Where the Jobs Are – Futility of Minimum Wage

Go Lean Commentary

There are laws and there are absolutes.

Gravity is an absolute: what goes up must come down!

Minimum wage is a law, not an absolute.

The book Go Lean…Caribbean, which calls for the elevation of Caribbean economics, asserts that the Caribbean has to better managed the realities of minimum wage jobs. The book examined the anatomy of minimum wages (Page 152) and its effect on a community’s eco-system. This classic case study on this subject is quoted as flows:

A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labor. Although minimum wage laws are in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage.

The minimum wage is generally acknowledged to increase the standard of living of workers, reduces poverty, reduces inequality, boosts morale and forces businesses to be more efficient. Critics of the minimum wage, predominantly followers of neo-classical economic theory, contend that a minimum wage increases unemployment, particularly among workers with very low productivity due to inexperience or handicap, thereby harming less skilled workers and possibly excluding some groups from the labor market; additionally it may be less effective and more damaging to businesses than other methods of reducing poverty.
Source: Black, John (September 18, 2003). Oxford Dictionary of Economics. OxfordUniversity Press. p. 300.

The reality of minimum wage, helping some workers while harming others, has been bantered about in the news as of late, consider the following news articles:

Title #1: Fast Food Workers Win A Historic Raise
By: Cole Stangler, International Business Times

New York made shockwaves on Wednesday when a specially-convened state wage board called for a hike in the minimum pay for fast food workers to $15 an hour. Assuming it’s approved by Gov. Andrew Cuomo –and no signs suggest otherwise– the new rate will be, at once, a jaw-dropping victory for labor activists, a rare political setback for name-brand restaurant chains, and the latest piece of fodder for a national debate about the value of fair pay. It also can’t come soon enough for David Ramirez.

CU Blog - Where the Jobs Are - Futility of Minimum Wage - Photo 1“We need that raise, my man,” says Ramirez, 52, an employee at the same Subway restaurant in midtown Manhattan for the past 10 years, where he earns the state minimum, now $8.75. “We bust our a– up in here.”

On most days, Ramirez wakes well before dawn in downtown Brooklyn, where he splits monthly rent of $1300 with his mother who receives Social Security benefits. He usually starts work at 5 in the morning. When his shift ends at 3 in the afternoon, he heads to a different Subway in Woodmere, Queens –about an hour and a half away by train– and works another 4 hours. It makes for an exhausting 60 hour work week. Since he divides the time over two jobs, neither tallying more than 40 hours per week, Ramirez doesn’t earn any overtime. In New York City, he says, those annual earnings of about $21,000 are hard to get by on. A raise of $6 would go a long way.

“It would make a big difference, not just to me,” he says, “but other families too.”

Unchartered Waters
That was also the thinking of the Fast Food Wage Board, which voted unanimously in support of the $15 rate. The pay hike would apply to fast food chains with 30 or more locations nationwide, and be phased in over time, becoming mandatory in New York City by 2019, and the rest of the state by July 2021. Backed with enthusiasm by Gov. Cuomo, the raise can proceed without legislative approval: a New Deal era law allows state regulators to boost wages for specific industries and occupations where they deem pay “insufficient to provide for the life and health” of workers. The raise comes after two and a half years of high-visibility protests from the so-called Fight For 15, a movement of low-wage workers and labor activists backed by the powerful Service Employees International Union that demands higher wages in fast food and other low-paying sectors.

Amid pressure from these activists, other major cities have already approved $15 minimum wages –Seattle, San Francisco and both the city and county of Los Angeles– but New York’s looming pay hike is unique for a couple of reasons. For one, it’s the only one to apply to a single industry. It also would take effect across the entire state, whereas the other ambitious wage hikes have all been limited to cities.

Jay Holland, government affairs coordinator for the New York State Restaurant Association, blasted the state’s decision to single out the fast food industry. “This is an economic policy that’s never been tried before,” he says of the sector-wide wage. “The idea that an EMT worker or a home care aide should make less than a fast food worker flies in the face of reason.”

“Most restaurants operate under really thin margins,” he adds. “You’re gonna have to raise prices, lay people off or come up with some creative scheduling practices to save money.”

