It’s Time For A New Business Model

Thousands of minimum-wage workers are taking to the streets in protest against low wages that they are receiving from McDonald’s, Wendy’s, Burger King and other fast food establishments. Representatives of those establishments ran a full-page ad in the USATODAY saying that raising the minimum wage would cost jobs. The workers responded by saying that they were crappy jobs anyway.

A new study by the University of Kansas stated that doubling McDonald’s salaries and benefits would cause your Big Mac to cost just 68¢ more. There you have it; McDonald’s can raise the burger by 68¢, and still keep their profits and expenses at the level they are now. Yes, McDonald’s CEO, Donald Thompson could keep his 8.75 million yearly compensation package.

McDonald’s 2012 annual report showed that the fast-food giant only spent 17.1 percent of their revenue on income and benefits for more than their 500,000 U.S. employees.

I think the workers would see a pay raise before the fast-food chains allow them to unionize without fear of retaliation.

In the 1970s, the fast food jobs were mainly for high school and college kids who used them as entry-level jobs. With unemployment at 7.6% many of these jobs are now held by older workers who need their job to support their families.

The Walmart business model of low-cost goods and low wages and benefits for their employees has made them the world’s largest retail giant in the world. The retail giant’s lobbyists have spent a lot of money trying to convince us that increases in employee wages and benefits would mean that they would have to cut back their workforce. That’s ludicrous; they pay so little now, that a price increase on their merchandise wouldn’t be that much and they still could maintain their current profit margin. It’s the same way for the fast food industry.

The low paying corporations are being called out but they’re not going to be embarrassed into doing the right thing, so it’s time for a Federal minimum wage increase.

My wife cracked up when I told her that a man offered me a job to bale some hay. I went to get my annual truck inspection at Larry’s Texaco this morning. I was sitting in the crowded office, surfing the web on my iPhone when a man who was also waiting for his truck to be inspected, told me that he was on his way to bale some hay and asked me if I was interested in making some extra money by helping him. I assume by the look on his face that he was surprised that I turned him down. He said it was impossible getting help these days, and then he went on to say that as a kid, he used to bale hay for 3¢ a bale. I don’t know how much he was paying, but I bet it’s nowhere near minimum-wage.

Last month the Washington D.C. city council stood up to Walmart and this is being followed by low wage workers protesting for decent pay. Perhaps the worm is beginning to turn.

We Need to Change the Narrative

Saturday, I went to the new Costco store in Sugarland where I was surprised to see so many people lining up to get their new membership cards. I thought everyone in the Houston area had one but as we were leaving an hour later; long lines of brand new applicants were in line. It’s true, if you’ve seen one Costco, you have seen them all and that’s because they can build a new one every 100 days.

The Costco Sugarland location is ideal for Victorians; it's only about a 90- minute ride; close to all the big stores without entering the Houston city limits, and the exit takes you straight to 59 South.

I’m glad America is finally standing up to the largest retain corporation in the world, Walmart, by not cowering to their enormous pressure. The stories of Wal-Mart intimidations are legendary. It didn’t work in Washington D.C. where the city council stuck to their guns and did not give in to them on their new $12.50 minimum wage on companies with more than $1 billion in annual revenues and indoor retail premises of 75,000 square feet. Walmart said it would look for another city to build their six brand new stores.

I saw an interesting debate about the Wal-Mart/D.C. situation when Michael Smerconish, hosted the Chris Matthews show. He had libertarian economist, Stephen Moore, and another chap whose name is escaping me at the moment as his guests. Mr. Moore made the predicable “hey Wal-Mart offered jobs D. C. needed, and now they don’t have that.” The other guy made the status quo argument of income inequality. Mr. Smearconish made his “let the free market decide” argument.

Costco was used as an example of a company with an average payroll of $20 an hour  that could compete nicely with Wal-Mart whose typical payroll is a little over $8 an hour. Costco employees were not on the public dole while a lot of their competitor’s employees were. Even when Walmart pays for a portion of their employee's benefits, Costco workers’ pay a 12 percent out- of- pocket premium for benefits, while Walmart workers’ pay 40 percent. How does Costco do it? They don’t have the selection Walmart does but Costco averages $814 in sales per square foot, while Sam's Club makes just $586 per square foot. And don’t even try to compare customer service.

Companies have been allowed to set the narrative that they are the job creators, and they need the room to prosper, so it can have a trickle-down effect. That meant that they are not to be burdened with unions, minimum wage or equal pay legislation, regulations or environmental standards. They have gotten their way for over thirty years and are now benefiting while a great portion of the country continues to struggle. Even if Walmart raised their employee's to the required $12.50 an hour in D.C.,the customer would only see an increase of 46¢ at the cash register that day and about $12.40 annually. People are finally calling them out on  their talking points but it took them 30 years to catch on to what they were doing.

Walmart needs to continue to build in urban areas in order to survive; Washington D.C. knows that, so they feel that they don’t have to succumb to the standard Walmart threats.

The problem with Michael Smearconish “let the markets decide” theory is that it’s great in concept, but large corporations use it to their advantage by persuading politicians to skew the laws in their favor. Consumers are not political advocates; they will shop at a store for its convenience and prices and not pay attention to what they hear about the company’s payroll practices. It sounds good but before you know it, another Walmart has set up shop and the cycle continues. Victoria Caterpillar is another example of Fortune 500 Company getting away without having to pay top wages.Mr. Smearcomish did not like government interfering in the free market, but I’ve lived long enough to know that, we are the government and companies no longer do the right thing without a nudge from us as consumers or as part of the government.

I’m not a Walmart hater. I shop in their stores. I know that they add to our tax base, provide a lot of jobs and keep prices low. I just believe they should share more of their wealth with their associates who work hard so that the company can remain the global retail giant that they are.