Tag Archives: minimum wage

by | May 1, 2019 · 1:33 am

Boycott the Anti-Worker Surcharge

Workers in the Fight For $15 movement have sparked dozens of minimum wage increases over the past six-and-a-half years. Workers have also won the battle of public opinion: even the majority of Republican voters now support their efforts. But businesses who profit off low wages, particularly those in the food industry, aren’t ready to concede defeat. When they’re not hoodwinking media outlets with an astroturf group that pretends to represent workers’ interests, restaurants are campaigning hard against higher wages at the point of service.

Adding a small surcharge to your bill is one aspect of restaurants’ anti-worker campaign. Those that employ this practice should be boycotted.

What is the surcharge and where might you see it?

The surcharge is an added cost that a business links to pro-worker legislation. It is presented differently in different establishments. Customers who look closely may just see a line item that says “living wage surcharge” or “mandates surcharge” when they get their checks. Some restaurants may put a note about the charge in small font at the bottom of their menus. Others may put up a sign explaining the added costs.

Signs and menu notes often assert the organization’s support for the benefits that ostensibly led to the surcharge. Don’t be fooled. The note, and the charge, are designed to prejudice customers against living wage policies.

How do we know the surcharge is anti-worker?

Consumers don’t like surprising add-ons; when you go somewhere expecting to pay menu price and then end up needing to pay more, you’re usually annoyed. Business owners who put a surcharge on their menus know that and want you to tie your annoyance to legislation that makes them compensate their employees more fairly.

Note that the labor involved in making, selling, and/or serving a product is only one of many factors that influence a product’s price. The cost of purchasing the ingredients or materials needed to make a product matters, as do rent, utilities costs, advertising spending, and a variety of other business expenses. Have you ever seen a “rent increase surcharge” on a menu? How about an “advertising fee?” Since a business owner’s desired profit may be the biggest factor in the prices that business owner sets, the most honest note on a menu would probably be something along the lines of: “The price of this hamburger is $15 because of the lifestyle of Mr. Smith, the owner of this restaurant and four other restaurants in the city, who lives in a $1.5 million house, drives a Porsche, and is looking forward to his three-week stay at a Hawaiian resort this summer.”

That’s not to say it’s necessarily unethical for businesses to raise prices after a minimum wage increase. While minimum wage increases don’t tend to influence prices very much – in part because they can lead to a higher volume of sales (due to increased demand for businesses’ products), efficiency gains (e.g., lower turnover), and/or more equal distributions of wealth within companies (by shifting profits from owners to workers) – it’s reasonable for prices to be one channel through which businesses with small profit margins absorb added costs. But it is both unreasonable and unethical for a business to itemize labor costs and nothing else. When you see a wage surcharge or note tying price increases to wage increases on a menu, what the business is really saying is that, if it weren’t for the law, they’d be paying their workers a more exploitative wage. And that they’re hoping your annoyance about the surprise charge they’ve added will convince you they should be able to do so.

How can you challenge the surcharge?

The next time you see a business embracing this practice, ask to speak to the owner. Explain why their policy is unacceptable and ask them to change it. If they refuse, let them know that you’ll be boycotting their business until they change their mind. Then leave a note in the comments of this post or send a direct message to @BenSpielberg on Twitter to get the business added to the list below.

Update (8/1/19): Effective 7/23/19, Ike’s Love and Sandwiches became the first business to respond to the boycott by removing their surcharge. They have been removed from the list below. Email aizleforhr@loveandsandwiches.com or call 510-309-9909 to let them know that you appreciate them making the right decision and can now resume eating their sandwiches.

Update (1/19/20): Following conversations with Emily Burton and me, Enoteca La Storia in San José has become the second restaurant to remove the surcharge. They have been removed from the list below. Email Joe Cannistraci at joe@joecannistraci.com to let him know that his concern for his workers’ well-being is much appreciated.

Enoteca La Storia
408-618-5455
infosj@enotecalastoria.com, Mike@enotecalastoria.com, miyuki@enotecalastoria.com, joe@joecannistraci.com
Submitted by: Emily Burton

Notes: Emily emailed them and they wrote a long response attempting to justify the policy, saying (among other things) that they felt it was a better solution to their increased labor costs than raising menu prices and that many other restaurants also have this practice. Emily conveyed that the policy attempts to pit customers against workers and that she would be encouraging others not to go there until they changed the practice.