Anna agrees with Holland. She earns $9.75 an hour and works 32 hours a week, scrubbing tables and mopping floors at a McDonald’s in midtown Manhattan. Like many low-wage workers, she lacks job protections and did not provide her last name. “It sounds good,” she says of $15 an hour, “but you know they’re gonna cut hours. That’s what they’re already doing.”

James Sherk, labor policy expert at the conservative Heritage Foundation, says the pay mandates will accelerate the industry’s turn toward automation — self-service tablets, for example, that replace the need for cashiers. Such technologies are already being developed, but are not yet widely used.

“The main barrier to implementation is the up-front cost and then maintenance,” Sherk says. “But with the minimum wage going up it will make a lot more sense for McDonald’s to do this. It changes the financial calculus.”

Tsedeye Gebreselassie, staff attorney at the left-leaning National Employment Law Project, shrugs off the criticism. Businesses always tend to complain when the wage floor rises, she says, and this is no exception. Plus, the hike is staggered over time, giving the firms –which include some of the largest corporations in the nation– plenty of time to adjust.

The boost will also deliver broader benefits to the economy, as workers find themselves with more spending power than before. That bottom tier of the labor force is in despearate need of economic gains. “Part of why there has to be such a dramatic increase is that wages have fallen so dramatically,” Gebreselassie says. “This is about playing catch up.”

It’s also about setting high standards for an increasingly large part of the labor force, she says. More than 4 million people work in the fast food sector nationwide; 180,000 of them are in New York.

As the recovery continues to inch forward, lingering myths of fast food as a temporary gig for teens simply don’t reflect the new economic reality. A New   York survey found 87.5 percent of the state’s fast food workers are aged 19 and older. “Because this is such a growing industry, more and more adults are going to be spending their careers in it,” she says. It makes sense that decent pay should follow.

Another benefit of the wage hike is that it remains largely immune to a common threat of employers confronted with mounting high labor costs: relocation. Unlike the sorts of manufacturing jobs that companies can easily ship to cheaper states or countries — say, General Electric’s ongoing relocation from a unionized capacitor plant in Fort Edward, New York to non-union Clearwater, Florida — fast food restaurants aren’t about to up and leave the state en masse. “You need to be where your customers are, where the demand is,” says Gebreselassie.

“Everything’s Rising Except For The Pay”
For many workers, business concerns don’t change the fact that current pay practices verge on the nightmarish.

“Everything’s rising except for the pay — rents, food, transportation” says Filiberto Carrillo, who, like David Ramirez, has to work at two different New York City Subways to make ends meet. He’s worked at Subway for 6 years, he says, and earns $10 an hour. “Right now, when you ask for more pay, they just give you more hours.”

Physically, he cannot tolerate much more. Carrillo says he usually works 15 to 16 hour days, or 75 hours a week. A $15 wage would be a relief, he says, before going to fix coffee for an anxious customer in line.

Meanwhile, for David Ramirez, a pay raise might resolve his MetroCard dilemma. Right now, he uses a weekly pass. He knows it’s cheaper to get the monthly one, but it’s especially prone to malfunction if it bends a lot — it’s happened before and takes far too long to get fixed. The monthly cost difference between the two passes is about 7 dollars. He would rather not make such calculations.

Source: International Business Times Web News – Posted 07-23-2015; retrieved from:
VIDEO – New York City Gives Fast Food Workers a Raise to a Minimum $15 an Hour – https://youtu.be/2QaFCrhFLjg

Published on Jul 22, 2015 – New York City fast food workers are getting a pay raise after the state’s wage board approved a new minimum hourly pay of $15, up from $8.75 which would take effect by 2018 and 2021 for the rest of the state. The wage hike applies to fast food workers — whether at big corporations like McDonald’s (MCD) and Burger King

Poor McDonalds!

No wait … the foregoing article highlights:

… the pay mandates will accelerate the industry’s turn toward automation — self-service tablets, for example, that replace the need for cashiers. Such technologies are already being developed, but are not yet widely used.

This is the theme of this commentary, minimum wage is a law, not an absolute; technology will simply be deployed to mitigate the high costs of labor. See this subsequent article, posted earlier, during the 4th Quarter of 2014:

Title #2: McDonald’s has joined the list of food chains looking to put more machines to work
By: Patrick Thibodeau, ComputerWorld Magazine Contributor

Oct 24, 2014 – McDonald’s this week told financial analysts of its plans to install self-ordering kiosks and mobile ordering at its restaurants. It isn’t the only food chain doing this.

