Tag Archives: living wage

Hold Up, Bernie! Stopping BEZOS Requires a Different Approach.

Amazon’s CEO, Jeff Bezos may be the wealthiest person in the history of the world: as of September 6, his net worth is $168 billion. At the same time, his company’s employment practices are terrible. At Amazon fulfillment centers (the warehouses in which they prepare orders for delivery), wages are low, conditions are grueling, and attempts to unionize are squelched at every turn. If Bezos made, say, $10 billion over the past year instead of the $84 billion he actually made during that 12-month time period – if he was unbelievably, ridiculously rich rather than record-breakingly rich – he could have given each of his employees worldwide (not just the warehouse employees) a $130,000 bonus.

That’s the backdrop for the Stop BEZOS Act, a bill Bernie Sanders just introduced in the Senate. Like a similar bill introduced in the House of Representatives by Ro Khanna last summer, the Stop BEZOS Act (which stands for “Stop Bad Employers by Zeroing Out Subsidies Act”) would make large employers – defined as those with 500 or more employees – pay taxes equivalent to the amount of federal money spent on their workers’ public benefits. That is, the Sanders and Khanna bills would penalize employers whose employees’ incomes are low enough to qualify for SNAP (food stamps), free or reduced-price school meals, rental assistance, and health coverage through Medicaid.

Unfortunately, these bills reinforce dangerous stereotypes about public assistance, are likely to do more harm than good, and should be opposed. There are much better ways to fight back against the corporate greed and low wages Sanders and Khanna rightly condemn.

To understand why the approach in and messaging around these bills is so damaging, consider the tweet and embedded video clip below from Fox News host Tucker Carlson.

On the one hand, it’s great to see a Fox News host calling out the underpayment of workers by insanely rich people. But note the way Carlson talks about this problem. Amazon “employees are so poor, you’re paying their welfare benefits.” Bezos is “offloading his payroll costs onto taxpayers.” This language is designed not just to get people angry about Bezos – it’s set up to pit “taxpayers” and “you” – Carlson’s viewers – against people who struggle to make ends meet and receive public assistance. One possible response to this message is “you’re right – Bezos should be paying his workers more!” Another, especially given the programming typical from Fox, could very well be “Why the hell am I, a taxpayer, paying for welfare benefits for other people? Let’s cut them!”

Though Sanders and Khanna are two of the most reliably power-balancing members of Congress and mean well, their language is alarmingly similar to Carlson’s. Sanders pitched his bill with the promise that “the taxpayers of this country would no longer be subsidizing the wealthiest people in this country who are paying their workers inadequate wages.” Khanna said “taxpayers shouldn’t be responsible for paying the expenses of workers employed by multibillion-dollar companies.” Sanders and Khanna are clearly blaming rich people, not people who are struggling to get by, but they’re still creating a distinction between “taxpayers” and the workers who receive public assistance.

This distinction is a false one. Workers receiving public assistance are themselves taxpayers. Their overall taxes are lower than those of richer people, largely because we have a moderately progressive federal income tax. But when it comes to federal payroll taxes and state and local taxes, such as sales taxes, they actually pay a higher percentage of their incomes than rich people do.

Another problem with Sanders’s and Khanna’s framing is that public benefit payments that help struggling workers make ends meet are not “subsidizing the wealthiest people in this country,” as Sanders claims they are. Amazon pays workers poorly because they can, not because food stamps, rental assistance, and Medicaid are working overtime to keep working families and vulnerable adults afloat. Does anyone really think that, were these programs to be cut, Amazon would start paying their workers enough to live on? The company’s concern is their profits, not keeping their workers out of poverty.

Moreover, the level of public assistance in this country is far too low. According to data from the Congressional Budget Office, for instance, the average household in the second income quintile (the 20th to 40th percentile) made $30,600 a year in market income in 2014, which isn’t too far off the median income of an Amazon worker today. This average household receives $6,200 in “means-tested transfers,” which include the programs the Sanders and Khanna bills deal with, and after Social Security, Medicare, a few other programs, and taxes are factored in, this average household takes home $44,500 annually. That’s still $6,500 lower than the budget a one-parent, one-child household would need to “attain a modest yet adequate standard of living” in Fort Wayne, Indiana, a city with a lower cost of living than most other places in the country. In a more expensive area and/or for a bigger family, it’s not even close to what the household would need. This bill erroneously suggests that Amazon’s workers would be fine without public assistance if Amazon were to raise wages, but the reality is that higher wages would be unlikely to obviate the need for families to have additional support.