CALIFORNIA RESTAURANTS TO BOYCOTT

San José

Luna Mexican Kitchen
408-320-2654
lunamexicankitchen@gmail.com
Submitted by: Paul Nyhof

Luna

Notes: I emailed management and they never responded.

Treatbot
408-548-7328
info@treatbot.com
Submitted by: Melissa Urbain

Treatbot.jpeg

Notes: I emailed management and they never responded.

Village California Bistro
408-248-9091
john@thevillagebistro.net
Submitted by: Ben Spielberg

Village Bistro

Notes: I emailed management and they never responded.

Zona Rosa
408-275-1411
dine@zonarosasj.com
Submitted by: Ben Spielberg

Zona Rosa

Notes: I emailed management and they never responded.

San Francisco

Greens Restaurant
415-771-6222
info@greensrestaurant.com, min@greensrestaurant.com
Submitted by: Ben Spielberg

Greens

Notes: I had a nice email exchange with Min Kim, their general manager. Min said they support all the pro-worker legislation in San Francisco and said “I do understand your push to include costs in the menu. But, I also do believe you and I would not be having this conversation if it wasn’t separated.” Min indicated interest in discussing the issue further but has not responded to my follow-up emails.

Palo Alto

Local Union 271
650-322-7509
hello@localunion271.com
Submitted by: Ben Spielberg

Local Union 271

Notes: I emailed management and they never responded.

Mayfield Bakery and Café
650-823-9200
info@mayfieldbakery.com, karey@bacchusmanagement.com, tim@bacchusmanagement.com
Submitted by: Ben Spielberg

Mayfield.png

Notes: Founding Partner Tim Stannard wrote to me that “The issue of labor surcharges is a difficult and thorny issue for us…It’s probably too complex to go into in an email, but if you send me your phone number I’d be happy to give you a call to try to explain.” Tim left me a message and said he was interested in chatting about the issue but then stopped returning my emails and follow-up calls.

Oren’s Hummus
408-391-9762
mistie@orenshummus.com
Submitted by: Kate Frelinger

Oren's Hummus

Notes: I emailed Mistie, the President and Owner, and she wrote back an email explaining why they have the surcharge, saying she “encourage[s me] to consider the business owners [sic] perspective in that we do not control the ongoing increases of the additional health care and other costs that are imposed on the business.” She incorrectly contended that the surcharge “is infarct [sic] pro-worker because without denoting these funds to pay for these benefits we would likely have to hire less people or provide a lesser quality of benefit.” When I followed up with an explanation of why her assertions were unfounded, she said she “respectfully need[ed] to decline [my] invitation to speak more on this matter.”

WASHINGTON RESTAURANTS TO BOYCOTT

Check out this comprehensive list from Working Washington.

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by | October 1, 2018 · 5:44 pm

Dear Councilman Grosso: Please Be Our Ally and Support 77

Dear Councilman Grosso,

We’ve met before. I worked at a bar in Chinatown that you used to frequent. We only spoke a few times, but I remember feeling proud to have you as our guest because you had a reputation for being an ally – an advocate for women and for the LGBTQ community. I’m writing to you today to ask you to be an ally to vulnerable workers in Washington, D.C. by supporting Initiative 77, which will raise the wages of tipped employees and help stabilize a flawed system.

The restaurant industry in Washington has afforded me many opportunities as both a bartender and manager. I have a deep respect for my service industry peers, and when my colleagues came out against 77, I voted “no” alongside them. In retrospect, the pressure in the industry was substantial to oppose, and then to repeal. Yet when the voters of D.C. popularly supported 77, I began to realize that our conversation about the initiative had been imbalanced. We had not heard from bartenders who supported 77 and, perhaps most importantly, we had not heard from many of the most vulnerable members of our industry.

In support of these vulnerable workers, I testified against the repeal of 77 after most of the Council had left for the night, dashing from work after last call at 1:00 a.m. and returning to close the bar after my testimony. While I waited my turn, I heard the fears of my colleagues who work in some of the city’s most renowned restaurants. They testified that 77 would catalyze the decline of our vibrant restaurant industry. Many fears reminded me of those I heard when other voices lobbied against paid sick days. Meanwhile, so many whose fears are realized on a daily basis went unheard that night. Once more, I will try to speak for them, as one of them.

