Sunday, March 1, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

2 side to minimum wage coin

sievers column sig

By
From page B7 | January 19, 2014 |

The controversy over the minimum wage has taken center stage recently.

As usual there is more here than appears at first glance. The basic argument for the increase includes points such as: the wage should be enough to serve as a living wage and therefore be “fair”; the increase in wages will be spent and therefore improve consumption in the economy.

The arguments against the increase include points such as: employers will be less willing to hire staff if the cost is higher; wages for entry-level positions are not living wages because people should progress above that level in their career; an increase for the employee is a reduction for the employer who could spend it elsewhere, so this is a zero sum calculation.

There is a second level to consider, which is less apparent.

Increasing minimum wages lessens the difference to the next higher wage level, a result called compaction. Thus pushing up wages at the bottom will eventually push up wages throughout the organization, increasing its costs. Often this cost increase leads to a price increase for the company’s goods or services. This contributes to the overall level of inflation and soon the minimum wage seems inadequate again.

Now let’s address a third level of possible consequence.

One possibility is that the business cannot raise its prices in a competitive environment so the company has less money to spend to improve or to pay the owner, often a small business person. Limits on upgrades to technology and equipment, including maintenance and repair, can cause the business to offer a less-desirable product and then begin to slip until it goes out of business. Or the owner simply accepts less income, realizing that owners of small businesses get the residual, whether a large or small amount, and by definition are the last to be paid.

Another possibility is that the business makes a drastic change in its technology that requires fewer employees, especially at the minimum wage. History provides numerous such examples, but an interesting new one is worth considering.

Much of the wage controversy has occurred in the fast food industry so let them be the example. A company in the Bay Area has developed a totally automated machine that makes custom hamburgers. It grinds the meat and slices the vegetables at the moment of order. You could have beef or half pork and half buffalo with custom toppings without anything growing stale waiting. The machine, which can produce 360 burgers per hour, could be far more responsive to specific orders and deliver a fresher product rapidly.

With such a machine, the fast food store would need fewer, if any, minimum wage folks working the prep line. Those jobs would simply disappear to be replaced by jobs requiring more skill and sophistication to operate and maintain the machine.

The machine would eliminate low wage jobs often called “dull and boring” and replace them with more interesting and skillful jobs, most likely at much higher wages. This would be the argument for using such a machine, while the argument against would be the lament that some jobs were eliminated.

I would offer two lessons to learn from this brief discussion.

First is that the economy at both local and global levels is astonishingly complex. You cannot make any change without a cascade of results, many of which may not be apparent or anticipated.

The second lesson is that society should be very attentive to preparing people to be well-qualified to work in a competitive environment where technology is bringing change at an astounding pace.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from the University of California, Berkeley. Contact him at [email protected]

LEAVE A COMMENT

Discussion | 10 comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

  • The MisterJanuary 19, 2014 - 8:16 am

    Did you know that the main beneficiaries of an increased minimum wage are unions? Many of their pay scales are exponentially tied to the minimum wage. If minimum wage goes up a little, union wages got up a lot. Do you supposed it's any wonder that unions lobby and give generous campaign contributions to politicians and conduction propaganda efforts to get increased minimum wage laws? I would have thought Mr Seivers would have mentioned that.

    Reply | Report abusive comment
  • Teach5thJanuary 19, 2014 - 9:13 am

    What a great article which clearly spells out the arguments for and against raising the minimum wage. Unfortunately, those pushing raising the min. wage stopped reading after the 2nd paragraph. In the last paragraph, the author writes that society should be attentive to preparing people to be well-qualified to work in a competitive environment. To prepare "people" it's important to teach kids/"people" to think. Unfortunately, most people don't/can't think through differing opinions and ideas because they're so busy just trying to make it in this lousy economy. If they did think, they' realize that we currently have a president, together with his White House staff/cabinet that have lied to us about Obamacare, Benghazi, and the IRS scandal and they would be outraged.

    Reply | Report abusive comment
  • CD BrooksJanuary 19, 2014 - 9:30 am

    Teach5th, you were going along nicely until you imploded at the end. You can't teach without proper information. Maybe you should go find some.

    Reply | Report abusive comment
  • Teach5thJanuary 19, 2014 - 9:40 am

    Really, and where would you suggest I do that? Maybe the New York Times? We're you not paying attention when Obama said you could keep your doctor/insurance if you liked them? Was that the truth? Or how about his administration saying for weeks that Benghazi was attacked because of a video? The Senate came out this week with a report saying that hours after the attack, his administration was told the truth. Me - imploding? No, I'm furious that there are people who make fun of others and tell them to go find "proper" information when the ones making the suggestion don't mind being lied to. CD - I suggest you follow your own advice:)

    Reply | Report abusive comment
  • Teach5thJanuary 19, 2014 - 9:42 am

    I didn't spell "we're" we're. My computer program made that correction. I didn't want you going off on a tangent about me being a lousy speller who teaches kids instead of focusing on what followed the misspelling:)

