Thursday, December 18, 2014
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 mark@wealthmatters.com.

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
.

Solano News

Solano College trustees move back ‘home’

By Susan Winlow | From Page: A1 | Gallery

 
Needs of small dog give Solano man life’s mission

By Ian Thompson | From Page: A1, 5 Comments | Gallery

 
Christmas comes early for prenatal program participants

By Susan Hiland | From Page: A2 | Gallery

Police chief: Suisun crime up 3 percent in 2014

By Ian Thompson | From Page: A3, 3 Comments | Gallery

 
Council OKs $65,730 pact to advocate for Travis base

By Ryan McCarthy | From Page: A3

 
Fairfield pays $42,500 to settle soil suit

By Ryan McCarthy | From Page: A3

Jury convicts teen for role in 2012 DeBartolo’s heist

By Jess Sullivan | From Page: A3, 5 Comments | Gallery

 
 
 
Fairfield police log: Dec. 16, 2014

By Susan Hiland | From Page: A10

Fairfield police log: Dec. 15, 2014

By Susan Hiland | From Page: A10

 
Suisun City police log: Dec. 16, 2014

By Susan Hiland | From Page: A10

Suisun City police log: Dec. 15, 2014

By Susan Hiland | From Page: A10, 1 Comment

 
.

US / World

Pope played crucial role in US-Cuba rapprochement

By The Associated Press | From Page: A1

 
US travel industry carefully eyeing Cuba tourism

By The Associated Press | From Page: A1

US-Cuba thaw could benefit farmers, energy and travel firms

By The Associated Press | From Page: A1

 
Cubans cheer historic renewal of US relations

By The Associated Press | From Page: A1, 2 Comments

Freed American endured years of declining health

By The Associated Press | From Page: A1

 
US, Cuba patch torn relations in historic accord

By The Associated Press | From Page: A1, 1 Comment

 
Fears fanned by hackers bring down Sony film

By The Associated Press | From Page: A1, 1 Comment

Like Iran, secret diplomacy leads to US-Cuba thaw

By The Associated Press | From Page: A1

 
Bay Bridge light sculpture to keep on shining

By The Associated Press | From Page: A4, 4 Comments

Study: Huge wildfire supports need for controlled burns

By The Associated Press | From Page: A5

 
A fresh setback for efforts to cure HIV infection

By The Associated Press | From Page: A5, 2 Comments

14 charged in deadly 2012 meningitis outbreak

By The Associated Press | From Page: A5

 
Study: Alcatraz inmates could have survived escape

By The Associated Press | From Page: A5

Colombian rebels announce unilateral cease-fire

By The Associated Press | From Page: A6

 
Russians flock to stores to pre-empt price rises

By The Associated Press | From Page: A6, 1 Comment

Pakistan buries victims of school massacre

By The Associated Press | From Page: A6, 1 Comment

 
Nigerian court sentences 54 soldiers to death

By The Associated Press | From Page: A6

.

Opinion

Crime Witness Protocol 101

By Kelvin Wade | From Page: A7, 8 Comments

 
 
Editorial Cartoons: Dec. 18, 2014

By Daily Republic Syndicated Content | From Page: A7

 
.

Living

Today in History: Dec. 18, 2014

By The Associated Press | From Page: A2

 
Community Calendar: Dec. 18, 2014

By Susan Hiland | From Page: A2

Horoscopes: Dec. 18, 2014

By Holiday Mathis | From Page: A9

 
My siblings don’t want to replace abusive mother’s pacemaker

By Kathy Mitchell and Marcy Sugar | From Page: A9

.

Entertainment

25 movies chosen for the National Film Registry

By The Associated Press | From Page: B4

 
Saving Private Ryan’ among films being preserved

By The Associated Press | From Page: B4

TVGrid

By Daily Republic Syndicated Content | From Page: B4

 
.

Sports

Carr faces another tough test in rookie season

By The Associated Press | From Page: B1

 
For MLB, changes in Cuba will take time to sort out

By The Associated Press | From Page: B1

Falcons cruise by crushers in girls basketball

By Paul Farmer | From Page: B1, 1 Comment | Gallery

 
49ers release McDonald amid further legal trouble

By The Associated Press | From Page: B1

Track coach Drummond gets 8-year doping suspension

By The Associated Press | From Page: B2

 
Warriors’ Bogut out with knee injury vs. Thunder

By The Associated Press | From Page: B2

AP source: Romo close to $15M, 2-year deal with Giants

By The Associated Press | From Page: B2

 
Baseball monitoring White House Cuba decision

By The Associated Press | From Page: B2

APNewsBreak: Judge rejects NCAA concussions deal

By The Associated Press | From Page: B2

 
Painkillers lawsuit against NFL dismissed; may be appealed

By The Associated Press | From Page: B2

Garcia resigns as FIFA prosecutor

By The Associated Press | From Page: B2

 
Chattanooga women stun No. 7 Stanford 54-46

By The Associated Press | From Page: B2 | Gallery

 
This date in sports history for Thursday, Dec. 18, 2014

By The Associated Press | From Page: B3

.

Business

McDonald’s in Japan limits orders of fries

By The Associated Press | From Page: B5

 
Amid scrutiny, Uber says it will focus more on safety

By The Associated Press | From Page: B5

Health care exchange sign-ups exceeding last year

By The Associated Press | From Page: B5, 1 Comment

 
Fed to be ‘patient’ about a rate hike; stocks soar

By The Associated Press | From Page: B5

.

Obituaries

Marian L. “Chicki” Downs

By Nancy Green | From Page: A4

 
.

Comics

For Better or Worse

By Daily Republic Syndicated Content | From Page: A8

 
B.C.

By Daily Republic Syndicated Content | From Page: A8

Rose is Rose

By Daily Republic Syndicated Content | From Page: A8

 
Blondie

By Daily Republic Syndicated Content | From Page: A8

Pickles

By Daily Republic Syndicated Content | From Page: A8

 
Baldo

By Daily Republic Syndicated Content | From Page: A8

Baby Blues

By Daily Republic Syndicated Content | From Page: A8

 
Wizard of Id

By Daily Republic Syndicated Content | From Page: A8

Beetle Bailey

By Daily Republic Syndicated Content | From Page: A8

 
Frank and Ernest

By Daily Republic Syndicated Content | From Page: A8

Zits

By Daily Republic Syndicated Content | From Page: A8

 
Sally Forth

By Daily Republic Syndicated Content | From Page: A8

Garfield

By Daily Republic Syndicated Content | From Page: A8

 
Peanuts

By Daily Republic Syndicated Content | From Page: A8

Dilbert

By Daily Republic Syndicated Content | From Page: A8

 
Get Fuzzy

By Daily Republic Syndicated Content | From Page: A8

Sudoku

By Daily Republic Syndicated Content | From Page: A9

 
Bridge

By Daily Republic Syndicated Content | From Page: A9

Word Sleuth

By Daily Republic Syndicated Content | From Page: A9

 
Crossword

By Daily Republic Syndicated Content | From Page: A9

Cryptoquote

By Daily Republic Syndicated Content | From Page: A9