Bread Line during the Great Depression Photo by Margaret Bourke-White 1937
McDonald's has announced a raise in pay of at least $1 over the local minimum wage for some of their 90,000 workers, costing McDonald's about $100M or 2% of their 2014 profits of $4.7B possibly setting a trend to be followed by their franchisees who employ over 660,000 workers. Wal-Mart as well raised their minimum pay to $10 per hour for nearly 40 percent of their workers costing them around $1.6B or 6 percent of their 2014 profits of $26.9B.
These actions are similar in effect to raising the minimum wage, as some would like to bring it to $15 per hour, way above either Wal-Mart's or McDonald's current minimum. The impact of raising the minimum wage has been studied by many economists, who, for example, have studied fast food restaurants in neighboring states where only one of the two states raised minimum wages, with results that appear to indicate that there isn't any discernible job loss associated with raising the minimum wage.
Alternatively, raising the minimum wages can have many studied and reported positive effects including reducing turnover and increasing productivity. And as can be seen in the cases above of Wal-Mart and McDonald's, these companies can well afford it.
But, there is another effect that I would like to ponder, namely the shifting of disposable cash from the corporation, that might be distributed to stockholders or saved, instead, to the workers, who at their level of income, are most likely to spend it within their own communities, ironically at stores like Wal-Mart and McDonald's. Economists call this the "Ripple Effect" where for each dollar given to someone with lower income, $1.64 is returned to the economy through the increased spending in their local community.
I was pondering, the other day, what I, as someone who is likely to be in the top 2%, want to make me happy. On my list (in no specific order) is: safety, health, a clean environment, a network of friends and family, the ability to feel productive and useful, and constantly learning. At my age, the accumulation of toys has definitely become less interesting.
I suspect that my list isn't that different from yours. And, some of my needs are directly impacted by others. My safety and the nature of my environment is based upon social order, and the happiness and productivity of others. I know that it sounds a bit socialistic (I can't wait to read some of the comments), and as an Entrepreneur who has started several businesses and taught entrepreneurship at many colleges, I do believe in capitalism, but, I also believe that my interests are served through the happiness of others in my community. And, as we have all too often seen, the size of our community has extended over the planet's surface as a direct result of technology. Hackers in China, and terrorists in the Middle East can make us miserable with great efficiency thanks to jet planes, the Internet and so on..
Creating good paying jobs serves my interests as well as those of the workers who can then afford to buy a big screen color TV, send their kids to college and enjoy a better life. I think that we've lost our way. Growth is fun. Building wealth is fun. But, if we want to reduce, for example, Mexican migrant workers crossing our borders, then we should be focusing upon exporting prosperity to Mexico as opposed to building walls. If we want to reduce terrorism, and increase our safety then we should be finding ways to increase world happiness, not simply enable the TSA to further intrude into our behavior.
Achieving full employment with living wages is part of our achieving our own individual and collective happiness. They are tied together regardless of whether we are at the top or the bottom of the pyramid. It's true that paying more for a hamburger might prevent us from buying some other piece of essentially unnecessary consumer crap, but in the end does it really matter?
Which will make you happier?
About the Author
Bob Caspe is the CEO at the International Entrepreneurship Center (http://iecpartners.com). He has started three companies, has taught thousands of entrepreneurs around the world, and has mentored and taught students at MIT and Babson College.
Download a copy of his book: Entrepreneurial Action at http://caspegroup.com/textbook.php
Bob's personal website: http://caspegroup.com.