The company that owns Chili’s Grill & Bar also said this week it will complete a tablet ordering system rollout next month at its U.S. restaurants. Applebee’s announced last December that it would deliver tablets to 1,800 restaurants this year.

The pace of self-ordering system deployments appears to be gaining speed. But there’s a political element to this and it’s best to address it quickly.

The move toward more automation comes at the same time pressure to raise minimum wages is growing. A Wall Street Journal editorial this week, “Minimum Wage Backfire,” said that while it may be true for McDonald’s to say that its tech plans will improve customer experience, the move is also “a convenient way…to justify a reduction in the chain’s global workforce.”

The Journal faulted those who believe that raising fast food wages will boost stagnant incomes. “The result of their agitation will be more jobs for machines and fewer for the least skilled workers,” it wrote.

The elimination of jobs because of automation will happen anyway. Gartner says software and robots will replace one third of all workers by 2025, and that includes many high-skilled jobs, too.

Automation is hardly new to retail. Banks rely on ATMs, and grocery stores, including Walmart, have deployed self-service checkouts. But McDonald’s hasn’t changed its basic system of taking orders since its founding in the 1950s, said Darren Tristano, executive vice president of Technomic, a research group focused on the restaurant industry.

The move to kiosk and mobile ordering, said Tristano, is happening because it will improve order accuracy, speed up service and has the potential of reducing labor cost, which can account for about 30% of costs. But automated self-service is a convenience that’s now expected, particularly among younger customers, he said.

“It’s keeping up with the times, and the (McDonald’s) franchises are going to clamor for it,” said Tristano, who said any labor savings is actually at the bottom of the list of reasons restaurants are putting in these self-service systems.

McDonald’s is already deploying mobile ordering in other countries. In France, you can order a McDonald’s hamburger from a mobile device, tablet or desktop and pick it up later at a restaurant, said Thomas Husson, a Forrester analyst in a report.

“By reducing the stress of the ordering, McDonald’s has significantly increased the average revenue per order,” wrote Husson of the experience in France.

Chili’s has deployed some 45,000 tablets from Ziosk, which makes the system. Ziosk CEO Austen Mulinder says the tablets are used for ordering drinks, appetizers and desserts and for making payments, but they remain optional for customers. The waitstaff will take the first drink and entrée orders, which are often modified by people at the table.

Mulinder said there’s no capital cost to installation, and the multi-year subscription price for the system is more than offset by increased revenues it generates.

The tablet also includes games and an opportunity for people to give feedback, and to join a loyalty program. That creates the potential for increased sales, because customers aren’t necessarily waiting to catch an employee’s attention to refill a drink. It also avoids the frustration of waiting for the check, said Mulinder.

“Restaurants want to speak the language of the millennials and the language of millennials is digital,” said Mulinder.

Wyman Roberts, the CEO of Chili’s parent company, Brinker International, spoke to financial analysts this week in a conference call about the new system. “We’re excited about the potential this has to create a stronger connection and smarter interactivity between us and our guests,” said Roberts, according to a transcript by Seeking Alpha.

Patrick Thibodeau – Senior Editor – covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld.

The current Federal minimum wage is $7.25/hour; a change to $15 is considered by some: Extreme!

Needless to say, this issue is highly charged politically.

There are forces on the “left” that want to elevate many in poverty by mandating a higher minimum wage, setting a higher entitlement benefit. Then there are forces on the “right” that want the Free Market to reign, despite any suffering by those at the lowest rungs of society’s economic ladder. Consider this right-leaning commentary here in the following article:

Title #3: McDonald’s Announces Its Answer to $15 an Hour Minimum Wage – Touch-Screen Cashiers
By: Jim Hoft, June 15th, 2015

This is exactly what the left pushed for… Fast Food chains were never meant to be a place for someone to raise a family of 6, they were to be part time positions with some full-time advancements. Mostly the fast food restaurants were for school aged kids to learn how to interact with people, with a job, to offer spending money, and to begin responsibility learning for their future.

The part time position was not intended to pay for a house, it is a stepping stone to move on.

$15.00/hr x 8 hrs= $120/day x 5 days= $600/week x 52 weeks = $31,200/year!!

Of course when this happens, like it did today in Los Angeles, the poor and unskilled workers will go on Welfare, and cost American workers more to support them.

