Minimum wage hikes are a great idea. But here's how corporations and the right hope to make America hate them
Last week, a restaurant in suburban Minneapolis began not-so-discreetly adding a 35 cent “minimum wage fee” to its diners’ bills. An asterisk at the bottom of the Oasis Café’s receipts explained: “*MIN WAGE FEE is a charge to offset a state increase of minimum wage for tipped employees.” Naturally, outrage ensued, and the restaurant’s Facebook page became locked in Manichaean battle between supporters of the restaurant and defenders of the common working American.
Instead of conspicuously posting that separate surcharge, the Oasis Café probably could have saved itself a lot of aggravation and vengeful one-star Yelp reviews by merely folding any added labor costs into the prices of its menu items. No matter how innocent it was, or whether they merely wanted to be honest and upfront about things, many people took it as a mealy-mouthed protest that nickel-and-dimes their customers and spits on their hardworking staff.
However, the Oasis Café is not alone in passing the buck, or fraction thereof, in response to wage increases — which, in Minnesota’s case, is a mere $8 as of Aug. 1. The city of SeaTac, Washington, which largely exists to service the airport that shares its name, enacted a $15 minimum wage earlier this year. Although full of exemptions at the outset, the fair-wage ordinance spurred one long-term parking garage to tack on a daily $.99 “living wage surcharge” that comes in addition to a $2.50 “airport access fee.” Park your car for a week’s vacation, and that $6.93 is quite a bit more than a 35 cent fee for dinner, although the outcry was comparatively muted.
Minimum wage increases aren’t the only inspiration for sticking consumers with the bill. For years, San Francisco restaurants have tacked small fees (usually $3 or $4) onto the total tab to pay into a city healthcare fund for uninsured food-service workers. Overall, the policy earned grudging respect in a progressive, food-obsessed city with a history of standing up for labor — until it was revealed that several restaurants weren’t paying into the healthcare fund at all, but pocketing the money. Worse, a Los Angeles restaurant-bakery defended its 3 percent healthcare surcharge by directing any miffed customers to deduct the equivalent amount from the tip.
In the aggregate, this points to a trend whereby businesses protest progressive policy that might eat into their profits by nickel-and-diming their customers, and then, upon being called out, claim their backs were against the wall. It could get uglier, too. Assuming the U.S. ever gets serious about carbon taxes to reduce greenhouse gas emissions, might we see gas stations decouple those taxes from the price of the gasoline itself, and hit drivers with the full amount owed only after they’ve put the pump back in the holster? (I do hope I haven’t given Exxon an idea.)
The practice isn’t just making restaurant tabs more unpleasant and invoice-like, either. Inscrutable fees have made phone bills so opaque that T-Mobile was able to make millions in kickbacks from third parties who cram those bills with dubious charges, thereby profiting off its users’ confusion and passivity. And it worked. Major corporations will probably be savvier than a mom-and-pop diner, but the strategy is the same: when a progressive policy wins, consumers must lose. Maybe an ensuing public outcry will lead to the policy’s repeal, maybe it will throw cold water on further proposals, or maybe the company can just defray some of the costs. Every scenario is a win.
Let’s not dwell too long on the grotesque phrase “living wage surcharge,” or the implication that it’s somehow punitive for a business to keep its employees alive. But as Seattle gets acclimated to its $10.10 wage and mulls over the possibility of a $15 threshold (with a likely exemption for small businesses), the sky isn’t entirely caving in. Craig Jelinek, CEO of Costco, told Seattle Weekly that “$15 seems not even a living wage” and that “We at Costco could manage it.” That’s a far cry from the apocalyptic drumbeat emanating from the Wall Street Journal’s editorial page, for whom the prospect of a minimum wage increase sounds like a gamma-ray burst shearing through the solar system to extinguish life on this planet. They’d prefer literally any other policy, even an expansion of the dreaded welfare state.
But the arguments don’t hold up. The American Legislative Exchange Council (ALEC), that intellectual fountainhead for a great deal of conservative public policy, has a white paper on raising the minimum wage that takes a peculiar tone. Instead of hectoring those meddlesome socialists who can’t see the consequences of interfering with the free market, ALEC sheds a few crocodile tears for low-wage earners, who will still be caught in a cycle of dependency and mass unemployment. Remarkably, however, the same paper concedes that a $9 wage would lead to “increased spending by minimum-wage earners … [and for] GDP to remain constant in the long run.” Imagine, the architects of wage suppression themselves, basically conceding the point to Paul Krugman.