    Reply | Report abusive comment
  • CD BrooksJanuary 19, 2014 - 10:31 am

    Teach5th, we have a policy here where we don't worry about typos, misspellings and punctuation. I'm rock-solid in my place and I've learned plenty, thanks! Pornac will bury you in his sarcasm, get ready for it! :)

    Reply | Report abusive comment
  • Teach5thJanuary 19, 2014 - 10:46 am

    CD- Pornac will use sarcasm in place of facts to counter what I wrote. That's what liberals do. If you don't believe me, watch MSNBC. They mock folks on the right (look who's been fired recently) or the read a written-for-them apology, throwing in phony tears to make the apology seem real. If they were truly what they were trying to make the non-thinkers believe them to be, they wouldn't have spent the minutes before the mocking began trying to rev it up. So, let PORNAC begin. It'll just prove my point:)

    Reply | Report abusive comment
  • CD BrooksJanuary 19, 2014 - 11:01 am

    Teach5th, yeah, you're a sorry mess. Good luck with yourself! :)

    Reply | Report abusive comment
  • Rich GiddensJanuary 19, 2014 - 3:40 pm

    The higher the minimum wage, the higher the black unemployment rate and the higher the cruelist tax for all---inflation, which I believe will be arriving about now. The minimum wage was never intended to be a CEO or even a craftman's wages or salary. All of the liberal / socialist banter and illogical emotional appeals regarding ''income inequality'' is rubbish, garbage and trash for your average dumb Californian or New Yorker low information voter ---''the rent is too darn high'' nonsense! You dummies are going to reap the economic whirlwind.

    Reply | Report abusive comment
  • PornacJanuary 19, 2014 - 7:07 pm

    Rock-solid points make Pornac teary eyed. I skipped 5th grade.

    Reply | Report abusive comment
  • Recent Articles

  • Enter your email address to subscribe and receive notifications of new posts by email.

  • .

    Solano News

    School bands compete in Pageantry on Parade

    By Susan Hiland | From Page: A1, 2 Comments | Gallery

     
    Peace and patience: Quilters gear up for show

    By Amy Maginnis-Honey | From Page: C1 | Gallery

     
     
    Conservancy plans next Quail Ridge Reserve walk

    By Susan Hiland | From Page: A3

     
    Police seek suspect in armed robbery

    By Bill Hicks | From Page: A3, 3 Comments

    4-H Presentation Day brings fun, education to Fairfield

    By Susan Hiland | From Page: A3 | Gallery

     
    The agony of the codling moth, ecstasy of worm-free apples

    By Christine Macgenn | From Page: C4

     
    What you eat can affect your medications

    By Marilyn Ranson | From Page: C4

    CAASC 18th Annual Chinese New Year and Scholarship Celebration

    By Steve Reczkowski | From Page: A5 | Gallery

     
    Rollover in Suisun City

    By Aaron Rosenblatt | From Page: A5, 1 Comment | Gallery

    State schedules ramp closure at freeway project site

    By Kevin W. Green | From Page: A5

     
    Appointments on tap for Board of Supervisors meet

    By Kevin W. Green | From Page: A5

     
    Tri-City NAACP honors community members at gala event

    By Bill Hicks | From Page: A5 | Gallery

     
    NY, SF town house prices through the roof

    By Bud Stevenson | From Page: B7

     
    Fairfield police log: Feb. 27, 2015

    By Susan Hiland | From Page: A9

     
    Suisun City police log: Feb. 27, 2015

    By Susan Hiland | From Page: A9

    Airmen with local ties finish basic training

    By Nick DeCicco | From Page: B10

     
    Force draws many from South, middle class

    By Tom Philpott | From Page: B10

    .

    US / World

    Christie to Calif. Republicans: No rush to pick 2016 nominee

    By The Associated Press | From Page: A1

     
    US missionary abducted in Nigeria is courageous, friends say

    By The Associated Press | From Page: C3

    Weekend storm drops snow, rain, hail in California

    By The Associated Press | From Page: A5

     
    Dress that ‘greatly resembles’ stolen Nyong’o gown found

    By The Associated Press | From Page: A5

     
    Churches, synagogues, mosques bear tough New England winter

    By The Associated Press | From Page: A6

    Hyundai recalls 263,000 cars due to power-steering problem

    By The Associated Press | From Page: A10

     
    Blind dog rescued after being lost for 2 weeks in the cold

    By The Associated Press | From Page: A10

    Details about proposed national monuments in California

    By The Associated Press | From Page: A10

     
    National monument supporters in California get antsy

    By The Associated Press | From Page: A10, 1 Comment

    US drone strike in Yemen kills 3 suspected al-Qaida fighters

    By The Associated Press | From Page: A11

     
    Greece will not seek another bailout, prime minister says

    By The Associated Press | From Page: A11

    Attacks kill 37 people in and north of Iraq’s capital

    By The Associated Press | From Page: A11

     
    Nemtsov a possible ‘sacrificial victim,’ investigators say

    By The Associated Press | From Page: A12

    .

