy working for everyone. The working class and blue collar employees which make up the majority of our workforce had money in their pockets, creating a lot of demand for businesses to prosper. This epitomizes a healthy economy. We’ve seen it. We’ve proved it.
Puzder: “A number of cities and states are already there – including New York, California, Washington D.C. and Seattle. Others are considering it. “
Puzder shot this video filled with doom and gloom predictions back in August of 2017. But a recent UC Berkeley study released in September of this year, show that the cities who have implemented these minimum wage standards are experiencing steady economic growth.
Or take this study conducted by right-wing Manhattan Institute affiliate Jacob Vigdor, and Amazon among others. They initially concluded that the minimum wage increase in Seattle had reduced take-home pay for workers. But a second study released afterwards by the same authors corrected what the initial study overlooked, and thereby came to the opposite conclusion.
Also, according to very recent data from the Bureau of Labor Statistics, the states with the highest unemployment level are not $15/hr minimum wage states. Rather, at the top of that list are conservative red states such as Mississippi, Alaska, and Arizona,
Puzder: “The left casts the minimum wage debate as a war between employee and employer. But most business owners pay their workers as much as they can.”
“As much as they can” is a very subjective phrase. To a high-level CEO, this could mean paying out $8/hr to his employees as long as he “can” still purchase that sixth vacation home. To one with a better adjusted moral compass, this could mean $15/hr for their workers while still leading a very comfortable life for themselves with perhaps only one or two vacation homes. This goes the same for board members, upper management, and major shareholders who give little to no prioritization to the welfare of the workforce below them.
But this is beside the point. One of the most glaring observations that illustrate today’s rigged economy is the distribution of profits created by increased worker productivity. Prior to Reagan, increases of business productivity would be distributed to the lower-level employees as well as to the higher-level employees.
Yet under Reagan, we saw what the administration truly viewed as important- skyrocketing increases in CEO pay while keeping the minimum wage down, prioritization of corporate profits and share value, and gains from increased worker productivity now being captured only by those at the very top.
The neutering of government that once prevented this behavior was done by those very same wealthy interests that have reaped tremendous gains from this “free-market” integration. Fueled by nothing but greed, it has been re-energized recently by The Third Great Republican Tax Scam led by Donald Trump.
He goes on to list the three consequences he believes will occur if he raised the minimum wage:
Puzder: “1. A lot of people will lose their jobs or have their hours reduced. According to a 2014 Congressional Budget Office study, just a $10 minimum wage would cost half a million jobs as businesses terminate employees. Obviously, far more jobs would be lost at $15 an hour. To survive, employers would have to reduce hours even for workers who manage to keep their jobs. That’s a pay cut.”
Puzder disingenuously only portrays one finding of the study – one that seemingly backs his narrative. But actually reading the full study rather than cherry-picking a single sentence gives you the honest findings: https://www.cbo.gov/publication/44995
What he conveniently omits:
– “Many more low-wage workers would see an increase in their earnings. Of those workers who will earn up to $10.10 under current law, most—about 16.5 million, according to CBO’s estimates—would have higher earnings during an average week in the second half of 2016 if the $10.10 option was implemented.”
– “Some of the people earning slightly more than $10.10 would also have higher earnings under that option..”
– “Further, a few higher-wage workers would owe their jobs and increased earnings to the heightened demand for goods and services that would result from the minimum-wage increase.”
– “The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate.”
– “Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $2 billion.”
– “Families whose income would have been between one and three times the poverty threshold would receive, on net, $12 billion in additional real income. About $2 billion, on net, would go to families whose income would have been between three and six times the poverty threshold.”
And here’s one finding that Puzder certainly doesn’t appreciate:
“Real income would decrease, on net, by $17 billion for families whose income would otherwise have been six times the poverty threshold or more, lowering their average family income by 0.4 percent.”
In other words, paying people an amount that they can live on would decrease the income of upper-middle class to the extremely wealthy earners like Puzder himself, an average of less than a half of a percent. And apparently, that is a sacrifice Puzder is unwilling to make in order to simply pay his workers a wage they can live on.
