Dear Walmart, McDonald’s, Starbucks: How Do You Feel About Paying Your Employees So Little That Most Of Them Are Poor?
One of the big problems with the U.S. economy is the disappearance of the middle class.
The rich keep getting richer and the poor stay poor, and many folks who used to have decent jobs and lives in the middle are now joining the ranks of the poor or near-poor.
The reason this hurts the economy is that pretty much all the money earned by middle-class households gets spent, while much of the money earned by rich people gets saved or invested.
If investment were needed badly right now--if our problem was a lack of products to buy--the investment would help the economy. But America's formerly huge and well-off middle-class is now broke. So there isn't as much demand for products and services as there used to be. (See: "MILLIONAIRE'S ISLAND: A Simple Example Of How Rich People Don't Actually Create Jobs").
The disappearance of America's middle-class is generally attributed to the "loss of manufacturing jobs," as technology replaces people and companies move jobs overseas. (Apple, for example.)
This explanation is a smoke-screen.
Yes, a lot of the manufacturing jobs that America has lost paid good middle-class wages. And, yes, many of the folks who lost manufacturing jobs have not been able to find comparably compensated other jobs.
But the real problem is the loss of good-paying jobs, not the loss of manufacturing jobs.
Many Americans who used to have middle-class manufacturing jobs--or who would have had them had they not disappeared--now work in low-wage service jobs at companies like Walmart, McDonald's, and Starbucks.
The consensus about these low-wage service jobs is that they're low-wage because they're low-skilled.
But that's not actually true. They're low-wage because companies choose to make them low-wage.
No, you say. Low-wage service jobs are low-wage because they're low-skilled. It's a free market. Companies should pay their employees whatever the market will bear. If those low-skilled low-wage workers had any gumption, they'd go get themselves skilled and then then they'd be able to get high-paying high-skill jobs. Employers shouldn't have to pay employees one cent more than the market will bear.
This argument overlooks three things:
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First, all those good-paying manufacturing jobs that the U.S. has lost weren't always good-paying. In fact, before unions, minimum-wage laws, and some enlightened thinking from business owners, they often paid terribly.
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Second, the manufacturing jobs also weren't high- or even medium-skilled. In fact, most of these manufacturing jobs required no more inherent skill than the skills required to be a cashier at Walmart, a fry cook at McDonald, or a barista at Starbucks. (Yes, people who work on assembly lines building complex products need training. But cashiers, fry cooks, and baristas need training, too. Don't believe this? Go volunteer to be a Walmart cashier or a Starbucks barista for a day. )
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Third, it is often in companies' interest--as well as the economy's interest--to pay employees more than the market will bear. For one thing, you tend to get better employees. For two, they tend to be more loyal and dedicated. For three, they have more money to spend, some of which might be spent on your products.