Sun 24 Nov 2013 @ 05:42 PM


Evil Rich Corporations and Poverty Stricken Employees Part 2

I came across a story today of a woman who works at a McDonald's restaurant (I don't know if it is a corporate owned store or a franchised location). In any case, she makes somewhere around $9 per hour and is having a hard time supporting herself and her daughter on that amount of money. I can understand that completely, I'd have a hard time with that as well.

So she calls a corporate phone number to speak to someone about her plight. I don't know if she was hoping that would result in a raise, but it's worth a shot. I've asked for a raise before when I needed more money to help make ends meet. As the story goes, the support person she spoke to suggested she seek food stamps or other government social program benefits. She and the entire internet are upset that McDonald's suggests people take advantage of those benefits.

I must admit, I don't like the answer McDonald's gave. It seems insulting or some such. A better answer would be an explanation of why they can't give her as much money as she wants or even as much as she needs.

What I'm about to say will likely not be popular, but it is true. When you are hired by an employer, they are agreeing to pay you a certain amount of money in exchange for a certain amount of labor. You have a resource they need (labor) which they are willing to pay for. They use that labor to create (or add value to) products which they are then able to sell to their customers. The customer payment is used to pay for the original raw materials and your labor and overhead (facilities, utilities, taxes, etc). With any luck, there will be some money left over after making those payments to either grow the business or compensate investors in the form of dividends.

Taking all those things into account, it is possible to determine the value of labor. If a company is making gross sales of $50,000 per year, and the total non-labor cost is $30,000, that leaves only $20,000 per year for labor. If you work for that company and need more than $20,000 per year, the employer has three options:

  1. Go into debt to pay you more money than is available.
  2. Explain that while you may be a good hard working employee, there simply isn't more money to give.
  3. Terminate you so that another employee can be hired before you leave on your own.

The first option isn't a good one. Some companies do something similar to it: Kmart lost millions of dollars over the last few years as their sales continue to dwindle despite having large labor costs. The last option isn't good either for a number of reasons. That leaves the middle option.

If you ran your own business as a sole proprietorship and had no employees, you would quickly learn that whatever money is left over after paying all expenses is how much you are worth. No more and no less. Employers take on the liability of paying employees in the hope that they'll make a profit, though that is not guaranteed. It doesn't matter though because they're legally obligated to pay you regardless of profit or loss. As an employee, you have certain protections (though no guarantees). In effect you're trading a certain amount of stability for potential income. It's not a bad deal at all. If you are an unskilled worker, however, you're most likely going to be stuck making whatever the job is worth, not what you want or need.

These facts can be hard to live with when you are single and without a family. They become even harder when you have a family to provide for. Sadly, that is not the companies concern. I'm not saying they shouldn't be fair or compassionate, but imagine this scenario. A fast food company has two positions to fill. Both employees will be responsible for the exact same amount of work. It seems only fair that they be paid the exact same amount in wages. What if one of the employees was single without a family, but the other has a spouse and a couple of kids to support? Is the value of the labor of the married employee suddenly worth more to the company just because that person has a family to support? Of course not. I've heard people complain for years when one employee was paid more than another due to circumstances outside the business.

This brings us back to the original story about the woman working for McDonald's. She can't make ends meet on her $9 per hour. Presumably that $9 is the fair market rate for her labor. The fact that she has a daughter to support is not the responsibility of McDonald's.

Please note, I'm not saying that big business couldn't treat employees better. However, it seems odd to me that so many people are so upset because she can't make enough from a fast food company to support her family. These are jobs often filled by part time single employees without family responsibilities. If money is needed I can understand why someone would take the job, but to complain about McDonald's seems wrongheaded to me. If you can't make enough with the job you have, you should find other work, either a replacement job or a second job. If you aren't being treated fairly by your employer, find a different employer. Don't allow them to continue to take advantage of you if that's what you believe is happening.

Not all jobs are worth the same amount of money, nor should they be. To suggest that the work performed by a doctor has exactly the same value as a fry cook is silly. Yet that is effectively what people are doing when calling for all companies to pay a living wage. Increasing the minimum wage and other costs to employers will have two impacts on the labor pool. One, employers will do as much as possible to minimize their labor costs. Cutting hours, increasing efficiency, whatever it takes. Two, it will make inflation worse. More valuable labor will begin to be compensated at a correspondingly higher rate until we're right back where we started.

Sadly, government policies over the last several decades have continued to erode at the quality of jobs available. So many manufacturing jobs (relatively unskilled jobs that built the middle class) have been moved off shore that what is left falls into two categories: skilled high paying jobs and unskilled low paying jobs. There's not nearly as much in the middle anymore. This is one of the single biggest reasons why the spread between the so-called rich and poor is increasing. To suggest that the job done by someone on an automobile assembly line has the same value as someone sitting on a hamburger assembly line makes one look foolish.

I feel sorry for this lady, and I wish I had an idea of something that would definitely help her. Expecting McDonald's to pay her enough to support a family is not a reasonable expectation, however.

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