Instead, Puzder uses taxpayer money in his business model to increase those profit margins, with us providing his employees with food stamps, housing assistance, Medicaid, and other forms of welfare. As reported by the Chicago Tribute: http://www.chicagotribune.com/business/columnists/ct-hiltzik-andy-puzder-20170124-story.html
Puzder: “2. Businesses will close, and the jobs they created will disappear. A recent report from researchers at the Harvard Business School found that each $1 increase in the minimum wage results in a 4-10% increase in the likelihood of restaurants closing. An over $7 an hour increase, to $15, would be devastating not only for restaurants, but for small businesses and their employees.”
Actually, what that study concluded was that lower quality restaurants as ranked on Yelp (with a 3.5 rating or lower considered “lower quality”) were the ones effected by a minimum wage increase. They also found that restaurants with a rating higher than 3.5 were not effected by the increase.
So poorly rated restaurants who don’t pay their employees a wage they can live on have an increased chance of going out of business. It’s very hard to be sympathetic here.
Puzder: “3. Young people will lose that entry-level job opportunity. My first job was scooping ice cream at a Baskin-Robbins in Cleveland, Ohio in the 1960s. I was paid just $1 an hour. But it taught me valuable lessons – like the importance of showing up on time, teamwork, and presenting a happy demeanor to customers. No one can get that better job until they have their first job.”
But this world doesn’t exist anymore.
Now we have adults working in these low-pay fast-food positions, taking these jobs in order to provide for their families, with the intention of working there for the long-haul. These temporary summer jobs from which teenagers gather valuable experience are no longer abundant like they used to be. Again, much thanks goes to Reaganism.
Puzder: “4. The cost of all workers will have to go up. If you hire a dishwasher at $15 an hour, your cooks will be unhappy with their wages. You’re going to have to pay everybody more, which increases labor costs across the board. That’s more pressure on profits. Too much pressure and you’re out of business.”
But as previously mentioned, this type of increase had been implemented before, leading to an economy that grew. And it’s happening now, with states/cities/townships who have implemented the wage hikes showing few detrimental effects.
What Puzder and the Conservative argument often fails to mention is the rise of spending by consumers in the local economy as a result of a minimum wage increase. Short-term problems with capital are eased by increased demand from new customers with extra money in their pockets, or current customers who can now afford to spend even more. As the CBO pointed out – a stimulative effect occurs when a rise of the minimum wage is implemented, as these employees now have the extra funds to go to a restaurant, buy that car that they’ve been holding off on, renovate their home etc.
This goes back to Ford’s notion of paying his assembly line a high wage so they could afford to buy one of his cars. Specifically pertaining to Puzder, when the community around one of his restaurants all have their wage increased, this means that instead of having that can of soup from Aldi for dinner, they are able to afford a meal at Hardee’s instead.
Puzder: “5. Fewer people will open businesses. $15 an hour is a very steep hill to climb. Would-be entrepreneurs will do the math on labor costs and realize it’s just not worth the risk. This is a real cost to the economy that we can’t measure. A company that never exists never employs anyone. “
But this hasn’t shown to be. There is no lack of business investment in places like New York, California, Washington D.C. or Seattle.
Puzders claim also contradicts what history has shown us, whether it be examining the drastic increase of the minimum wage increase under Eisenhower, or any one of the many times we’ve raised the minimum wage in smaller increments.
A gradual short-term goal of the $15 minimum wage would puts our working and middle class closer to the position they were in during the decades of our most vibrant economy. This is an era where we all had meaningful purchasing power. So if you’re an entrepreneur with a good idea or business model, the demand will not be lacking. Instead, you’ll have a wide populous that can afford whatever you’re offering them, as long as it’s a quality product or service.
