Wages on demand

Fast-food workers have been sporadically striking throughout American cities in recent months, with the goal of securing what they call a "living wage" of $15 per hour.

Several points seem to have been forgotten by those waving the placards.

First, reflecting a principle that pops up fairly early in Econ 101, workers are hired and paid in a market economy according to their ability to enhance the profit margins of their employers. As economist Thomas Sowell recently put it, "If their work is really worth more than what their employer is paying them, all they have to do is quit and go work for some other employer, who will pay them what their work is really worth."

Put differently, wage rates are determined not by a worker's subjective assessment of his value, but by what the market dictates. It doesn't matter a whit what we think we should get, because our pay is determined by others' perceptions of what we have to offer. Fairness has nothing to do with it.

Because the marketplace tends to allocate wages according to the skills and educational levels of workers, the relatively lower wages paid to fast-food workers stem from the fact that they tend be less educated and possess fewer skills. They are, accordingly, much more easily replaced than software designers, accountants and surgeons.

The unfortunate (but unavoidable) truth is that, if fast-food workers had more education and skills to offer, they wouldn't be fast-food workers.

Second, employers aren't in the business of providing a "living wage." They are paying for labor, and are only going to pay as much as they have to in order to further the success of their businesses, which requires minimizing overhead. A business that goes out of business because it does otherwise is able to employ no one and pay no wages.

Again, as Sowell puts it, "the employer is not hiring people in order to acquire dependents and become their meal ticket. He is hiring them for what they produce." And if you do a job that just about anybody can do, including teenagers working part-time after school gets out, you can't expect to be paid like an NBA center or a corporate CEO.

Actually, you can't be expected to be paid much at all.

If that sounds harsh, so, too, is what we call the "real world." And if you wish to prosper in that world's competitive labor markets, it might make sense to acquire skills and education before demanding that your boss immediately double your pay. At the least, you could more profitably spend your time hitting the books rather than marching and chanting outside Arby's or Burger King.

The fewer skills and education a person has, the luckier he is to have a job of any kind, and he is unlikely in those circumstances to have much leverage with those who have provided it.

Third, and following from points one and two, when labor becomes too expensive (as fast-food workers making $15 per hour would be), employers hire less of it. They also seek ways, such as automation, to lower costs, which usually means the elimination of precisely those jobs that are currently filled by lower-skilled employees (like fast-food workers).

In the end, then, and however we might wish otherwise, there is no magic wand that can be waved that will make the relationship between worker productivity and compensation go away. We can whine and stomp our feet and hold our breath until we turn blue at the unfairness of it all, but the world still can't be made to give us what we want.

Entry-level positions will always earn entry-level wages, and will disproportionately go to the young and less-educated.

Virtually everyone reading this column has held a number of such jobs at some point in their lives, usually before moving on to better ones. In my own case, this included bagging groceries, frying burgers, bartending, and working the graveyard shift at a local factory for the minimum wage of $2.30.

At none of those jobs did it occur to me to ask for a living wage; indeed, I'd never heard of the concept, nor had anyone else I worked with. And If I had turned down any of them because I felt exploited and offended by the low pay, others would have been glad to take my place.

The test, then, for whether a worker in the fast-food industry (or any industry) deserves $15 per hour (or any particular wage) is whether he can find someone out there willing to pay it. Because the only valid determinant of what your labor is worth is what the marketplace says it is. The more value you can add at your place of work, the more your labor will be valued and the better you will be paid.

Hence, an obvious suggestion: If you don't like what Hardee's is paying you, quit working there, get hold of a copy of the classifieds, and shop your services elsewhere. And then be sure to demand a minimum of $15 per hour when they bring you in for an interview.

Good luck with that.

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Freelance columnist Bradley R. Gitz, who lives and teaches in Batesville, received his Ph.D. in political science from the University of Illinois.

Editorial on 09/29/2014

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