Public benefits are an excellent use of our tax dollars. Not only do they help people meet their basic needs in the short run, they carry long-run benefits for kids as well. And since a lot of people living in poverty are unable or not expected to work, public assistance would be needed even in an economy in which all companies treated their workers fairly. We should be expanding public benefits – as both Sanders and Khanna surely agree – not lending credence to the arguments of people who seek to demonize them.

Beyond the bad messaging, the Sanders and Khanna bills, if enacted, would likely cause immediate problems. As my former colleagues at the Center on Budget and Policy Priorities Bob Greenstein, Sharon Parrott, and Chye-Ching Huang explain:

The bill would create powerful incentives for employers to minimize the number of workers they hire who likely qualify for Medicaid, SNAP, and the like — that is, workers in low-income families — and instead hire or retain people less likely to qualify for these benefits…

The bill includes a provision barring an employer from asking job applicants about their benefit receipt. But an employer does not need information about whether a job applicant is receiving benefits to take steps that limit the hiring of workers likely to receive benefits…That’s because information about a worker’s family and health often emerges in job interviews and even more so after an individual is employed. Some employers also get information about dependents for the purpose of administering various benefits or withholding the proper amount of taxes from paychecks…

Moreover, prospective employers that couldn’t secure such family-related information directly could look for other indicators of whether an individual’s household income is likely low and whether the worker and his or her family likely qualify for benefits — including, in particular, a worker’s race, gender, and neighborhood

Finally, some employers may pressure employees not to sign up for programs for which they qualify to reduce the tax penalty on the employer. Even without such pressure, some workers may decide that receiving benefits that their families need has become too risky…[T]he bill’s tax penalties would likely influence employer decisions on which employees to let go when they trim their workforces to cut costs, such as during recessions…The chilling effect could be substantial…

In addition, the legislation would likely lead to substantial corporate lobbying efforts to restrict eligibility and cut benefit levels for core low-income assistance programs, because doing so would reduce companies’ tax bills — effectively making a cut in Medicaid, SNAP, school meals, or rental subsidies akin to a direct corporate tax cut.

The good news, as Greenstein, Parrott, and Huang note, is that there are much better ways to achieve what Sanders and Khanna are trying to achieve. Some of the most direct ways to raise worker wages are to mandate higher minimum wages, break up huge companies like Amazon through antitrust legislation, and, perhaps most importantly, strengthen labor law to make it easier for workers to form unions. We should also raise the corporate tax rate and actually “Stop Bad Employers by Zeroing Out Subsidies,” which would mean closing federal corporate tax loopholes and pressuring cities and states to stop giving away huge “economic development incentives” (read: tax breaks) to large corporations like Amazon, which has thus far received over $1 billion in state and local subsidies and paid a whopping total of zero dollars – that’s right: zero – in federal taxes in 2017.

Sanders and Khanna already support these alternative ideas, and I applaud them for the way they’ve consistently championed worker rights and sought to hold large corporations accountable. I encourage them to double down on those efforts while reconsidering both this bill and their rhetoric about public assistance. That would probably lead to less enthusiasm from Tucker Carlson, but it would help people living paycheck to paycheck a whole lot more.

4 Comments

Filed under Business, Labor

Starbucks’ Greed Versus San Jose’s Living Wage

Living Wage Cartoon

The San Jose City Council will soon decide whether to condone corporate greed and poverty-level wages for workers or apply city law to Starbucks and a large developer who want to lease property at the San Jose Convention Center.  San Jose would normally require businesses leasing the property to pay employees a living wage, but the City Manager’s Office recommends an exemption for Starbucks and the developer because, among other reasons, the businesses “have indicated to City staff that imposing any wage policy requirements in [their] leases…creates financial and competitive hardships in the operation of their respective businesses.”