I have felt the volatility of subsisting on tips. At that Chinatown bar, our staff sometimes missed a week’s income when bad weather drove everyone away. More recently, while pursuing my graduate degree, I worked daylight hours, which cut my income to a fraction of what it had been. While I earned meager tips off a handful of guests, I meticulously cleaned and prepped the bar for the busy night ahead. The system allowed my hard work to go unpaid.

I believe that Initiative 77 is a step toward professionalizing this industry and giving all tipped workers the stability and respect that they deserve. This is a bill meant to help the most vulnerable in our industry. It is for women who smile through degrading treatment because we need a tip. It is for underpaid immigrants who toil tirelessly to keep things running, often doing double the work for half the pay. It is for the welfare of our residents who are not chosen to work in the city’s highest-grossing restaurants.

I have seen enormous, unjustified disparities in pay. As a manager, I’ve seen the books. I’ve seen what restaurants spend on turnover, and I’ve witnessed the revenue lost from an undervalued and sometimes uninspired workforce. I also know that rising expenses are absorbed through small increases in food and beverage prices. The industry will shift to accommodate a higher base wage.

The Council has repeatedly asked these vulnerable workers to show themselves. It has asked why they have not spoken more loudly. Councilman Grosso, as an ally, I believe you know better. These groups are more dependent on good relationships with management and staff than they are on any city law. And they already voted once. I am asking you to stand for them. I am asking you do what’s right.

Supporting 77 is a way for you to stand for the rights of all tipped workers across our city. With your support of 77, you’re not choosing between restaurants and workers; you’re choosing to create a more just and equitable system for all.

Aubrey DeBoer

Aubrey DeBoer is a bartender and restaurant manager in Washington, DC with nearly 10 years of industry experience. She has been a Ward 5 resident for the past eight years.

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by | December 31, 2017 · 12:40 pm

Written in 2017, Relevant in 2018 and Beyond

With the year drawing to a close, and because I like lists, I wanted to highlight the ten pieces I wrote in 2017 that I believe remain most relevant for 2018 and beyond.

#10: The Trump administration’s ongoing attack on workers (The Washington Post, August 30)
Donald Trump pledged during his campaign, that, with him in office, “the American worker will finally have a president who will protect them and fight for them.” In this piece, Jared Bernstein and I tick off a multitude of ways in which this promise has turned out, predictably, to be false. The list has gotten longer in the time since we went to press (check out Jared’s recent interview of Heidi Shierholz on how the Trump Labor Department is trying to help employers steal workers’ tips), and it will be important to continue to shine a light on team Trump’s anti-worker actions in 2018.

#9: The Paul Ryan Guide to Pretending You Care About the Poor (Talk Poverty, November 20)
Speaking of the disconnect between Republican politicians’ rhetoric and their actual actions, this satirical piece outlined the way in which Paul Ryan sells his help-the-rich-and-punish-the-poor agenda as the opposite of what it actually is. With the Republican tax cut for rich people signed into law, Ryan has already trained his sights on eviscerating programs that help the poor. Don’t let anyone you know fall for how he’ll spin it.

#8: Why Medicaid Work Requirements Won’t Work (The New York Times, March 22)
Elected officials who share Ryan’s disdain for poor people will likely try to add work requirements to their states’ Medicaid programs in 2018. Here, Jared and I explain why that policy’s main effect is just to deprive people of needed health care.

#7: Seattle’s higher minimum wage is actually working just fine (The Washington Post, June 27)
The Fight for $15 has been incredibly successful over the past few years; 29 states (plus DC) and 40 localities now have minimum wages higher than the federal minimum. Yet the not-so-brave quest some economists and politicians have undertaken to hold down wages for low-wage workers continues unabated, and they jumped all over a June study of Seattle’s minimum wage increase to proclaim that workers are actually better off when we allow businesses to underpay them. A closer look at the study, of course, reveals that it proves nothing of the sort, so keep this rebuttal handy for the next raise-the-wage fight you find yourself engaged in.

#6: Below the Minimum No More (The American Prospect, May 30)
Abolishing sub-minimum wages is the next front in the minimum wage wars; while many jurisdictions have raised the headline minimum wage, most have failed to satisfactorily address the exemptions in minimum wage law that allow businesses to exploit tipped workers, workers with disabilities, and teenagers. It’s about time we had one fair minimum wage for all workers, as this piece explains.

