Minimum Wage Hike: Yes, It’s Ethical – But is it Logical?

AGORA – THE ORIGINAL MARKETPLACE OF IDEAS

By Dan Georgakas and Constantinos E. Scaros

From time to time an issue emerges and inspires various minds to converge, often at odds with one another, to discuss it. Hopefully, collective enlightenment will result from such conversations. The Ancient Greeks did that in the Agora, the original marketplace of ideas, and we, their modern-day descendants, aspire to continue that tradition.

We respect one another’s opinion very much, but often times we will disagree on particular issues. We would never fabricate a difference of opinion for the sake of writing an interesting column.

Rest assured, anything we write here are our sincere, heartfelt thoughts. We will share them with you every two weeks. We hope you enjoy them, and we look forward to your taking part in the discussion as well – by contributing letters to the editor in response, and/or commenting on our website: www.thenationalherald.com.

PART 1: GEORGAKAS SHARES HIS POINT OF VIEW

Dino, in the past month we have seen spirited demonstrations by fast food workers demanding a raise in the current minimum hourly wage of $7.25 to at least $10 and hopefully $15. This is not a liberal versus conservative issue. It is a matter of logic and ethics, what the Ancient Greeks termed Logos and Ethos.

Wages paid at $7.25 per hour produce a yearly income of about $15,000, which is below the poverty line. Economic survival for such workers and their families is dependent on various public assistance programs, such as the availability of food stamps.

The average wage of the 4 million workers in the fast food industry is $8.25 per hour which produces a paltry $18,000 annual income. A raise to $10.50 per hour for just these fast food workers would add over a billion dynamic dollars to the economy. The dollars are “dynamic” in that low-wage workers have to spend almost all of their income on the essentials of daily life. That means the money immediately enters and simulates the base of the economy.

Benefits for often hard-pressed city and state governments would be a rise in sales tax income while all levels of government would have to spend less on assistance programs. Employers would benefit by spending less on training new workers as the turnover rate would likely decline.

These are not jobs that can be exported. We also know that in response to the Great Recession, companies already have stripped their employment numbers as low as possible. They cannot go lower as fast and reliable service is a crucial competitive factor for fast food and retail establishments.

Corporations could easily accommodate these pay increases. Walmart and McDonalds, for example, are among the most profitable enterprises in America. Executives at such corporations earn at least high six figure salaries and scores of untaxed benefits. Even CEOs who lose their jobs because the corporations they managed have floundered are routinely given millions of dollars to leave. Nonetheless, corporations are most likely to pass along new costs to consumers.

One hundred economists who support a raise in the minimum wage have sent a petition to Congress showing that an increase of the minimum wage to $10.50 will add no more than 2.7% costs to corporations that have the largest number of minimum-wage workers. These means the price of a Big Mac rises from $4.50 to $4.60 or a $10 breakfast special at Denny’s rises to $10.27. Such price increases will not affect sales.

Which brings us to Ethos. The trend in America these past 30 years has been for the rich to become super rich while the average income of all others remains stagnant or just matches the rate of inflation. The same Walmart that doesn’t wish to raise the minimum wage pays just three heirs of the Walmart founder more than a billion dollars annually in dividends!

The unspoken aspect of raising the minimum wage is that it may stir other workers to ask for wage increases. Persons alarmed by such a prospect need to consult Adam Smith, the author of the seminal Wealth of Nations. Smith (hardly a Marxist) stressed that capitalist greed was not only unethical but a sure road to intellectual and political suicide.

Minimum wage workers are not slackers who do not wish to work, and they have already qualified for the jobs they hold. Their demand for a wage increase raises a fundamental ethical question for our society. Do we or do we not support a minimum wage that is also a livable wage?

PART 2: SCAROS RESPONDS

Dan, if Walmart, McDonald’s, and many of the other corporations to which you refer generally were run by Dan and Dino, then I would wholeheartedly endorse your proposal for an increase in the minimum wage. I can certainly speak for myself and I believe I know you well enough to speak for you, too: Dan and Dino would not be blinded by greed, If the added expense counted against our already-astronomical profits was a mere 2.7%, surely we would be able to continue to enjoy a high quality of life, reassured that our decision would help society function more smoothly (Logos) and satisfied that we have done what is good, right, and just (Ethos).

Gordon Gekko, played so well by Michael Douglas in the film Wall Street, famously said: “greed is good.” Dan and Dino – though they certainly enjoy making a buck – do not believe that greed is good. But Gordon Gekko calls the shots in the business world, Dan and Dino do not.

It is my realization, with great regret, that greed is an ugly and prevalent side effect of capitalism, and while I know of no economic system suitable to replace capitalism, I also know that in order to sustain capitalism, we must live with some amount of greed. The less greed there is – I’m sure can agree – the better.

I think raising the minimum wage will create more harm than good, to a great extent because of greed, and to some extent because of economic necessity, some of it fueled by extravagance. Rather than lose 2.7% of their profits – some because they are barely making a profit to begin with (perhaps because they succumbed to extravagance and are living moment to moment) and others, the Gekkos of the world, because if “greed is good,” then anything that fails to maximize profit is not – they will hire illegal aliens.

If we remove from the equation the tiny sliver of the illegal alien pie comprised of terrorists, gang members, and druglords, the vast majority of the remainder will work long, hard hours, complain very little, and readily accept wages far below the minimum allowed by law.

Any attempts by the government – the state and local levels, too, but especially the federal – to regulate and combat the employment of illegal aliens is a farce. In fact, it probably won’t be too far into the future until any one of the Fox News commentator/hosts – O’Reilly, Hannity, Huckabee, you name ‘em – begin their program with a breaking news story about a judge who ruled against an individual or a company for failing to hire an illegal alien, contending that it was a violation of the alien’s Constitutional rights under the Equal Protection Clause of the 14th Amendment. Absurd though that may sound, we are perilously veering in that direction.

Therefore, for the many good reasons you state, I support a raise in the minimum wage, too. But not until Draconian laws are passed to have a stifling, chilling effect on the hire of any illegal aliens for whatever purpose, or any other workers “off the books.” Until such laws are passed, the raising of the minimum wage will lead to all the benefits you describe at Company A, while Company B will hire its workers and replace them with illegals, minors, and other off-the-bookers who will have no rights, no benefits, no legal recourse, and will pay no taxes.

Once such strict laws are passed to ensure that every single employee – and I don’t mean just formal companies, I also mean those doing odd jobs across America as we speak, like shoveling snow and fixing furnaces – is officially accounted for, i.e., “on the books,” then I will fully support your proposal to raise the minimum wage.

I, too, have no problem with Gordon Gekko settling for a smaller yacht if that means the average short order cook can improve his or her quality of life. But without changing the laws regarding undocumented employment first, Gekko will still enjoy his big boat while the fast food workers will be fired and replaced by off-the-books counterparts. And then those displaced legal workers will rue the day that the minimum wage was raised.

PART 3: WHAT’S YOUR OPINION?