Recently, I wrote about “other channels of adjustment” for firms facing minimum wage increases (other than reducing hiring or laying off workers). My main point was this: though a minimum wage hike need not lead to job losses at every single firm, in the absence of firms not knowing how to incentivize their workers properly to maximize profitability, other business responses are not costless.
A good example can be seen in today’s story about Whole Foods. Under pressure from campaigners, Amazon recently raised its pay for its lowest-paid employees to $15-an-hour. Now some workers aren’t enjoying the effects:
The Illinois-based worker explained that once the $15 minimum wage was enacted, part-time employee hours at their store were cut from an average of 30 to 21 hours a week, and full-time employees saw average hours reduced from 37.5 hours to 34.5 hours. The worker provided schedules from 1 November to the end of January 2019, showing hours for workers in their department significantly decreased as the department’s percentage of the entire store labor budget stayed relatively the same.
“We just have to work faster to meet the same goals in less time,” the worker said.
The labor budget and schedule cuts at Whole Foods in the wake of the minimum wage increase appear to be similar to changes Amazon made after it raised the pay of warehouse workers to a minimum wage of $15 an hour. That move was widely praised but Amazon also cut stock vesting plans and bonuses that had provided extra pay to some workers.
Some Whole Foods workers say the cuts have led to understaffing issues. “Things that have made it more noticeable are the long lines, the need to call for cashier and bagging assistance, and customers not being able to find help in certain departments because not enough are scheduled, and we are a big store,” said one worker in California.
Whole Foods and Amazon therefore seem to be adjusting to higher hourly pay in several ways: cutting hours for employees and sweating them harder during those reduced hours, cutting back on stock plans and bonuses, and passing on the extra cost to consumers in the form of worse service. None of these are costless:
- cutting hours or bonuses negates the earnings boost from hourly pay increases
- sweating workers harder makes the work environment less pleasant, and may reduce job opportunities for workers incapable of “upping their game”
- a worse shopping experience is a quality-adjusted price increase for consumers
These are exactly the types of impacts I was referring to re: high minimum wages. When statutory wage floors are increased, the fact that the firm would not have opted to undertake these changes in the absence of the wage hike suggests changes would otherwise not have been profitable, and as such are still costly (though some firms are no doubt currently not efficient – making it feasible for some that higher minimum wages could jolt them to a better business model.)
There’s a great discussion of this issue towards the end of a brilliant EconTalk podcast on the minimum wage this week.
For more on the minimum wage, read here, here, here, here, here, here and here.
Food stamp usage is on an upsurge as a result of the economic downturn and liberalized eligibility. Thanks to some good journalistic work from Aleksandra Kulczuga of the Daily Caller, we’re getting a better picture of how government dependency is spreading to a new generation.
Kulczuga reports that college students are increasingly going on the dole thanks to encouragement from college officials and poverty organizations dedicated to fomenting government dependency.
From the article:
Adam Sylvain, a sophomore at Virginia’s George Mason University, recounted a recent conversation with friends in his dorm room. “My roommate told me he applied for food stamps, and they told him he qualified for $200 a month in benefits,” Sylvain said. “He’s here on scholarship and he saves over $5,000 each summer in cash.”
“A few of our other friends who were in the room also said if there were able to, they would get food stamps … They think that if they’re eligible it’s the government’s fault, so they might as well,” Sylvain said.
Students at GMU can buy a meal plan for $1,275 that provides 10 meals a week for the semester — that’s $71 a week.
When I was in college, my friends and I worked during the school year and through the summer to fund our expenses. My father worked multiple jobs to pay his way through college while supporting a young wife. He grew up in a family headed by a single mother that relied on extended family and charities to help them through tough times. He may have been eligible for food stamps in college, but he would have never taken a government handout.
Today’s generation seems to be different. This Salon article tells of unemployed college grads using food stamps to purchase organic food at high-end grocers like Whole Foods.
From the article:
At Magida's brick row house in Baltimore, she and Mak minced garlic while observing that one of the upsides of unemployment was having plenty of time to cook elaborate meals, and that among their friends, they had let go of any bad feelings about how their food was procured.
"It's not a thing people feel ashamed of, at least not around here," said Mak. "It feels like a necessity right now."
Savory aromas wafted through the kitchen as a table was set with a heaping plate of Thai yellow curry with coconut milk and lemongrass, Chinese gourd sautéed in hot chile sauce and sweet clementine juice, all of it courtesy of government assistance.
Remember that many of these students probably had their college educations subsidized by the government as well.
As I hope you know by now, John Stossel is on the Fox Business Network every Thursday night at 8 p.m. Don't miss it. But if you do, there are rebroadcasts at 10 p.m. Friday, 7 p.m. Saturday, and 11 p.m. Sunday.
But some people complain that their local cable station doesn't carry the Fox Business Network. Well, contact them and tell them you want Stossel! (I'll wait while you do that.) And now, since the cable company won't add the network instantly, you should also know that clips and full shows are also available at Hulu.com. Just go to http://www.hulu.com/stossel for lots of recent shows -- on health care, global warming, Ayn Rand, Whole Foods, and more.
Michael Petrilli created a stir with his Wall Street Journal op-ed, "Whole Foods Republicans," on Monday. He noted that the American electorate includes more college graduates every year, and in 2008 the Republican nominee for president lost the college-educated vote for the first time since the 1970s. Republicans need to stop sneering at the "arugula vote" and start appealing to educated, progressive voters:
What's needed is a full-fledged effort to cultivate "Whole Foods Republicans"—independent-minded voters who embrace a progressive lifestyle but not progressive politics....
What makes these voters potential Republicans is that, lifestyle choices aside, they view big government with great suspicion. There's no law that someone who enjoys organic food, rides his bike to work, or wants a diverse school for his kids must also believe that the federal government should take over the health-care system or waste money on thousands of social programs with no evidence of effectiveness....
Even more important is the party's message on divisive social issues. When some Republicans use homophobic language, express thinly disguised contempt toward immigrants, or ridicule heartfelt concerns for the environment, they affront the values of the educated class. And they lose votes they otherwise ought to win.
These voters are part of the "libertarian vote" that David Kirby and I have been exploring. Libertarian voters tend to be more educated than average (see "The Libertarian Vote," table 11, page 17), and they can be described as "fiscally conservative and socially liberal." It's good to know other people are noticing them, and we hope that soon candidates and consultants will take note. For those who are still dubious, the day after the Wall Street Journal column, the Washington Post published this letter:
When I read House Minority Leader John Boehner's Washington Forum commentary about the GOP's thoughts on economic policy and job creation -- as compared with that of the Obama administration ["A better plan for jobs," Dec. 11] -- I wanted to cheer. I am concerned about America's increase in debt and think that the health reform plan is interventionist and has no hope of reforming health care.
But I can't cheer. Because I apparently can't be a Republican -- limited government, fiscal conservative -- unless I am also willing to vote for "pure conservative" candidates a la the purity test being proposed to the Republican National Committee: pro-life, anti-gay marriage, draconian immigration policies ["A party both united and divided," front page, Nov. 30]. These are policies I refuse to support.
So, whom do I vote for next year?
Kathy Rondon, Falls Church
I don't know if Ms. Rondon shops at Whole Foods, but she's definitely a part of the "libertarian vote." Republicans wondering why they lost in 2006 and 2008, and Democrats worrying about slipping poll numbers during 2009, should take a look at the libertarian slice of the electorate.