When a blogger has the chutzpah to post the following admonition on his blog, two thoughts spring immediately to mind: 1) that blogger's posts have been given too much gravitas, or 2) that blogger is secretly insecure. Here is the admonition, courtesy of Barry Ritholtz and his blog The Big Picture:
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Subtle it's not; inflammatory it is. Pompousness alone begs for someone to take a swipe, so swipe I shall, though the swipe isn't directed at The Big Picture; it's directed at a recent Ritholtz missive published at Bloomberg titled “The Empty Feeling of McDonald's Pay Raise.”
The groaning, listless title pretty much sets the tone, and it's all tired stuff, really. Whenever a minimum-wage grand schemer is desirous to see the world embrace his vision of the minimum wage, Wal-Mart and McDonald's are invariably conjured. Predictably, Ritholtz places Wal-Mart and McDonald's in his cross hairs. He then fires away with the usual nasal drippings: Wal-Mart and McDonald's raise their minimum wage, just not in an amount and to an extent that soothes Ritholtz's conscience. A bit of wheezing on insufficient vacation and paid time off further dampens the prose and the reader's mood.
Of course, that's a start. The flood gates open when the subject turns to motives. By ratcheting up their respective minimum wage, Wal-Mart and McDonald's will reduce employee turnover, though there was really no other avenue, particularly on McDonald's part. Ritholtz tells us,“Don’t underestimate the competition for quality workers at fast-food restaurants. The supply of people willing to do the difficult, dirty work of grilling greasy burgers and fries or interacting with drive-through customers is finite.” (With this passage, Ritholtz surrenders his all-important "monopsony" card.)
By all means don't underestimate the competition for quality workers, but don't overestimate it either. Everyone wants the best quality for the price he or she is willing to pay. It's no trifle, though, to note marginal productivity matters. If I have a job that requires a worker bring nothing more than the ability to push a broom, I want the best broom pusher at the price I'm willing to pay, but no more. Given the supply of competent broom pushers and the marginal product of broom pushers, my price will be low.
As for the “supply” of people willing to work in the fast food industry being finite, congratulations to Ritholtz for identifying an identity. The supply of people willing to drive trucks, split atoms, fly to the moon, write op-eds, clean toilets, perform brain surgery, and everything else is likewise finite. If it were otherwise the marginal cost to employ these people (sans government interference) would be zero.
The supply of willing workers for any job is always finite, even with the prodigious reproduction skills of the Indians and the Chinese, but it's also heterogeneous. It's composed of human beings of varying and unique abilities. Moreover, the jobs themselves are equally heterogeneous.That Wal-Mart and Target title a job “clerk” doesn't mean the requirements or worker experience for each job is similar. The value to the “clerk” job at Wal-Mart could be $10 per hour; to Target it could be $12. Two unlike things given the same name doesn't make them alike.
To Ritholtz, though, they are alike; everything is alike, hence a minimum wage that transcends the universe of jobs. One size fits all. What's more, the size of Ritholtz's minimum wage provides a much larger fit than the putatively binding fit that prevails today.
Still, not even a whisper on productivity. Whether due to space limitations or neglect, Ritholtz bypasses the undeniable relationship between productivity and wage rates.The focus is instead on wage rates and crony capitalism. Ritholtz tells us that Wal-Mart and McDonald's are “corporate welfare queens.” To reach this conclusion, one must engage a bit of sophistry, so engage we will.
Because many of their respective employees are welfare recipients, by association Wal-Mart and McDonald's are “welfare queens.” Here, Ritholtz leans on a benefactor, Bloomberg Businessweek, which reports that "fast food wages come with a $7 billion side public assistance.” Wal-Mart employees receive $2.66 billion, or $5,815 per employee, in government aid each year. Wal-Mart and McDonald's have in essence externalized a portion of their employee cost. The low-value worker would be paid a higher wage if Wal-Mart and McDonald's were not exploiting the welfare subsidy.
That Wal-Mart and McDonald's benefit from redistribution schemes that took root long before either company achieved its current standing is a stretch. Boundaries are stretched further still by Ritholtz's assertion that Wal-Mart's and McDonald's business model's are “so dependent on government aid, tax breaks, and Medicaid.”