    Opinion

    Editorial Cartoon: March 1, 2015

    By Daily Republic Syndicated Content | From Page: A8

     
    Sound off for March 1, 2015

    By Daily Republic | From Page: A8

     
    New school funding plan remains on bumpy path

    By Dan Walters | From Page: A8

    Even Gruber deserves a break sometimes

    By Megan Mcardle | From Page: A8, 2 Comments

     
    I might just vote for a Democrat next time around

    By Letter to the Editor | From Page: A8, 9 Comments

    Aging Fairfield housing agency faltering

    By Letter to the Editor | From Page: A8

     
    .

    Living

    Today in History: March 1, 2015

    By The Associated Press | From Page: A2

     
    Community Calendar: March 1, 2015

    By Susan Hiland | From Page: A2

    With numbers falling, Houston-area nuns’ future uncertain

    By The Associated Press | From Page: C3

     
    Horoscopes: March 1, 2015

    By Holiday Mathis | From Page: C4

    Kidney Walk participation helped give me a positive outlook on life

    By Kathy Mitchell and Marcy Sugar | From Page: C4

     
    .

    Entertainment

    Take a look – Dr. Seuss has a new book

    By The Associated Press | From Page: C2

     
    Publisher launches line of Warhol e-books

    By The Associated Press | From Page: C2

    Q&A: Opera star Deborah Voigt writes of turbulent life

    By The Associated Press | From Page: C2Comments are off for this post

     
    PUBLISHERS WEEKLY BEST-SELLERS

    By The Associated Press | From Page: C2

    Review: ‘The Girl on the Train’ has realistic plot

    By The Associated Press | From Page: C2Comments are off for this post

     
    TVGrid

    By Daily Republic Syndicated Content | From Page: B11

    .

    Sports

    Vikings girls looking for first section title

    By Paul Farmer | From Page: B1 | Gallery

     
    Local Report: Vaca’s Aquino wins Masters wrestling title

    By Daily Republic staff | From Page: B1

    Phegley hopes his style will catch on in Oakland

    By The Associated Press | From Page: B1

     
    A year after meeting Tiger, Indian golfer on the rise

    By The Associated Press | From Page: B1

    Jeff Gordon takes a final spin at track that meant so much

    By The Associated Press | From Page: B1

     
    Players’ union head: future spring games in Cuba possible

    By The Associated Press | From Page: B2

    Harrington takes 36-hole lead, then more rain in Florida

    By The Associated Press | From Page: B2

     
    Defending champ Federer beats Djokovic to retain Dubai title

    By The Associated Press | From Page: B2

    Safarova beats Azarenka to win the Qatar Open

    By The Associated Press | From Page: B2

     
    Environmental activists disrupt meeting by Olympic officials

    By The Associated Press | From Page: B2

    Hamilton hones Mercedes with fastest time at F1 testing

    By The Associated Press | From Page: B2

     
    Thunder’s Russell Westbrook has surgery on cheekbone

    By The Associated Press | From Page: B2

    Anthony Mason, rugged forward of 1990s Knicks, dies at 48

    By The Associated Press | From Page: B2

     
    Warriors center Festus Ezeli suspended for a game

    By The Associated Press | From Page: B2

    Reichelt leads Austrian World Cup downhill sweep

    By The Associated Press | From Page: B2

     
    Harvick wins Xfinity race at Atlanta for 3rd year in a row

    By The Associated Press | From Page: B4

    Stolen No. 44 NASCAR race car found in suburban Atlanta

    By The Associated Press | From Page: B4

     
    .

    Business

    Fruits and vegetables get a star-studded marketing push

    By The Associated Press | From Page: B7

     
    For many in US, cash saved at gas pump is staying in pockets

    By The Associated Press | From Page: B7

    Nevada casinos keep $953.7 million in winnings in January

    By The Associated Press | From Page: B8

     
    Historic snows causing headaches for real estate industry

    By The Associated Press | From Page: B8

    Boy, 13, builds Braille printer with Legos, starts company

    By The Associated Press | From Page: B9Comments are off for this post

     
    Recalls this week: hand trucks, ceiling fans

    By The Associated Press | From Page: B9

    Review: Freedom! These smartwatches leave the phone behind

    By The Associated Press | From Page: B9

     
    Greek prime minister rules out third bailout

    By The Associated Press | From Page: B9

    AP Exclusive: Fuel-hauling trains could derail at 10 a year

    By The Associated Press | From Page: B12 | Gallery

     
    .

    Obituaries

    John W. Van Wart

    By Nancy Green | From Page: A4

     
    Virgil Albert Hanson

    By Susan Hiland | From Page: A4

    Thomas Browning

    By Nancy Green | From Page: A4, 1 Comment

     
    Leah E. Hoffman

    By Nancy Green | From Page: A4

    .

    Comics