Knee-jerk reactions against higher wages are poisoning the important debate we need to have

Gary Horcher Facebook page.
Gary Horcher Facebook page.

Two recent stories about America’s underpaid workers and the effort to give them a break remind me just how much more we need to talk about class warfare, and propaganda, and economics…but most of all, what’s going on at dinner tables around the country.  (That’s the point of The Restless Project.)

A quick review:

1) A bartender was left a “Why I don’t tip in Seattle”   note after a dinner by a patron railing against that city’s new $15 minimum wage law.

2) A Seattle company CEO decided to pay all his employees at least $70,000 after learning the true cost of housing nearby.  Then, The New York Times reported the company, which processes credit card transactions, was struggling. Some cheered the news as new evidence that workers need incentives to perform well.

America has a very real and very serious economic problem. Wages have essentially been stagnant for years….decades…arguably, since a man first walked on the Moon. Really.  Young people can’t afford homes and they aren’t buying them, instead choosing to live with their parents well into their 30s. Really. In an economy that’s two-thirds consumer spending, this is a ticking time bomb. People need more money.  There’s only three ways to get them that money — the government can give it to them, or they can work for it, or we can lower prices on everything.  I’m sure we all agree that No. 2 is better than No. 1, and it’s a whole lot better than No. 3.

The problem is it’s going to be very hard to get people higher wages in an environment that has become so toxic to the idea.

Just to put the numbers out there for anyone who hasn’t done the math (and don’t feel bad if you haven’t. During a recent discussion with a smart friend of mine who makes about $60,000 a year, s/he said $15 / hour was more than she made. It’s not. Not even close).

Assuming a minimum wage worker scores 40 hours at a job, that’s $600 a week — $2,400 for four weeks. Pre-tax.  Guess what the AVERAGE rent is in Seattle? $1,500 for a one bedroom.

Remember, this is for the new wage that Seattle workers must be paid…by 2021 (for smaller businesses that allow tipping).  So that fellow who left that note instead of a tip? He failed to tip a worker who hadn’t actually gotten a law-required raise yet.

Hold that thought for a moment (I promise a happy ending) as we move to the sad story of Seattle payments firm Gravity and CEO Dan Price, who decided to create his own internal minimum wage at $70,000 annually. The raises are to be phased in during the next three years — a web developer who earned $41,000 was bumped up to $50,000, for example.  Sounds like a good employee retention plan to me.

But The New York Times found a couple of 20-somethings who seemed to vaguely think there was something wrong about this, and you have an Internet sensation of a story.  Three months after the announcement, Gravity is in trouble.  And as you might imagine, folks who seem to dislike higher wages jumped at the Internet chum.

“Note to all CEOs everywhere: Don’t make a move like Price’s without first consulting Hayek, Von Mises, or Friedman,” said smugly.  I’m sure your Facebook news feed is full of even more glib comments about why paying workers more makes them lazy.

Price’s poorly-executed publicity stunt no doubt ruffled feathers. Mind you, it also got him a few hundred more clients, which seems to be lost in all the glibness. His real problem, however, is his brother, who is a part-owner. He hates the wage idea, and is now suing.  So what’s the important lesson here: Don’t pay workers more, or don’t change your entire compensation structure without getting buy-in from ownership?

If you really believe that “simple economics” crushed a company within three months because it announced it would lift wages within three years, I have some gold coins to sell you.

My concern is that Gravity’s story, however it ends, will now be used as a bludgeon against anyone who talks about higher wages for workers.  Listen carefully to those who are so violently opposed to the idea, and think about why.

Back to the tip jar for a moment, and that happy ending I promised.  After the bartender’s story went viral, the anonymous notecard leaver apparently had a change of heart.  On Wednesday, KIRO News reported that the man behind the card sent a letter to the station to be delivered to the bartender. In it was a sizable tip, a valuable gold coin and a thoughtful note.

“Thank you for your part in opening a dialogue regarding the subject.  For that you have earned my gratitude and for that reason please accept this gold coin as payment for that service,” it read.

This is what I find so typical: Somebody rages against a vague idea placed in their head (socialism!), but when faced with a real-life human being in real-world consequences, the sloganeering and shallow understanding of the issues melts away. I really do find most Americans are generous, and kind, and – yikes! – agreeable when dealing with people. The problem is the yelling at the moon chatter and echo chamber than dominates our noisy airwaves. I know plenty of people, for example, who will say the most awful, even racist, things about immigrants…but when they discover the immigrants in their midst, the reaction is always, “Well, I don’t mean ‘her.’ ” I know we all want to yell HYPOCRITE when we see this in action, but I think it could actually be a starting point for understanding and dialog. 

It’s one thing to yell SOCIALISM. It’s another to encounter a person who is wildly underpaid and try to use an economic theory to explain to that person why they should just be OK with that.  There are lots of problems with the American economy right now — as I’ve written elsewhere, people with average salaries can’t afford average-priced homes or apartments, and that’s dire. There are plenty of ways to try to solve them.  Let’s talk about them. I for one am not crazy about the $15 minimum wage laws sweeping the nation because I think it’s the wrong fight to pick. It doesn’t help nearly enough people, and it’s not nearly enough to really help. Declaring victory over a $5-or-so dollar-an-hour raise that arrives in 3-5 years is far too much patting-ourselves on the back.  And it doesn’t address the real problem. Wages across the board are terrible. Families can’t buy starter homes because they don’t exist any more (more on that soon).

But knee-jerk reactions against efforts to give workers a break poison the discussion. Is there a better way for a very successful start-up to lift wages so its workers can afford to live somewhere near its office?  Perhaps. Let’s figure that out.  Let’s not babble on about the need for worker incentives and such. Those who do sound like little more than protagonists in a Karl Marx novel.

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About Bob Sullivan 1538 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.

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