McDonald’s recently came out with their answer to those that want $15/hr pay:


This month in Europe McDonald’s hired 7,000 touch-screen cashiers. See a related article here:http://www.cnet.com/news/mcdonalds-hires-7000-touch-screen-cashiers/
CU Blog - Where the Jobs Are - Futility of Minimum Wage - Photo 2

From a Caribbean perspective, neither extreme – “left” nor “right” – is acceptable!

The $31,200 annual salary for New York proposed minimum wage is higher than the average income for all Caribbean member-states, except the states with bloated figures from residing expatriates and offshore banking activity (Bermuda, BVI, Caymans & St. Barths). This new $31,200 minimum wage development would therefore lure even more Caribbean citizens away, as those minimum wage jobs in New York would be higher than their normal income/experiences at home. The Caribbean crisis will therefore deepen.

These ‘Agents of Change’ (Technology and Globalization/Mobilization of Labor Force) align with the book Go Lean … Caribbean. The book calls for the elevation of Caribbean economics, asserting that the Caribbean region has been losing the battle of technology and globalization. The consequence of our defeat is the sacrifice of our most precious treasures: our people, especially our youth. The assessment of all 30 Caribbean member-states is that every community has lost human capital to emigration. Some communities, like Puerto Rico (and the US Virgin Islands) have suffered with an abandonment rates of more than 50% , thus the term “Nuyorican”. Other states have watched as more than 70% of their college-educated citizens flee their homelands for foreign shores.

These ‘Agents of Change’ are affecting everyone, everywhere. The Go Lean book therefore posits that there is a need to re-focus, re-boot, and optimize the engines of commerce – fix the broken eco-systems – so as to make the Caribbean a better place to live, work and play. We need jobs; though our focus is on higher-paying jobs, the minimum wage variety, must not be ignored. The foregoing news articles therefore are very relevant … and fear-inspiring.

The book Go Lean… Caribbean, serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU) with the charter to facilitate jobs in the region. The book posits that ICT (Internet & Communications Technology) can be a great equalizer for the Caribbean to better compete with the rest of the world. This job-creation focus is among these 3 prime directives of CU/Go Lean roadmap:

  • Optimization of economic engines in order to grow the regional economy to $800 Billion and create 2.2 million new jobs.
  • Establishment of a security apparatus to protect the resultant economic.
  • Improvement of Caribbean governance to support these engines.

Early in the Go Lean book, the responsibility to create jobs was identified as an important function for the CU with these pronouncements in the Declaration of Interdependence (Pages 14):

xxvi.     Whereas the Caribbean region must have new jobs to empower the engines of the economy and create the income sources for prosperity, and encourage the next generation to forge their dreams right at home, the Federation must therefore foster the development of new industries, like that of ship-building, automobile manufacturing, prefabricated housing, frozen foods, pipelines, call centers, and the prison industrial complex. In addition, the Federation must invigorate the enterprises related to existing industries tourism, fisheries and lotteries – impacting the region with more jobs.

xxvii.    Whereas the region has endured a spectator status during the Industrial Revolution, we cannot stand on the sidelines of this new economy, the Information Revolution. Rather, the Federation must embrace all the tenets of Internet Communications Technology (ICT) to serve as an equalizing element in competition with the rest of the world. The Federation must bridge the digital divide and promote the community ethos that research/development is valuable and must be promoted and incentivized for adoption.

xxviii.   Whereas intellectual property can easily traverse national borders, the rights and privileges of intellectual property must be respected at home and abroad. The Federation must install protections to ensure that no abuse of these rights go with impunity, and to ensure that foreign authorities enforce the rights of the intellectual property registered in our region.

