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.

It’s all about the numbers

Where are those 11 poor states?

I thought I would paste in the chart to show those who are interested just where the country has been for a long while. You can choose to believe or disbelieve the poll numbers, but the Wall Street Journal/NBC News poll was a lot more accurate than Gallup or Rasmussen in the last election. The map clearly shows that the GOP has land mass and the Dems have the most populated areas.

Did you hear about the Republicans latest plan? The Senate Republicans want to give the president the authority to make the cuts where he wishes. That’s ludicrous, and the White House knows what they’re up to. The GOP reads the polls, and they see that they will once again take the fall for the sequester failure, so they are trying to dupe the president. I’m sure the White House had a good laugh, but the president will invite congressional leaders over Friday afternoon for little chat. Senate minority leader, Mitch McConnell already said that revenues would not be part of the deal. Fed Chairman Ben Bernanke told the Senate that they are engaging in backward thinking. He said they should be working on long-term solutions and not be obsessed over short term deficits.

The congressional Republicans remind me of local poster Jack Evony, who despite the poll numbers and election results, he still thinks that his philosophy still reins superior. He said Obama supporters are from poor states (he said there were 11 states but didn’t name them), and those states had 166 electoral votes. In fact, he said that those Obama voters made more money off welfare than a man could off a regular 40-hour week. If Jack kept up with politics, he would know that no Republican candidate has not won a state above the Mason-Dixon line since 1988. Perhaps George W. Bush won New Hampshire don’t know but the northeast, west, and Midwest states like Colorado and Nevada then and there are solid blue states like Illinois, Michigan Ohio, Wisconsin, Iowa and Pennsylvania. Being in denial is not a good political strategy. As the panel on “Morning Joe “were once again talking about the demise of the GOP, Tom Brokow spoke of the ebb and flow of politics but then advertising elite Donny Deutsch, said" it is not about their policies or the big tent, its that people see the GOP as an old white man's party that refuses to change.”

I love math because it’s a science that can’t be disputed although some try to manipulate it. For example, neither party tried to keep the payroll tax cut (2% FICA) it was allow to expire, so it was no surprise when the retail giants came under their sales projections. It’s the good-paying middle class jobs that will keep those retail sales up. That doesn’t keep Walter Williams from recycling his minimum wage propaganda because the only part he’s right about is the entry-level position. The minimum wage increase (long overdue) would be phased in, and companies would adjust. I wish our local paper would splurge a little and feature a real economist because we sure could use it.
 

It would be interesting to get a local perspective from a prominent local republican such Dale.I would be interested to know if they think that the national GOP has the problem and if it does can it be fixed at the grassroots level?  Sort of like a rising tide lifts all boats.I know the GOP still growing strong in Texas but can it hold off a mass registration by the DNC and their cronies?

If the GOP had the numbers they wouldn’t be trying all their gimmicks to keep people from voting.

Monday Morning Tidbits

The Sunday talk shows were about the inevitable sequester cuts, which will start Friday. It’s never about a solution it’s always about who’s the blame and the one talking is defending their version of the facts. Spin is what it amounts to. The GOP is now  saying that the cuts aren’t really that bad because proportionately most of the cuts will not affect this year’s spending. I really like what Chris Matthews had to say this morning “ Republicans go to work looking for something they can cut other than defense spending, and Democrats will try to find some way of helping the people who are hurting. The taxpayers are pulling on the apron strings of both parties, so that’s the reason we have so much debt.” Republicans think they can only raise taxes once every thirty years, but that’s a philosophy they’ll all fight for. On the other hand, some Democrats want to reform entitlements, and some don’t. Someone said we could stop the crisis with a one-page bill repealing the sequester cuts, but that’s too easy.

I did see a good discussion Saturday morning about why Democrats and liberal- progressives should care about the continuing degeneration of the Republican Party. The panel on MSNBCs “Up with Chris Hayes “show came up with a conclusion that the Democrats will become complacent and the default party but nothing else, if they’re not pushed by a strong opposition party. There’s a good example of that in my opening paragraph, where we just play the blame game and pay very little attention to the merits of any argument. The GOP will eventually find a leader they can all coalesce around, and the Democrats need to be prepared for that. Right now, the Democrats are aligned, but they need to stand for something and not as just be the party with the most reasonable position at the time because the other solution is way out of the mainstream.

A week ago, a good friend of ours had tears in her eyes, as she told about a recent increase in their healthcare insurance premium. It seems that they were not warned of the $300 a month increase, but she immediately blamed Obamacare. That’s where we are these days; we find the most common villain and just dump our troubles there. If I heard it right, it was a private insurance company that raised the rates, but she never told us the reason why. Her being a good friend, we did what came naturally; we just nodded our heads as if we were in agreement. If we were in another venue and the circumstances were different, I would’ve told her to pick up the latest copy of Time magazine (I'm  still reading all the fine detains of the article for a future blog) so she could see all the waste, fraud, and abuse that’s going on in our healthcare system. I just had a 62-year-old friend of mine, who was fixing to retire, tell me that he was going to stay an additional three years because after this year, his company would no longer offer health insurance.

I was hoping that the “ Pro/Con: Minimum wage thread” would get some interesting comments but the first one I saw was about a city worker getting slammed because he favored a minimum wage increase. It’s one of those “I pay your salary, so I’ll decide if, when, and how much you get” standard answers when you mention public employees.