#5: Protect the Dreamers (The American Prospect, September 28)
Republican Senator Jeff Flake claims that he voted for the Republican tax bill after “securing…commitment from the [Trump] administration & #Senate leadership to advance [a] growth-oriented legislative solution to enact fair and permanent protections for #DACA recipients.” In this piece, Jared and I note how a clean Dream Act is the only approach that politicians who truly care about helping immigrants would find acceptable; Flake must be held accountable for supporting it. State lawmakers should also be pressured to take the steps we outline to combat the xenophobia emanating from the White House.

#4: U.S. Intelligence Agencies Scoff at Criticism of Police Brutality, Fracking, and “Alleged Wall Street Greed” (34justice, January 9)
To date, there is at best remarkably weak evidence behind many prominent politicians’ and pundits’ claims about Russian interference in the US election. I read the report that is the basis for many of these claims when it came out in January and, as I noted at the time, it’s almost comically propagandistic. Some Democrats’ disregard for actual facts when it comes to allegations of Russian hacking and “collusion” is troubling, as is the McCarthyite climate in which people who challenge the Democratic Party Establishment are accused of being secret agents of Vladimir Putin. Those who would prefer a more reality-based Russia discussion in 2018 would do well to take a half hour to watch Aaron Maté interview Luke Harding about this topic.

#3: Amen for Alternative Media (34justice, May 2)
An obsession with Russia conspiracy theories is far from the mainstream media’s sole problem. The problem also isn’t a paucity of Republican journalists, as the May/June issue of Politico posited. Instead, as my response to Politico discusses, the mainstream media’s problem is one of subservience to power. Independent media are doing the public a great service by exposing us to information and viewpoints often absent from corporate cable and major newspapers, and it is essential that we fight to protect and promote independent media in the years ahead.

#2: The Progressive Agenda Now: Jobs and Medicare for All (The American Prospect, April 3)
Given Republican control of the presidency and both chambers of Congress, one would be forgiven for urging social justice advocates to focus their energies on policy defense. But that would be a mistake, as Jared and I note in this column, both because the best defense is sometimes a good offense and because, if we want to enact the policy millions of people need, we must lay the groundwork for that policy as soon as possible. There is much more beyond a federal job guarantee and Medicare for All that we have to flesh out and advocate for, but those two big policy ideas wouldn’t be too shabby a start.

#1: We Don’t Need No “Moderates” (34justice, July 29)
Putting the right politicians in power is the prerequisite for enacting most of the policy changes we need to see. Those who tell you that “moderate” or “centrist” politicians are more “electable” than social-justice-oriented politicians are wrong, and there is never a good reason – never – to advocate for the less social-justice-oriented candidate in a Democratic primary. The results of the 2017 elections only underscore this point. It’s time we got to work electing true social justice advocates to positions of power.

Happy reading and happy new year!

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by | January 4, 2016 · 8:02 pm

The Sound Reasoning Behind a $15 Minimum Wage

The New York Times Editorial Board recently endorsed a $15 federal minimum wage.  A proposal at the federal level would phase in $15 an hour in small increments over a period of several years and would still, as the Times mentions, set a wage floor in 2020 below what most low-wage workers need to provide for their families.  Yet Slate’s Jordan Weissmann believes that “the argument in favor of a $15 federal minimum is…extremely weak,” and that the endorsement is “emblematic of a progressive movement that has fixated on a much higher minimum as the answer to the problem of low-wage work while refusing to grapple with the potential downsides.”

Weissmann supports a federal minimum wage above $10 an hour and possibly in the $12 an hour range; like Alan Krueger, one of the economists who authored some of the landmark research on the minimum wage, his argument against $15 surely comes from a good place.  His assertions are substantively wrong, however; proponents of a $15 federal minimum have grappled with the points he makes and have decided that the case for a $15 federal minimum is actually much stronger than Weissmann’s.

The crux of Weissmann’s argument is that, “if the government forces wages too high, businesses will eventually cut back on hiring.”  $15 would be “too high,” he argues, because it is higher than “historical and international norms.”

