I was glad to see that most of our Dunkin’ franchise owners made it through another round of “Fight for 15” protests a few weeks ago. We have seen quite the orchestration over the past year by SEIU and their activist friends. Of course, protests are nothing new in our democracy, nor is the willingness of the media to publicize the cause. We’ve all seen the press present the Fight for $15 as a just cause—one the American public agrees is a fair and equitable resolve. They’ve successfully steered the dialogue into a question of whether we “feel” that American workers should be making at least $15 per hour regardless of the work they do. The flaw in that thinking, of course, is that the pay a person receives for their work should bear a relationship to the value of the work they provide. The reality is employers should not pay their workers more than the productive value of the work they perform.
When a staffer for the Heritage Foundation, a Washington think-tank, testified before a Congressional hearing on the impact of mandating a minimum wage in 2013, he presented the case study of American Samoa, a U.S. territory in the South Pacific Ocean. Between 2007 and 2009, Congress mandated businesses in the territory increase the minimum wage from $3.56 to $7.25, to match the federal minimum. The plan was to raise the rate in annual increments of fifty cents. Within two years the impact was clear. The unemployment rate on American Samoa soared from 5 percent to 35 percent; one of the two tuna canneries (the main industry on the island) closed, while the other dramatically cut hours and jobs. Overall employment fell 14 percent; employment in the tuna canning industry dropped 55 percent and real wages plummeted 11 percent. Congress ultimately agreed with the governor of American Samoa and ceased future minimum wage increases on the islands.
Back here on the mainland, Congress isn’t quite repeating that mistake, but state legislatures and city councils absolutely are. In the hope of winning favor from organized labor and its activist allies, state and local (as well as some national) elected officials are kowtowing to the demands of SEIU and their minions, at the ultimate expense of the very people they purport to want to help.
Our capitalist system is predicated on supply and demand – what a willing buyer will pay a willing seller for a particular good or service. It is not now, never has been, nor ever shall be dictated by what people feel another individual needs to live at a “minimum level of comfort.” And therein, lies the rub as far as I am concerned.
A few weeks back, DDIFO hosted its first members’ meeting in Virginia, the home state of Washington, Jefferson, Madison and Monroe. (And, it was an outstanding meeting, too!) It reminded me that our Founding Fathers clearly understood how demand would drive the market and establish the value of individual products. The reason many of them planted and harvested tobacco is because it was among the most valuable crops of their time. They could have just as easily planted and harvested kale or Belgian endive, but the market dictated the greatest return was on tobacco.
Today, markets still determine the value of a product and service. Hamburgers are less valuable than microchips and employees who work in high tech have a higher level of skill than their burger-flipping compatriots. We all understand that as workers develop valuable employment skills, they move up from the bottom rung of the economic ladder. Some are able to achieve that in traditionally low-wage jobs by moving into management; others move into more specialized jobs, like high-tech. In either case, they are compensated based on the value they bring to an organization. What the Fight for $15 advocates are pushing however, is to just leave that employee in a low-skill and low-value job, but compensate them at a level commensurate with higher skills.
Throughout our history, parents have advised/instructed/mandated that their children get an education so that they can get a good job and earn a wage that provides them with the resources they need to live their lives as they wished. The unspoken message in that exhortation is to “make something of yourself,” develop job skills and work experiences that are in demand so that you can maximize your income. Conversely, if a person is satisfied with a low-income (read: low-value) job and either doesn’t want to take on more responsibility or work harder, then he/she is compensated at their value and will have to adjust their lifestyle accordingly.
Even as George Washington was planting his tobacco crops, our system of capitalism was already rewarding innovation and hard work while placing a higher value on certain products and services. Even though the market value of some products has changed with the decades, it doesn’t mean the value associated with higher skill or harder work should be diminished by paying more for those who produce less.