According to a previous blog/commentary, computers are reshaping the global job market; now the foregoing articles relate that the impact is also affecting the low-end Fast-Food industry’s jobs. Nothing is safe! Consider these other blog/commentaries related to the current state of the job market:

http://www.goleancaribbean.com/blog/?p=5597 Wage-Seeking: Market Forces -vs- Collective Bargaining
http://www.goleancaribbean.com/blog/?p=5210 Cruise Ship Labor/Commerce: Getting Ready for Change
http://www.goleancaribbean.com/blog/?p=4278 Businesses Try to Stave-off Brain Drain as Boomers Retire
http://www.goleancaribbean.com/blog/?p=3446 Forecast for higher unemployment in Caribbean in 2015
http://www.goleancaribbean.com/blog/?p=2857 Where the Jobs Are – Entrepreneurism in Junk
http://www.goleancaribbean.com/blog/?p=2025 Where the Jobs Are – Attitudes & Images of the Diaspora
http://www.goleancaribbean.com/blog/?p=2003 Where the Jobs Are – One Scenario: Shipbreaking
http://www.goleancaribbean.com/blog/?p=1698 Where the Jobs Are – STEM Jobs Are Filling Slowly
http://www.goleancaribbean.com/blog/?p=242 The Erosion of the Middle Class

The book Go Lean…Caribbean details the creation of 2.2 million new jobs for the Caribbean region, many embracing ICT/STEM (Science, Technology, Engineering and Mathematics/Medicine) skill-sets. How? By adoption of certain community ethos, plus the executions of key strategies, tactics, implementations and advocacies. The following is a sample from the book:

Community Ethos – Deferred Gratification Page 21
Community Ethos – Economic Principle – Economic Systems Influence Choices & Incentives Page 21
Community Ethos – Consequences of Choices Lie in the Future Page 21
Community Ethos – Job Multiplier Page 22
Community Ethos – Lean Operations Page 24
Community Ethos – Return on Investments Page 24
Community Ethos – Ways to Impact the Future Page 26
Community Ethos – Ways to Help Entrepreneurship Page 28
Community Ethos – Ways to Promote Intellectual Property Page 29
Community Ethos – Ways to Impact Research & Development Page 30
Community Ethos – Ways to Bridge the Digital Divide Page 31
Strategy – Mission   – Education Without Further Brain Drain Page 46
Tactical – Fostering a Technocracy Page 64
Tactical – Tactics to Forge an $800 Billion Economy – High Multiplier Industries Page 70
Tactical – Separation of Powers – Commerce Department – Patents & Copyrights Page 78
Implementation – Ways to Pay for Change Page 101
Implementation – Ways to Deliver Page 109
Implementation – Ways to Impact ICT and Social Media Page 111
Planning – Ways to Improve Trade Page 128
Advocacy – Ways to Create Jobs Page 152
Advocacy – Ways to Improve Education Page 159
Advocacy – Ways to Better Manage Food Consumption – Reality of Quick Serve Restaurants Page 162
Advocacy – Ways to Impact Labor Markets and Unions Page 164
Advocacy – Ways to Foster Technology Page 197
Advocacy – Ways to Foster e-Commerce Page 198
Advocacy – Ways to Battle Poverty – Third World Realities Page 222
Advocacy – Ways to Help the Middle Class Page 223
Advocacy – Ways to Impact Youth – Usual Candidates for Fast-Food Jobs Page 227
Appendix – Growing 2.2 Million Jobs in 5 Years Page 257
Appendix – Job Multipliers Page 259
Appendix – Nuyorican Movement Page 303

The CU must foster job-creating developments for above minimum-wage jobs, by incentivizing many high-tech start-ups and incubating viable companies. The primary ingredient for CU success must be Caribbean people, so we must foster and incite participation of many young people into STEM fields.

The automation trend will continue. We cannot be on the receiving end of these monumental changes; we must help foster the change as well. These previous commentaries highlighted how the Go Lean roadmap is preparing the region for engagement with autonomous systems:

http://www.goleancaribbean.com/blog/?p=5376 Drones to be used for Insurance Damage Claims
http://www.goleancaribbean.com/blog/?p=3187 Robots help Amazon tackle Cyber Monday
http://www.goleancaribbean.com/blog/?p=1487 Here come the Drones … and the Concerns
http://www.goleancaribbean.com/blog/?p=1277 The need for highway safety innovations – here comes Google
http://www.goleancaribbean.com/blog/?p=673 Ghost ships – Autonomous cargo vessels without a crew

The Caribbean must not be parasites, we must be protégés!

The Caribbean is arguably the best address on the planet, but jobs are obviously missing. Everyone is hereby urged to lean-in to this Go Lean roadmap, so that we can create the high-paying, community-impacting jobs. This roadmap provides the turn-by-turn directions to get the region to its desired destination: a better place to live, work and play. 🙂

Download the free e-Book of Go Lean … Caribbean – now!

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