Math is Remorseless.

There’s a little thing I won’t even link to, wherein a poster is made out of a bunch of economic information to make the case for an increase in the minimum wage.

Now, of course I see the need for those blessed with money to be generous with their money and time toward those in need. Of course. But good intentions don’t change the math. Really really good intentions really really don’t change the math.

So, economic tidbit # 1: the average CEO compensation for the top 11 employers* of  minimum wage earners in America was $9.4M.

Math tidbit #1: that’s $4,517 per hour. That’s somewhat more than I make.

Now, 11 times $9.4M is$103.4m – the total compensation of all the CEOs of these 11 companies. I’m here going to make a rough guess, and say that these 11 companies employ, oh, 500,000 minimum wage earners in total. Full time work is about 2,000 hours a year.

So, if all the CEO salary was redistributed to the minimum wage earners, they would now see their wages jump by – 10 cents an hour. I might be wrong – maybe there’s only 250,000 minimum wage workers. OK, so it’s 20 cents an hour. You get the picture.

In most companies, the next 10 top paid executives together don’t make more than the CEO – fire them all, reallocate to the minimum wage earners, and – maybe 20 cents and hour.

The next tier of white collar workers are the people who put in years of hard work, got that business degree, and climbed to ladder – they might make $200K a year, if they’re lucky. So, do we want to fire all of them, and add another dime an hour?

But wait – what about profits? Sure, there are those, and you could pay some more to your workers and reduce profits some – and, unless you show a comparable increase in worker productivity**, the market will be less likely to invest in your company, making it more difficult and expensive for you to borrow money for stuff like inventory, which tends to make your company even less attractive to investors – and so on, and so forth, in what could become a death spiral – except that the leveraged buy-out crowd will, assuming it’s a viable business otherwise, swoop in, buy the company – and fire enough people and cut wages enough to return to profitability.

See, investors – that’s you and me and anyone with a 401k or a savings account or a CD that pays interest- most likely put our money in investments that pay the best returns – the mutual fund or CD that pays the highest rate. I know this is too confusing for many people to follow, but all those rates – returns on mutual funds, interest on CD and savings accounts, and so one – are all tied together. Ever wonder why stock prices rise when bond interest rates fall? Books have been written on this, but for now just know: if you have any investments at all, and choose them because they give the best return, then YOU are the one putting market pressure on companies to keep wages down.  No, really.

Few of us put our money only in instruments violate none of moral positions – we just don’t think that hard. If we did, we’d probably be reduced to stuffing our mattresses.

Also, shop at Walmart for the low, low prices? YOU are the one motivating them to pay the lowest possible price for the labor they buy, and to keep labor costs down any way they can. (And buy stuff made by Chinese slave labor or near slave labor).

In conclusion: OF COURSE people are greedy and nasty and sin; OF COURSE this means other people suffer. OF COURSE.  But trying to fix this problem by raising the minimum wage is just, frankly, idiotic. Often, appeal is made to some elaborate feedback mechanism, where it is assumed that minimum wage increases will prime the economic pump somehow – while it’s conceivable in theory that this might work, in practice it is almost always a demagogue trying to fire up class warfare for his own ends, or some innumerate rube with a good heart and a soft head whop proposes it.  Bottom line: raising the minimum wage does not magically make more money appear with which to pay workers. It comes from somewhere – usually, from other workers.

Nope, we must look for other ways to be just, rather than choosing feel-good methods that do nothing real, but at best help some workers we can see out of the hides other workers or would-be workers we can’t see. Life’s like that, a lot of the times.

* Of course, the CEOs are not really, in many cases, the ultimate boss of these minimum wage workers, who work for franchisees. But that looks like a quibble.

** Sometimes, companies like Costco and In and Out Burger pay their workers comparatively well, and do get more productive and loyal workers with less turnover. These are great companies and we should applaud and support them. One of the ways this works, however, is that their loyal, hard-working employees allow them to – hire fewer workers. There is no free lunch.

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Author: Joseph Moore

Enough with the smarty-pants Dante quote. Just some opinionated blogger dude.

2 thoughts on “Math is Remorseless.”

  1. You saw it at CAEI didn’t you. 😉 (yeah, big hearts over there, small brains)

    I’ve written two emails on this before. I’ll just post one here unless you want the other.

    One poster wrote:

    Walmart CEO Michael Duke earned 20.7 million dollars in compensation in 2012.

    Target CEO Greg Steinhafel earned 20.65 million dollars in compensation in 2012.

    Current Costco CEO W. Craig Jelinek earned just under 5 million dollars in 2012.

    Average hourly wages at Walmart are just below $13/hr., and average hourly
    wages at Target are reportedly about the same. Average hourly wage at
    Costco: just under $20/hr.

    There is a better way. Big businesses don’t have to choose between paying employees well and staying in business; that’s a myth, and a pernicious one.

    Ah yes the “myth” of cost. If something’s good enough, there will “never” be any trade offs for it. THAT is a pernicious myth.

    Now, let’s double check these claims with sources.

    Michael Duke’s compensation breaks down as follows:
    http://www.forbes.com/lists/2012/12/ceo-compensation-12_Michael-T-Duke_40MH.html

    So, his total compensation is $23.15 mil. Walmart has a total of 2.2 million employees. If we took Mike’s ENTIRE compensation and divided it evenly to every employee, they would get… +$10.52 annually. Or 88 cents a month. Divided by 160 hours (assuming a 40 hr work week, 4 weeks a month) comes out to… +$0.0055 cents an hour raise.

    Let’s check Craig Jelink.
    http://www.forbes.com/lists/2012/12/ceo-compensation-12_W-Craig-Jelinek_TLK2.html
    $5.75 mil salary. Costco has 128,000 employees, that means Craig could give up HIS entire salary to give his employees… a +$44.92 annual raise. Or +$3.74 a month. Or +$0.0234 cents an hour raise.

    In other words, if the “evil” wal-mart CEO paid out everything to his employees, they would get less than if the “good” Costco did the same. Huh, funny how things work out when you check math instead of emotions.

    Employee numbers from: http://money.cnn.com/magazines/fortune/fortune500/2012/performers/companies/biggest/

    —————–

    Though those employee numbers seem a bit low. Oh and I checked, if you took the total profits each company made and divided them up among the employees, Wal-mart would get 7k+ while Costco workers would get 11k+. Which means Costco is still “jilting” their employees out of more than Walmart’s is. Though one has to wonder, if they get raises from profits, should the employees also then get pay cuts if/when profits fall?

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