I have no idea how Ritholtz squares these circles. Political entrepreneurship takes you only so far. In the long run, everything distills to satisfying customers wants efficiently. In the long run, Wal-Mart and McDonald's have done just that.
Politicians devise and implement the various distributive programs Ritholtz references. These programs are means to buy votes and to curry political favor. They are independent of Wal-Mart and McDonald's.They would exist if Wal-Mart and McDonald's were nonexistent.
As for the nub of the issue, Ritholtz's premise that Wal-Mart and McDonald's even benefit from government paying their employees' wages. This is debatable, and the debate doesn't favor Ritholtz.
With a bit of poking and pondering forethought, you can easily argue Wal-Mart and McDonald's are actually hurt by government welfare. Both companies have to pay a higher wage than the wage that would prevail in an unhampered market. If a potential employee receives $5,815 in government welfare (and likely more if not working) that potential employee has been induced to forgo work. The potential employee receives unearned products and services, or "benefits" as the Brits will spryly say. This is a hurdle Wal-Mart and McDonald's must overcome with sufficient wage incentives. Exacerbating matters, the welfare recipient is likely a lower quality worker: a worker who has been infantilized into sub-average initiative and perseverance.
Never mind, though, because Ritholtz assures us that a $12-per-hour national minimum wage would internalize more of Wal-Mart's and McDonald's employment costs. A $15-per-hour minimum wage would be better. The Promised Land would be reached: all Wal-Mart and McDonald's employees would be independent of state and federal aid.
Whether $12 per hour, $15 per hour, or whatever, it's all make believe. The labor market is hampered by a bewildering array of government edicts, diktats, legislation, and regulations. How they interact to influence labor participation rates and wage rates is beyond comprehension. That leaves the actual participants -- employer and employee -- to call upon their unquantifiable asymmetrical knowledge to clear the market.
Here's what is within comprehension: A minimum wage further hampers and distorts labor markets. A minimum wage at its heart is a price control, and all price controls distort markets. To think you can overcome the distortions imposed by a cornucopia of welfare programs by imposing another distortion is preposterous. And to think you possess the comprehensive knowledge to conjure the right minimum wage is simply arrogant.
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Subtle it's not; inflammatory it is. Pompousness alone begs for someone to take a swipe, so swipe I shall, though the swipe isn't directed at The Big Picture; it's directed at a recent Ritholtz missive published at Bloomberg titled “The Empty Feeling of McDonald's Pay Raise.”
The groaning, listless title pretty much sets the tone, and it's all tired stuff, really. Whenever a minimum-wage grand schemer is desirous to see the world embrace his vision of the minimum wage, Wal-Mart and McDonald's are invariably conjured. Predictably, Ritholtz places Wal-Mart and McDonald's in his cross hairs. He then fires away with the usual nasal drippings: Wal-Mart and McDonald's raise their minimum wage, just not in an amount and to an extent that soothes Ritholtz's conscience. A bit of wheezing on insufficient vacation and paid time off further dampens the prose and the reader's mood.
Of course, that's a start. The flood gates open when the subject turns to motives. By ratcheting up their respective minimum wage, Wal-Mart and McDonald's will reduce employee turnover, though there was really no other avenue, particularly on McDonald's part. Ritholtz tells us,“Don’t underestimate the competition for quality workers at fast-food restaurants. The supply of people willing to do the difficult, dirty work of grilling greasy burgers and fries or interacting with drive-through customers is finite.” (With this passage, Ritholtz surrenders his all-important "monopsony" card.)
By all means don't underestimate the competition for quality workers, but don't overestimate it either. Everyone wants the best quality for the price he or she is willing to pay. It's no trifle, though, to note marginal productivity matters. If I have a job that requires a worker bring nothing more than the ability to push a broom, I want the best broom pusher at the price I'm willing to pay, but no more. Given the supply of competent broom pushers and the marginal product of broom pushers, my price will be low.
As for the “supply” of people willing to work in the fast food industry being finite, congratulations to Ritholtz for identifying an identity. The supply of people willing to drive trucks, split atoms, fly to the moon, write op-eds, clean toilets, perform brain surgery, and everything else is likewise finite. If it were otherwise the marginal cost to employ these people (sans government interference) would be zero.
