Almost daily you hear or read comments about inequality in America. Some phrase it as “a hollowing out of the middle class.” As someone for whom demographics were his beat these past 50 years, it is hard to dispute the clear data.
The causes by most in the media run the gamut from Ronald Reagan, Newt Gingrich, Neutron Jack Welsh, the decline of unions, tax policy by all administrations which favor the truly rich, globalization, financialization of the economy, unchecked immigration, an aging population, robots, computers, and the growing threat of artificial intelligence.
Well. You may agree with some or many of the reasons listed above but here is one that is rarely mentioned that I find to really have some traction. It is the Minimum Wage Rate in the United States.
Do you know what the Minimum Wage Rate is? It is $7.25 per hour. It was last raised in July, 2009. Not a typo, my friends. The rate has not been raised in nearly 14 years. Has your pay remained flat during that period?
On April 28, 2021 newly installed President Joe Biden signed an executive order that raised the minimum wage on all federal contracts to $15. I had no problem with that. Federal projects were funded by taxpayer money and debt. A few months later he asked that it be raised to that level for the 27 million workers who earned less than $15 per hour in the private sector. I had to smile at the absurdity of the suggestion.
The president admitted that it would squeeze some employers. What an understatement.
Most business startups in the U.S. fail within five years and the majority of them are restaurants (more about them later). Around one half of one percent of shops last 40 or more years and every year hundreds of thousands of small firms go bankrupt. So, a big jump to $15/hour in the minimum wage would not just squeeze small employers. It would put them out of business!
Now, while the federal minimum wage is now at $7.25, it varies greatly by state. The prosperous state of Washington pegs it at $15.74 cents an hour and California $15.50. New York is $15 in New York City and $14.20 for the rest of the state. Oregon is $13.50 and Vermont is $12.55.
Yet some states including Alabama, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, South Carolina, Tennessee, Texas, Utah, and Wisconsin are still pegged at the 2009 rate of $7.25 per hour.
When I bring this fact up with many people some express shock but others shrug and say “it is a great deal less expensive to live in Biloxi, Mississippi than San Francisco.” Agreed, but people still need to buy food, shelter and perhaps a used car at some point and $7.25 is a living wage in very few localities in the U.S.
When you dig just a bit, it gets even worse. Many states have a separate minimum wage for “tipped employees.” In states that still pay $7.25/hr., the tipped rate is $2.13/hr. Even Delaware which has a reasonable rate of $11.75, has a required rate of $2.23 for tipped employees. That might work if you are part of the waitstaff at a posh watering hole at Rehoboth Beach, but not everywhere.
I have read accounts over the years where investment bankers celebrating closing a new issue or big bond issue may go to a trendy restaurant in Manhattan, order endless bottles of $600 wine and tip the hot waitress several thousand dollars. Okay, good for her. What about the man or woman serving you at a pizza place or casual chain restaurant in Hammond, Indiana? Does he/she get enough tips to take them up to $15/hour in an average night. Highly unlikely.
My suggestion and no one in Congresss is listening would be to raise the national rate a few dollars and then index it a point or two above the CPI going forward. Why not simply index it to inflation a la Social Security? Well, what if Jay Powell and company work some magic and bring inflation down to their 2% target rate and somehow keep it there? At a 2% rate, the minimum wage would double in 36 years. Do the math. So, some catch up is needed but you still do not want to kill too many small businesses by doubling it all at once.
What can you do as a person? I have two suggestions and they are what I do personally. First, if you are at a white tablecloth restaurant give a generous tip if the service was good. Unless, it was horrible, leave at least 15%. Second, if it is a lunch counter or a casual chain (especially in a rural area), give your server a cash tip. Still want to use a credit card? Okay, give them the cash as a tip and write “on table” on the credit card slip. Servers love it as many have told me they often do not get tip money for a month and if the restaurant goes bust (most do eventually), they never see the tip money in many cases.
The second suggestion is when you are traveling. If you stay at an upscale hotel or inn, they invariably leave an envelope in your room market “chambermaid”. This summer many of you will be spending a night or two on a long road trip and could stay at a modest lodging such as a Holiday Inn or even a Motel 6. Leave a bit of cash for the clean-up team. They get minimum wage but are likely immigrants or single Moms who are struggling. Over the years, people have stopped me in the parking lot or checkout desk and thanked me (some almost in tears) profusely for a $5 tip. C’mon. Leave them something. It will cost about the same as the umpteenth cup of coffee that you get at Starbucks that week.
If
you would like to contact Don Cole directly, you may reach him at
doncolemedia@gmail.com
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