Puzder: “6. Prices for everything will go up as businesses pass higher labor costs along to consumers. One of two things will happen: Either consumers won’t pay the higher prices and businesses will lay off workers or close, or consumers will pay higher prices and have less money to spend elsewhere. Either way, the higher minimum wage will represent a drag on the overall economy. “
Prices don’t necessarily go up, as smart business managers find other ways to keep costs down, and therefore gain an advantage on their competitors. And if price increases do occur, most are shown to be inconsequential with consumers showing that they’d be willing to pay a little more for better pay for their workers. A recent analysis showed that a Big Mac would go from $3.99 to $4.16. If you surveyed those who regularly eat the sandwich, I’m thinking that the minute price increase would not be a deal-breaker.
And why don’t discussions in conservative circles ever consider a pay decrease for upper-management and CEO’s as a cost-saving measure? Since Reaganism began, CEO’s have now become so accustomed to the obscene salaries afforded to them at the expense of everyone else. They now feel entitled to tens of millions or more in annual compensation, often making hundreds, even thousands times more than their lowest paid employee.
The culture before Reagan simply didn’t assimilate this greed into American life, with CEO pay averaging around 30 times that of their lowest paid workers.
And an increase in the minimum wage has not once represented “a drag on the overall economy”.
Pudzer continues, now citing anecdotes of modern-day failures that he attributes to the minimum wage increase. I only found details to one of the stories, to which Pudzer makes large and deceptive omissions:
Pudzer: “In San Francisco, AQ, a 2012 James Beard Award finalist for the best new restaurant in America, saw rising labor costs drive its profit margins down from 8.5% in 2012 to 1.5% by 2015. So, it shut the doors. “
This is not even close to the full picture. Their stated reason for this closure was ““rising labor costs, rent increases, a pandemic of similar restaurants, demanding customers unwilling to come to terms with higher prices.” But Pudzer only mentions the “high labor costs” as the reason that AQ had to “shut the doors.”
Also, “beyond rising costs, people simply stopped going to AQ. At its peak, the seasonally-focused restaurant was serving 240 people per night, which in 2016 went down to 100 covers a night.”
Pudzer: “These stories are already all too common. Expect them to become more so as cities and states pile on the $15 minimum wage bandwagon.
It is common for businesses to fail. What isn’t common is for anyone with a basic knowledge of economics to blame a high minimum wage as the reason for these failures. Instead, we should be promoting the inclusion of a living wage as part of any business model. A living wage needs to be set by the government, and should be automatically adjusted to inflation or another metric that considers living expenses.
He tells us to “expect” more tales of businesses failures and economic shambles, but even the examples he provide are either opaque and lack access to detail, or are completely misrepresented.
Pudzer: “So…if a $15 minimum wage doesn’t help workers, and doesn’t help employers, who exactly does it help? Well, maybe just the progressive politicians who manage to mislead voters into believing that it’s the right thing to do. Sounding caring, compassionate and concerned is all well and good. But having a job is better.”
He concludes with this statement of summary with the assumption that the listeners at Prager U just absorb his baseless and unsubstantiated claims that run counter to documented historical evidence and scholarly research without questioning any of it. Unfortunately, there are probably many who might.
But this has nothing to do with “progressive politicians” who are “misleading voters”, rather everything to do with observing the times we did raise the minimum wage and the positive effects it had on the the economy, as well as examining the actual data gathered in the extensive studies available pertaining to the minimum wage.
He talks about how actually having a job is better than just sounding compassionate. But the types of jobs he defends contain little-to-no benefits, and come with a paycheck that cannot even provide for the bare essentials one needs just to live on. As a consequence of conservative “free-market” principals, you and I must come to the rescue with welfare assistance with our tax dollars.
We collectively have every right to tell a restaurant owner that if they are going to conduct business here in the U.S., they’re going to have to simply pay the people who are working hard for them a wage that they can at least live on.
Do not buy into Puzder’s narrative solely because it’s conservative Prager U that’s selling. For ideological conformation that often comes without merit is going for well above retail in the era of Trump – at a premium to those who forgo pragmatism are willing to pay. The problem is, it’s a worthless product. ■