The supply of willing workers for any job is always finite, even with the prodigious reproduction skills of the Indians and the Chinese, but it's also heterogeneous. It's composed of human beings of varying and unique abilities. Moreover, the jobs themselves are equally heterogeneous.That Wal-Mart and Target title a job “clerk” doesn't mean the requirements or worker experience for each job is similar. The value to the “clerk” job at Wal-Mart could be $10 per hour; to Target it could be $12. Two unlike things given the same name doesn't make them alike.
To Ritholtz, though, they are alike; everything is alike, hence a minimum wage that transcends the universe of jobs. One size fits all. What's more, the size of Ritholtz's minimum wage provides a much larger fit than the putatively binding fit that prevails today.
Still, not even a whisper on productivity. Whether due to space limitations or neglect, Ritholtz bypasses the undeniable relationship between productivity and wage rates.The focus is instead on wage rates and crony capitalism. Ritholtz tells us that Wal-Mart and McDonald's are “corporate welfare queens.” To reach this conclusion, one must engage a bit of sophistry, so engage we will.
Because many of their respective employees are welfare recipients, by association Wal-Mart and McDonald's are “welfare queens.” Here, Ritholtz leans on a benefactor, Bloomberg Businessweek, which reports that "fast food wages come with a $7 billion side public assistance.” Wal-Mart employees receive $2.66 billion, or $5,815 per employee, in government aid each year. Wal-Mart and McDonald's have in essence externalized a portion of their employee cost. The low-value worker would be paid a higher wage if Wal-Mart and McDonald's were not exploiting the welfare subsidy.
That Wal-Mart and McDonald's benefit from redistribution schemes that took root long before either company achieved its current standing is a stretch. Boundaries are stretched further still by Ritholtz's assertion that Wal-Mart's and McDonald's business model's are “so dependent on government aid, tax breaks, and Medicaid.”
I have no idea how Ritholtz squares these circles. Political entrepreneurship takes you only so far. In the long run, everything distills to satisfying customers wants efficiently. In the long run, Wal-Mart and McDonald's have done just that.
Politicians devise and implement the various distributive programs Ritholtz references. These programs are means to buy votes and to curry political favor. They are independent of Wal-Mart and McDonald's.They would exist if Wal-Mart and McDonald's were nonexistent.
As for the nub of the issue, Ritholtz's premise that Wal-Mart and McDonald's even benefit from government paying their employees' wages. This is debatable, and the debate doesn't favor Ritholtz.
With a bit of poking and pondering forethought, you can easily argue Wal-Mart and McDonald's are actually hurt by government welfare. Both companies have to pay a higher wage than the wage that would prevail in an unhampered market. If a potential employee receives $5,815 in government welfare (and likely more if not working) that potential employee has been induced to forgo work. The potential employee receives unearned products and services, or "benefits" as the Brits will spryly say. This is a hurdle Wal-Mart and McDonald's must overcome with sufficient wage incentives. Exacerbating matters, the welfare recipient is likely a lower quality worker: a worker who has been infantilized into sub-average initiative and perseverance.
Never mind, though, because Ritholtz assures us that a $12-per-hour national minimum wage would internalize more of Wal-Mart's and McDonald's employment costs. A $15-per-hour minimum wage would be better. The Promised Land would be reached: all Wal-Mart and McDonald's employees would be independent of state and federal aid.
Whether $12 per hour, $15 per hour, or whatever, it's all make believe. The labor market is hampered by a bewildering array of government edicts, diktats, legislation, and regulations. How they interact to influence labor participation rates and wage rates is beyond comprehension. That leaves the actual participants -- employer and employee -- to call upon their unquantifiable asymmetrical knowledge to clear the market.
Here's what is within comprehension: A minimum wage further hampers and distorts labor markets. A minimum wage at its heart is a price control, and all price controls distort markets. To think you can overcome the distortions imposed by a cornucopia of welfare programs by imposing another distortion is preposterous. And to think you possess the comprehensive knowledge to conjure the right minimum wage is simply arrogant.
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