Yet the rhetoric surrounding the minimum wage still borders on the hysterical, from the WSJ to the Chamber of Commerce to Forbes — a hysteria that happens to rest on complete ignorance about how poverty is lived in America. In a brilliant segment, Samantha Bee of “The Daily Show” skewered supply-side economist Peter Schiff, capturing his insistence that only teenagers earn such low wages because no one with a bachelor’s degree is actually an employee at Burger King, before cutting to college-graduate fast-food workers on the picket line. Yet to Schiff, adults earning the minimum wage is “a hypothetical situation that’s not going to exist.”
What will certainly exist in an America of higher wages is more consumer spending. According to Bloomberg News, a report by the Federal Reserve Bank of Chicago estimated that a $1.75 raise boost would increase consumer spending by some $48 billion, largely because low-income people would no longer have to pick and choose among necessities. Perhaps fears of mass unemployment ought to be tempered with, if not altogether replaced by, relief over hordes of new customers.
Still, people are resistant. The logic of low wages as the necessary condition for low prices is seductive, the “job-killer” cliché is omnipresent, the notion that any governmental intervention is the first step toward communism prevails, and there is always the zombie specter of runaway inflation. Although the inflation-mongers have been consistently wrong in their dire predictions for five years, there seems to be little consideration that their position is but the last refuge of the wage-suppressing scoundrel.
This is the climate in which an ordinary restaurant, likely operating on a slim profit margin as many do, feels the need to gamble with its customers’ loyalty by demonstratively passing on costs. The prospect of a fair wage isn’t just another public policy debate. It’s existential now. No one expects firms to swallow the costs of doing business out of concern for human welfare. But when an Oasis Café piously robs Peter to pay Paul instead of making a quiet adjustment to its pricing structure, as businesses routinely do, it becomes both a symptom and a cause of the general hysteria surrounding a fair wage. In an economic recovery that seems to be permanently tepid, people are primed for fear, no matter how yawning the chasm of income inequality.
But the tide might be turning. While businesses will almost certainly keep bristling at the cost of paying their employees decently, and itemizing that grievance on receipts, the backlash isn’t likely to die out. The concept of a living wage is swiftly becoming progressives’ unifying cause, and the argument that higher wages benefit the economy might supplant the low wages/low prices doctrine that has reigned for years. It’s a tough thing, though, appealing to people’s hearts and minds while also trumpeting hard economic data. Blowing right through the $15 dream, Sen. Elizabeth Warren questioned why the minimum isn’t $22/hour, right now. If there’s a public official who’s up to the rhetorical challenge, it is she.
Instead of conspicuously posting that separate surcharge, the Oasis Café probably could have saved itself a lot of aggravation and vengeful one-star Yelp reviews by merely folding any added labor costs into the prices of its menu items. No matter how innocent it was, or whether they merely wanted to be honest and upfront about things, many people took it as a mealy-mouthed protest that nickel-and-dimes their customers and spits on their hardworking staff.
However, the Oasis Café is not alone in passing the buck, or fraction thereof, in response to wage increases — which, in Minnesota’s case, is a mere $8 as of Aug. 1. The city of SeaTac, Washington, which largely exists to service the airport that shares its name, enacted a $15 minimum wage earlier this year. Although full of exemptions at the outset, the fair-wage ordinance spurred one long-term parking garage to tack on a daily $.99 “living wage surcharge” that comes in addition to a $2.50 “airport access fee.” Park your car for a week’s vacation, and that $6.93 is quite a bit more than a 35 cent fee for dinner, although the outcry was comparatively muted.
Minimum wage increases aren’t the only inspiration for sticking consumers with the bill. For years, San Francisco restaurants have tacked small fees (usually $3 or $4) onto the total tab to pay into a city healthcare fund for uninsured food-service workers. Overall, the policy earned grudging respect in a progressive, food-obsessed city with a history of standing up for labor — until it was revealed that several restaurants weren’t paying into the healthcare fund at all, but pocketing the money. Worse, a Los Angeles restaurant-bakery defended its 3 percent healthcare surcharge by directing any miffed customers to deduct the equivalent amount from the tip.
In the aggregate, this points to a trend whereby businesses protest progressive policy that might eat into their profits by nickel-and-diming their customers, and then, upon being called out, claim their backs were against the wall. It could get uglier, too. Assuming the U.S. ever gets serious about carbon taxes to reduce greenhouse gas emissions, might we see gas stations decouple those taxes from the price of the gasoline itself, and hit drivers with the full amount owed only after they’ve put the pump back in the holster? (I do hope I haven’t given Exxon an idea.)
