Rushville Republican

Columns

January 21, 2014

Education is the key to the problem of income inequality

According to the Fair Labor Standards Act (FLSA), the current federal minimum wage is $7.25 per hour. There’s a movement afoot by a few who want to double that minimum to $15 hour. The argument is that employees who earn only the current federal minimum are living at or just above the poverty level. Some fast-food workers in particular have been the most vocal about demanding that they be paid $15 per hour. In fact, as recently as last July, thousands of fast-food workers in seven cities staged a one-day strike for an increase in pay to $15 per hour.

This may sound hard-hearted, but the wage paid for a particular job isn’t based on what the employee needs to live a comfortable life, but on the value of the job itself to the employer. But, just for the sake of discussion, let’s suppose that the hourly wage for fast-food workers was increased to $15. What do you suppose would happen? Would the greedy fat-cat owners of fast-food franchises just be left with less profit? Hardly. Fast-food restaurants already operate on slim profit margins. They would probably be forced to increase menu prices, which would decrease the number of customers and, ultimately, reduce the number of employees needed to work in fast-food restaurants.

Two of the major fast-food chains show profit margins around 10%. In many locations labor expenses exceed profits, so increasing the hourly wage to $15 per hour would really slash their margins. If payroll costs doubled and other expenses didn’t decrease, menu prices would have to increase. That would probably mean that the price of a Big Mac, for instance, would increase by about $1 which would likely send consumers elsewhere.

But there’s another side to this issue that also needs to be discussed. Fast-food jobs are geared more toward entry-level jobs for teenagers, students, and part-time workers. A fast-food job is generally the place where young people start their careers and training. Older workers with families to support who took fast-food jobs during the recession have a tough time making ends meet, let alone saving or positioning themselves for upward job mobility. If, in other words, the hourly wage were raised to $15 per hour, many older workers would push younger workers out of the fast-food job market, and flipping burgers would become a career for some.

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