The dark irony is that Starbucks, the company claiming “financial hardship,” raked in hundreds of millions of dollars in profits in 2013 in “the best year in [its] 42-year-history” while the absence of wage policies like the one Starbucks is currently trying to circumvent consistently causes families to operate at or near the poverty line.  And though Starbucks is unwilling to sacrifice some of an individual store’s profits for the benefit of working families, the company is perfectly happy to sacrifice an individual store’s profits when doing so helps drive out neighborhood coffee shops.

That the San Jose City Council is even considering such a request speaks to the success of corporate think tanks in confusing the public about wage ordinances.  Even though the vast majority of recent research shows no downside to minimum wage laws and most economists support minimum wage increases, too many people still buy inaccurate and unsubstantiated claims that wage requirements hurt businesses, reduce available jobs, and must necessarily raise prices for consumers.  In addition to bad research, however, standard teaching of mainstream economic theory on price floors is also to blame for the misinformation about minimum wage and living wage laws.

Economist Jim Stanford describes the paradigm taught in most introductory economics classes:

I was taught early on at university that minimum wages screw up an otherwise efficiently-functioning marketplace for labour. You see, there’s a demand curve for labour, and it slopes down. There’s a supply for labour, and it slopes up. The two lines cross in the middle, at the sweet spot where supply equals demand.

Now draw the minimum wage: a horizontal line, positioned above the cross. It’s plain as day. Too much supply, too little demand, too much unemployment. Well meaning but foolish bureaucrats should leave the market alone to perform its autonomous, masterful balancing act.

The story is simple. It’s elegant. And it’s wrong. But you have to progress far beyond Economics 101 to find out why. And in the meantime, that simplistic supply-and-demand diagram gets deeply imprinted on too many impressionable minds.

As Stanford goes on to explain, the model doesn’t apply well to labor markets because supply and demand for labor work a lot differently than supply and demand for goods and services.  For example, employers don’t magically require fewer employees the moment wages increase.  But even if we pretend the model is accurate, the policy conclusions drawn from it would still be unwarranted.  First, the argument that the minimum wage is inefficient is based on a concept called deadweight loss, defined as the overall money that could have been made by both producers and consumers of some good under the free market equilibrium condition (in this case, the condition in which no minimum wage exists).  Deadweight loss is essentially meaningless when it comes to assessing the impact a minimum wage policy has on people’s lives.  Though it’s rarely discussed, even the deeply flawed, standard economic model generally shows a net increase in the overall money made by workers when a minimum wage is introduced.

Second, and more importantly, the standard model assumes that employers are willing to pay only what they can.  In reality, large employers frequently operate with enormous profit margins and award exorbitant compensation to executives.  The suggestion that minimum wage laws would force companies to raise prices or lay off workers is an outright lie – most companies can absorb the costs elsewhere quite easily.  Starbucks, for example, could hold prices and profits constant and hire over 1000 new workers at San Jose’s living wage by reducing the salaries of its top five executives to the measly total of $2 million a year each.

Opponents of minimum wage and living wage laws want us to believe, despite their faulty model and a large body of research suggesting otherwise, that wage requirements harm the people they’re designed to help.  They’re wrong.  Minimum wage and living wage laws are quite simply a choice between the welfare of lower-income people and the greed of a wealthy few.  So let’s challenge our professors when they falsely portray minimum wage as an economic problem.  And let’s hope the San Jose City Council keeps the living wage ordinance intact and strong – developer Don Imwalle and Starbucks can afford to pay their workers enough to make ends meet.

If you’re interested in having an impact on this issue, SumOfUs is circulating a petition asking Starbucks to drop its request; the company has responded to intense public pressure over unethical practices before.  You can also find San Jose City Council contact information here.

Update: This article ran on The Left Hook on Tuesday, January 28.

Update 2: The San Jose City Council voted later on Tuesday, January 28 to grant the exemption to Starbucks and Imwalle.  Though Ash Kalra, Kansen Chu, Xavier Campos, and Don Rocha voted in the interests of the citizens of San Jose, the rest of the council, led by Chuck Reed, Sam Liccardo, Madison Nguyen, and Rose Herrera, ignored the interests of their constituencies.

Update 3 (6/16): Starbucks apparently denied that they ever asked for the exemption on January 22, 2014, an assertion that is directly contradicted by the city memo that was also linked earlier in this piece.

5 Comments

Filed under Business, Labor