Adumbration

Evidently Seattle's Mayor McGinn thinks that proclamation is an effective method to improve the living standard of local citizens.   Would that it were so.

Danny Westneat and Jim Brunner developed the story in a series of articles in the Seattle Times:

• [1] "Mayor McGinn goes all out on Whole Foods over worker pay", DW, 7/20/2013
• [2] "Mayor’s race ignited as McGinn called out on Whole Foods attack", DW, 7/23/2103
• [3] "Whole Foods fight: Murray joins attacks on McGinn effort to block West Seattle project", JB, 7/24/2013
• [4] "Harrell joins Whole Foods fray, calls McGinn’s stand “shallow”", JB, 7/25

The long and short of it is that the current Seattle mayor, Mike McGinn, wants to use the influence of his office to stop Whole Foods from opening a new store because he thinks the company does not pay sufficiently high wages.  It is an unusual ploy, made possible by the fact that the subject development involves the prospective purchase from the city of an adjacent alley.  The alley purchase, however, requires approval by the city council, not the mayor, so McGinn is free to pontificate with no actual responsibility for decision-making in this subject^[1].  It is a local election season in Seattle; ballots are due August 6 for mayor and a few other local positions.  Of a large field of mayoral candidates, Peter Steinbrueck was first among the other eight to raise some concern for selective application of this policy, with a reminder of McGinn's prior support to development projects where his friends are involved^[2]; beyond that instance of hypocracy, I am reminded of another with McGinn's support to another taxpayer subsidized sports stadium.  At any rate, by Wednesday a couple other local politicians - fellow candidates to replace McGinn as mayor - weighed in to complain: Charlie Staadecker and current Washington state senator Ed Murray, with Murray making the observation that many City of Seattle employees are paid less than what Whole Foods typically pays it's employees^[3].  On Thursday a fourth candidate - current councilman Bruce Harrell - had little to add but apparently decided he had to say something^[4].

In all this posturing hubbub, nowhere to be found is a challenge to the presumption that a fiat on wage rates will improve living standards of low wage workers.  Harrell, Murray, Staadecker, and Steinbrueck seem only concerned that political process be followed, that the correct set of  privileged people are involved in deciding the terms of our employment, particularly the terms for those of us with minimal skills who would bear the brunt of any increase in the minimum wage.

Starting with the nominal reason why McGinn is in position to make any claim in the matter, a clear solution would be easements on the alley to be allocated to the effected property owners.  The alley is a point of access to the properties and is best dispositioned by the people more directly involved.  

The main consideration in this brouhaha is whether a mandate on higher wages will actually improve the lot of people on the lower end of the income range.  To that question it is clear that some people will be decidedly worse off - those who turn out to be unemployable because their economic contribution to the enterprise is not greater than the minimum allowed compensation.   Suppose a person employed at compensation X who makes contribution Y; as soon as X>Y that person is contributing a loss to the enterprise, which if sustained and extended leads to going out of business for the enterprise.  If the business owner persists with the inequality, the loss accumulates until the point when the business employs no one.

An equivalent situation is that of the employer when faced with a potential employee whose potential contribution is less than the mandated compensation.  Job seekers in those situations don't get hired at all.  They don't get an opportunity to show their worth.  They don't get the immediate benefit of wages.  They don't get the experience needed to convince another employer that they know what it means to show up on time and get the work done.  They don't get the satisfaction of knowing they contributed to a successful operation.  They don't get the prospects of higher wages if they show they are worth more than their current compensation.

But that's the fate to which Mayor McGinn and those of like mind would condemn the people most on the margin of beginning and sustaining a productive contribution to our society.  McGinn is not in that situation, and neither are his union supporters nor his opponents in the mayoral race. 

And his opponents deserve special mention in as much as they have raised objections on the basis of not including business input in such political maneuverings.  Consider what happens in such discussions.  Who can afford to take time to talk to politicians when they have payroll to meet?  Who bankrolls the campaigns of the major candidates?  The answer to both of these questions is the same - established business interests who have no desire to face competition from upstarts.  And what better way to restrain such competition than by imposing hurdles that make it more difficult for people to begin new businesses?  Those new businesses are the ones with the smallest margins, the ones least able to afford the smallest extra expense, the ones surviving week to week in the effort to establish a niche and reputation for quality or novelty or style that others have not yet managed to achieve.

Whole Foods is not the only center for discussion of wage rates in the Puget Sound region.  The Sea-Tac city council agreed to put a measure on the November 2013 ballot that calls for a $15/hour minimum wage ("SeaTac to vote on $15 minimum wage", The News Tribune, 7/25/2013).  If raising living standards were as simple as mandating a $15/hour minimum wage as proposed in Sea-Tac and by Seattle city council candidate Kshama Sawant then why should we stop there?  Why not $25 or $100/hour?

And Seattle is not the only nexus of debate on wage rates.  The Sunday New York Times ("Fighting Back Against Wretched Wages", Steven Greenhouse, 7/28/2013), and the CS Monitor on Monday ("Fast food workers strike McDonald's, KFC, and other chains", Akane Otani, 7/29/2013) report the actions of workers in some fast food chains who want higher pay.  I don't oppose people who choose to engage in collective bargaining.  I'm sure it's worked more than once in the short term at least, but it is also possible to overreach, as union members with Chrysler and General Motors discovered.

The point is that we all want more, but we can only get more if what we offer in exchange has correspondingly greater value to others.  This is true for our lives in business and as workers, a point which should be clearly recognized when we consider our role as purchasers of goods and services - in that role we don't long tolerate poor quality or inadequate service and soon go in search of someone better able to satisfy our needs.  For any good or service, the payment is not based on what the providers think to be desired, but what the consumers think to be of value.  What makes our wages more or less than those of other people in the economy is not the fact that we have skills and expertise, but that those particular skills contribute to something that people value at a level which supports wages we are paid.  The causal direction is from consumer to producer and not the other way around, which is something that people who agitate for higher wages may want to keep in mind - those wages are based on the expressed consumer preferences of themselves and everyone else in the society.

It would be nice if politico proclamations were enough to improve our material lot in this world, but the way the world works is more complicated.  The prospects for improved standards of living for all people rest in the steadily lowering costs associated with increasing production in accordance with our choices actually displayed in the market for goods and services.   If we want that end then we should look at what restrains production and at what distorts its satisfaction of those choices.