Weissmann is correct to note that a $15 minimum wage would affect a larger share of low-wage workers in Little Rock, Arkansas than in Seattle, Washington, where a minimum wage increase to $15 an hour is already being phased in.  He is also correct to note that the research literature on the minimum wage largely speaks to moderate increases in the minimum wage, not to what might happen if it were increased to $15 an hour.  Proponents of a $15 minimum wage know these facts; they just don’t agree that they’re disqualifying.

The thing is, opponents of the minimum wage have been claiming for years, based on flawed but standard economic theory, that the mere existence of a minimum wage will kill jobs.  A huge body of research over the past twenty years has shown that these arguments are wrong: most studies suggest that the minimum wage has negligible effects on employment, and while there are credible studies that find small negative employment effects, there are also alternative theories out there, and a few findings to back them up, about why a higher minimum wage could, in some cases, actually lead to more employment.  Not having research about what would happen at $15 does not mean that it would cost jobs – it just means that, if we go to that level, we can’t be certain that the minimum wage’s opponents will continue to be so wrong about its effects on the job market.

Whether you think $15 will pose an employment problem is thus a matter of conjecture.  Weissmann is entitled to his beliefs, but it’s worth highlighting that a) the proposed increase is phased in in increments, giving businesses time to adjust, b) corporate profits are near all-time highs (as is executive compensation), suggesting that most businesses that employ low-wage workers can easily absorb the labor costs (one recent analysis of the fast food industry even suggests that firms could absorb a $15 minimum wage without a reduction in profits), c) Weissmann’s arguments mirror those of the minimum-wage-increase naysayers who have repeatedly been wrong, d) Weissmann’s summary of the evidence from Puerto Rico is woefully incomplete; a more thorough look does not actually support his case, and e) even economists, who typically lean towards embracing standard but flawed supply-and-demand theory, have split opinions on what might happen under a gradually phased-in $15 federal minimum wage.*

The fact that a $15 federal minimum wage would affect more workers in Little Rock, Arkansas than in higher-wage states can also be viewed as an argument in favor of larger increases in the minimum wage – they provide more help to a larger number of low-wage workers who are struggling to get by!  As Weissmann himself acknowledges, it takes around $20 an hour for a single parent to raise a child even in states with the lowest costs of living.  He gives surprisingly short shrift to the huge risk in not raising the minimum wage high enough: that it will lock in insufficient income support for millions of low-wage workers who desperately need additional money.  The fact that the nationwide movement for $15 has been driven by the very workers who would be affected by the policy change suggests strongly that they view the definite downside posed by a lower minimum wage – less compensation for their hard work – as a whole lot scarier than the indefinite possibility that $15 might cause some reductions in employment.  The argument against $15 could theoretically be used to reject every bold new policy proposal that helps people; it’s really hard to make progress if you don’t push past historical and international norms every so often.

In addition, while I applaud Weissmann for his concern about low-wage workers being able to find jobs, advocating against higher wages for millions of people is an odd way to address this concern.  The minimum wage does not exist in a vacuum; it is one policy among many that can be used to help low-wage workers.  While Weissmann correctly notes that the Earned Income Tax Credit and minimum wage are complementary, he fails to consider whether direct job-creation programs and/or policy that addresses firms’ decision-making in response to minimum wage increases could complement the minimum wage as well.

So while Weissmann thinks the New York Times underweights the potential and unknowable risk of heretofore unseen levels of job loss, I believe (along with hundreds of economists) that he underweights the immediate, definite risk of keeping the minimum wage too low.  I encourage him to, at the very least, consider policy tools that can mitigate his concerns without depriving low-wage workers of much-needed income.

*Update (1/5/16): It’s also worth noting, as minimum wage expert Dave Cooper has reminded me, that “the fear of a negative impact on jobs is a bit too simplistic. The concern is that the higher minimum wage could reduce the total aggregate work hours among low-wage workers, but even if that occurred, those workers would still be better off if, even while working fewer hours, the higher hourly wage caused their annual earnings to rise.”

Correction (1/25/16): The original version of this post misspelled Weissmann’s name.

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by | February 14, 2015 · 2:46 pm

It’s Not What Employers Are Doing, But What They Can Do, That Matters

A few days ago, Buzzfeed reported that Staples, the large office supply chain, had stepped up its enforcement of a cap on hours worked for part-time employees. Despite the company’s unconvincing claim* that the policy is longstanding, it appears that Staples implemented the 25-hour-per-week cap in January of 2014 “to skirt impending rules requiring companies to provide health insurance” to employees who work at least 30 hours a week.