The practice isn’t just making restaurant tabs more unpleasant and invoice-like, either. Inscrutable fees have made phone bills so opaque that T-Mobile was able to make millions in kickbacks from third parties who cram those bills with dubious charges, thereby profiting off its users’ confusion and passivity. And it worked. Major corporations will probably be savvier than a mom-and-pop diner, but the strategy is the same: when a progressive policy wins, consumers must lose. Maybe an ensuing public outcry will lead to the policy’s repeal, maybe it will throw cold water on further proposals, or maybe the company can just defray some of the costs. Every scenario is a win.
Let’s not dwell too long on the grotesque phrase “living wage surcharge,” or the implication that it’s somehow punitive for a business to keep its employees alive. But as Seattle gets acclimated to its $10.10 wage and mulls over the possibility of a $15 threshold (with a likely exemption for small businesses), the sky isn’t entirely caving in. Craig Jelinek, CEO of Costco, told Seattle Weekly that “$15 seems not even a living wage” and that “We at Costco could manage it.” That’s a far cry from the apocalyptic drumbeat emanating from the Wall Street Journal’s editorial page, for whom the prospect of a minimum wage increase sounds like a gamma-ray burst shearing through the solar system to extinguish life on this planet. They’d prefer literally any other policy, even an expansion of the dreaded welfare state.
But the arguments don’t hold up. The American Legislative Exchange Council (ALEC), that intellectual fountainhead for a great deal of conservative public policy, has a white paper on raising the minimum wage that takes a peculiar tone. Instead of hectoring those meddlesome socialists who can’t see the consequences of interfering with the free market, ALEC sheds a few crocodile tears for low-wage earners, who will still be caught in a cycle of dependency and mass unemployment. Remarkably, however, the same paper concedes that a $9 wage would lead to “increased spending by minimum-wage earners … [and for] GDP to remain constant in the long run.” Imagine, the architects of wage suppression themselves, basically conceding the point to Paul Krugman.
Yet the rhetoric surrounding the minimum wage still borders on the hysterical, from the WSJ to the Chamber of Commerce to Forbes — a hysteria that happens to rest on complete ignorance about how poverty is lived in America. In a brilliant segment, Samantha Bee of “The Daily Show” skewered supply-side economist Peter Schiff, capturing his insistence that only teenagers earn such low wages because no one with a bachelor’s degree is actually an employee at Burger King, before cutting to college-graduate fast-food workers on the picket line. Yet to Schiff, adults earning the minimum wage is “a hypothetical situation that’s not going to exist.”
What will certainly exist in an America of higher wages is more consumer spending. According to Bloomberg News, a report by the Federal Reserve Bank of Chicago estimated that a $1.75 raise boost would increase consumer spending by some $48 billion, largely because low-income people would no longer have to pick and choose among necessities. Perhaps fears of mass unemployment ought to be tempered with, if not altogether replaced by, relief over hordes of new customers.
Still, people are resistant. The logic of low wages as the necessary condition for low prices is seductive, the “job-killer” cliché is omnipresent, the notion that any governmental intervention is the first step toward communism prevails, and there is always the zombie specter of runaway inflation. Although the inflation-mongers have been consistently wrong in their dire predictions for five years, there seems to be little consideration that their position is but the last refuge of the wage-suppressing scoundrel.
This is the climate in which an ordinary restaurant, likely operating on a slim profit margin as many do, feels the need to gamble with its customers’ loyalty by demonstratively passing on costs. The prospect of a fair wage isn’t just another public policy debate. It’s existential now. No one expects firms to swallow the costs of doing business out of concern for human welfare. But when an Oasis Café piously robs Peter to pay Paul instead of making a quiet adjustment to its pricing structure, as businesses routinely do, it becomes both a symptom and a cause of the general hysteria surrounding a fair wage. In an economic recovery that seems to be permanently tepid, people are primed for fear, no matter how yawning the chasm of income inequality.
But the tide might be turning. While businesses will almost certainly keep bristling at the cost of paying their employees decently, and itemizing that grievance on receipts, the backlash isn’t likely to die out. The concept of a living wage is swiftly becoming progressives’ unifying cause, and the argument that higher wages benefit the economy might supplant the low wages/low prices doctrine that has reigned for years. It’s a tough thing, though, appealing to people’s hearts and minds while also trumpeting hard economic data. Blowing right through the $15 dream, Sen. Elizabeth Warren questioned why the minimum isn’t $22/hour, right now. If there’s a public official who’s up to the rhetorical challenge, it is she.
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