You might have seen this in the news lately: Seattle has announced a plan to tax corporations that make over $20 million per year $275 per employee, in order to raise revenue for affordable housing and programs that help the homeless. Reportedly, Seattle's new tax is gaining traction with a handful of Silicon Valley cities, but it's also drawing a fair amount of criticism. Can you guess why? You got it - Amazon will likely respond by simply moving its offices somewhere else. In fact, Amazon has hinted that it's considering such a move. Man, what a bunch of fools those city officials are! Their plan is going to cost the city both jobs and revenue.
Except that Seattle (kinda) has the right idea. I don't agree with Seattle's new tax - how much control does the city council think Amazon and the other corporations really have over the local housing market? But I would get behind a similar concept, like steep monetary penalties for wealthy companies that can, but choose not to, pay their workers a living wage. (Looking at you, Walmart. Along with just about every fast food franchise.) Those companies' workers have to make a tough choice to cope with shortfalls, given their salaries: go without, work a second job (if possible), or rely on government assistance. It shouldn't be that way. They deserve wages that will let them cover basic necessities: food, clothing, a decent place to live, the means to afford the inevitable medical emergency. I don't think that's too much to ask. Let's penalize the companies that hoard the revenue and make their employees subsist on scraps.
By this point, I can practically see people objecting. (That's right, I can see you out there, saying "What is this bullshit?" to yourself. Hang on, I'm getting to you.) I've been hearing the same objections, more or less, for years, so let me write a few words to address them.
First, people often say that low wage jobs don't deserve higher wages because they don't require a lot of skill. Well, go work one of those jobs some time. There's a lot more work involved than most people realize. Take a fast food worker. The act of grilling a burger, deep-frying some chicken wings, or preparing whatever fast food an establishment serves, isn't terribly difficult. Try doing it nonstop for an entire shift, though, including when you're under pressure because a huge crowd of people showed up at the same time. Don't forget that you'll be performing some other task like cleaning or stocking during the slow times. So yeah, fast food employees work their asses off all day. They absolutely deserve a living wage.
Second, opponents argue that it will negatively affect businesses. I can kinda/sorta see that, if it's a mom-and-pop operation we're talking about. Small businesses have thinker profit margins, so requiring them to pay higher wages will probably cause a lot of them to go out of business. But we're not talking about mom & pop businesses. Walmart (I like to single it out because it's the king of asshole companies) raked in $482 billion in FY 2016, so it could easily spare some of that to give its employees a boost. Here's a Fortune article that crunched the numbers, so I don't have to. Point is, just about any retail/restaurant/fast-food franchise could provide pay & benefits without suffering much lost revenue. If it really wanted to.
Of course, this won't happen, because companies are obsessed with their balance sheets. Businesses that can will just move to a place where they don't have to pay employees as much - just like Amazon is hinting it might do. Hmm, that sounds familiar, like something that happened before. . .wait, it's on the tip of my brain. . .oh, I know! Outsourcing! That happened mostly in the 1990s so I think it's been long enough for us to gauge the impact. How'd that work out for everyone involved?
Not so well, right? Sure, it was great for the companies: they got a ready supply of inexpensive labor, and saved money by paying pennies on the dollar, with no perks like insurance or a pension. But for everyone else, not so much. A lot of companies moved to America's immediate neighbor to the south, but later packed up and moved again when they found a better bargain elsewhere. Think about that: the companies thought Mexico was too expensive. In other words, the competition for those manufacturing jobs basically became a race to the bottom. Remember that piece of info, because you will see it again. And the American economy took some hits too. Several million American factory workers (sources vary from 5MM to 14MM) were unceremoniously dumped back into the job search, with a predictable effect on wages, per the law of supply and demand. Here's a graph that helps explain it, courtesy of the University of Toronto (and some modifications by yours truly.) You'll notice that when you increase the labor supply (shown here by the dashed line labeled S2), wages go down.
Could outsourcing (and also technological advancements, to be fair) be responsible for the wage stagnation that's been happening for the last four decades? The number of jobs lost to technology and outsourcing ranges from 5 to 14 million, which represents about 3.9% - 10.9% of the total US workforce (these percentages are based on the April 2018 workforce of 127.2 million workers.) Those percentages are pretty big chunks of the workforce, so outsourcing & technology almost certainly played some part in wages flattening.
And it's not just outsourcing or technological gains. The "gig" economy, self-driving vehicles, retail kiosks (okay, I guess those last two are technological gains), the "retail apocalypse". . .they're all combining to make jobs, especially stable, well-paying jobs, harder to find. Add in factors like rising costs for housing and health care, and the result is that it is becoming harder for people to get by.
And people realize it. They instinctively "get it," even if they're not expert economists armed with reams of data to back up their arguments. They've understood things haven't been getting better for years now, and they've been making their frustrations known. The Tea Party. Occupy Wall Street. The 2016 Presidential election. These have all been expressions of the population's discontent over the status quo. They know the economy isn't working for them, and they're pissed about it. Amazingly, Washington and Wall Street still haven't gotten the message - if the recent tax reform bill is any indication.
Seattle kind of gets it. Its tax proposal, despite a few severe flaws, is a step in the right direction. And also why Amazon's CEO is an asshole for threatening to relocate unless the city of Seattle gives into its demands; it knows (or should know) the lessons from recent history about how a company's race to the bottom is detrimental to the overall economy (I told you that would come up again.) An economy is like an ecosystem, and when one part of it breaks down, it creates a ripple effect throughout the entire system. Right now, a decent-sized portion of the workforce is at risk. People need money to buy all the products our economy churns out, and they need good jobs to get that money.
But maybe I'm wrong. It's hard to know how events turn out while you're in the middle of them. Maybe this will all turn out okay, more or less. Things turned out more or less okay after industrialization and mechanization in the mid-1800s, right? Maybe we'll be okay this time too.
But what if we're not?
"There are only nine meals between mankind and anarchy." - Alfred Henry Lewis
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