Staples' original memo to store managers, as published by Buzzfeed.

Staples’ original memo to store managers, as published by Buzzfeed.

Staples’ decision will undoubtedly renew arguments that the Affordable Care Act’s (ACA’s) employer mandate – the provision that requires companies with more than 50 full-time workers to insure employees who work at least 30 hours each week – has led to harmful effects on work. These arguments, like parallel narratives about minimum wage laws and paid sick leave ordinances, are largely inaccurate, and advocates of evidence-based, power-balancing policy are absolutely right to debunk them.

However, we cede too much when, as is often the case, we default to a defensive stance. “Yes, the negative incentive is there, but the data show such effects to be small or non-existent” should not be the full scope of our response.

Instead, it’s imperative that we change the nature of these conversations. As Thomas Pynchon astutely observed: “If they can get you asking the wrong questions, they don’t have to worry about answers.”

Opponents of an employer mandate, minimum wage, and paid sick leave want people to focus on what employers will do in response to each policy’s enactment. The more relevant question, however, is about what employers can do.

First, it’s important to remember that businesses can deduct employer-provided benefits from their tax bills, and that the employer contribution to health benefits is widely viewed as coming out of worker salaries. Providing employees with health coverage, decent wages, and paid sick leave costs less money than a lot of people think, though it’s certainly more expensive than offering meager wages and no benefits.

More importantly, providing such benefits is the right thing to do. And it is undeniable that a typical business, when confronted with the prospect of labor cost increases, has numerous options. The business can explore ways to improve its productivity. It can raise its prices. It can reduce the salaries of affluent executives, or maybe make a little bit less in profits.**

In the most recent quarter for which financial information is available, August through October of 2014, Staples made $216 million in after-tax profits. Their CEO, Ronald Sargeant, made over $10 million in total compensation in 2013, while other top executives raked in well over $2 million apiece. Barack Obama didn’t have those numbers when he was asked about Staples’ policy a few days ago, but his suspicion “that [Staples] could well afford to treat their workers favorably and give them some basic financial security” was clearly right on the money. The ACA didn’t make Staples cut its employees’ part-time hours; instead, Staples management consciously chose to prioritize a fifth car or third house for a few wealthy individuals over its part-time workers’ ability to put food on the table. Other large companies, from Starbucks to McDonald’s to Walmart, make similar callous choices on a range of issues all the time.

There are two ways to address this problem. The main mechanism currently at our disposal is to loudly call such decision-making what it is – greedy and unethical – and vote with our dollars for companies that treat their workers fairly. Opponents of labor standards focus on what businesses will do rather than what they can do in part because we let them avoid moral reckoning. We won’t win everyone over, but we must not underestimate the power that moral authority has to shape behavior.

The second mechanism is policy that addresses firms’ decision-making. Some recent legislative proposals, in fact, like Congressman Chris Van Hollen’s CEO-Employee Fairness Act, have the potential to begin to wade into these sorts of waters. If we’re worried that companies will choose to lay people off in response to a minimum wage increase, for example, we could raise taxes on the executives of companies that make this choice.

No matter the policy outcomes, it’s essential that we ask the right questions in these debates. It’s worthwhile and important to document the evidence that policies like the employer mandate, minimum wage, and paid sick leave have minimal consequences on work. But it’s also essential to point out that any consequences these policies do have aren’t inevitable.

*As Buzzfeed’s original coverage explained, Staples claims that their part-time hours policy has been in effect for over ten years, and that the memo Buzzfeed obtained only “reiterated the policy.” Yet the memo contained phrases like, “Beginning with the week ending 1/4/2014,” and “Staples is implementing a policy.” A Staples spokesperson did not respond to follow-up questions about the memo’s language.

**It’s possible, though I’ve never seen a study to prove it, that some businesses actually can’t afford to adequately compensate their workers, that they’re barely squeaking by as is with low executive salaries, non-existent profits, and the highest level of productivity they can possibly attain. To the extent these businesses exist – and I’m skeptical that many of them do – it’s worth asking whether a business’s right to keep its doors open should trump its workers’ right to make enough to provide for their families. I don’t believe it should.

Note: A version of this post appeared in The Huffington Post on February 16.

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by | January 20, 2014 · 5:37 pm

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.

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