Sunday, April 9, 2017

Minimum Wage Hikes Are Not Pro-Life

May God bless Mark Shea, who thinks he is helping.

Mark is calling for a $15/hr minimum wage.  He has done so many times before, and he's likely to do so many times again, no matter what havoc it wreaks upon the poor, or how much it entrenches us in our poverty.  He still believes it will help.

And a higher minimum wage does help, but not who he thinks, and probably not as much as it harms even them.  As I explained in an earlier post, it helps union workers, especially among unionized government employees, members of unions like the SEIU and AFSCME.  Their contracts specify wages not as $X/hr, but as $(minimum wage)+Y/hr.  Increasing the minimum wage to $15 will give all such employees a $7.75/hr raise that they don't have to negotiate for, and that all other government budgets must be built around.

The first victims of minimum wage hikes are people who have a hard time making money for their employers even when paid only minimum wage.  Redpanels has illustrated this:

What happens to those jobs?  Typically, they are either automated or turned over to the customer.  Why do you have to pay to use the air compressor to fill your tires?  Why do you think nobody pumps your gas, washes your windshield, and checks your oil for you, like Gomer Pyle did in 1962?  Why do fast-food restaurants, 7-Eleven, and convenience stores and gas stations, one and all, have self-serve beverage fountains?  Where are all the soda jerks?

I live is a small town, with a population under 1000.  It's rural; the closest shopping outside town limits not counting gas stations is at least eight miles away.  Why do you think the McDonald's in the small town where I live bought a robot to fill sodas for the drive through?

What happened is that the minimum wage has made it unprofitable to hire people to do these jobs.  My guess is that the total cost of hiring a minimum wage employee, including minimum wage plus the employer's Social Security and Medicare taxes on wages paid plus the workman's comp and unemployment insurance premiums employers are required to pay plus the cost of keeping track of hours and computing all these things and sending the various payments where they have to go plus all other labor costs, adds up to quite a bit more than $7.25/hr, probably at least $10/hr and could be as high $12/hr.  Anyone whose labor doesn't make his employer a profit after paying all these costs does not get hired.

In fact, my own job would go underwater should the minimum wage rise to $15/hr.  And that's why I got really mad at Mr. Shea.

I work as a certified nurse aide (CNA) in a skilled nursing facility (nursing home).  My job is to help the residents with activities of daily living (ADLs) such as dressing, getting into and out of their beds and wheelchairs, moving to and from the toilet, eating, bathing, shaving, brushing their teeth and hair, taking their vital signs, helping them with other things as they need me to, and observing them for potential health issues, particularly pressure ulcers (bedsores) and other skin issues.  Almost nobody in this job gets paid $15/hr.  It's very rewarding in other ways, but it is hard work that doesn't pay well.  When I took the class to qualify for the Nurse Aide Certification Exam, the instructor told us that anyone able to read and write at a 10th grade level should be able to pass the class and the NACE.  And so it was.

The thing is, it takes about 1 CNA per nine residents to get everything done right and done well for all these residents during the daytime, and probably around 1 CNA per 15 residents at night.  You might get by with ratios of 1:12 during the day and 1:18 at night if you're willing to forgo things like oral hygiene (important for adequate eating, and preventing pneumonia and heart disease), proactive toileting, frequent bathing, incontinence rounds every two hours, and resident dignity, privacy, preferences, and safety.

When the minimum wage rises, every employer who pays less than the new minimum has to do one of three things:  increase revenue, increase productivity, or cut hours. Otherwise, they go under.  What this means for the nursing home administrator with about 90 residents is that if he's going to keep the same staffing level, he very likely will also have to come up with an extra $3900/yr in revenue for each resident, JUST for the increase in minimum wage, JUST for CNAs -- we aren't adding in rest of the labor costs for keeping those CNAs yet, let alone the suddenly-increased costs for staffing the dietary, housekeeping, maintenance, and laundry departments yet.

Most nursing home resident care is paid for by Medicare and Medicaid.  They are not going to kick out the extra $5000+ per resident per year.  Remember, hiring and keeping employees just got a LOT more expensive, perhaps nearly twice as much.  When prices go up, it puts downward pressure on purchases, so hiring and employment will go down.  Because Medicare's single largest source of revenue is payroll taxes, the giant jump in unemployment is likely to prevent Medicare from getting any sort of increase in revenue; rather, revenue will likely decrease.  So too will reimbursement.  And that means fewer CNAs to help residents live healthy lives.  Rather, we can expect that one result of an increase of the minimum wage to $15/hr is that nursing home residents will face a lot more neglect, and for many, homelessness as their facilities are driven under by a misplaced desire to be generous with other peoples' money.

May the Infinitely Merciful protect my residents from that.


Nate Winchester said...

Shea wouldn't be so bad if he tamped down his pride and let others talk. I hear the blog was once like that but I've been banned since he started turning it into an echo chamber.

Here's another way to back up your point (I would put it over there but, obviously can't).

Let's boil everything down to an uber-simplistic model so our minds can properly grasp the right idea before adding complexity to that idea.

Let's imagine Kevin. Kevin is a worker at McDonald's. Let's say he makes $5 an hour. After one day of working 8 hrs, Kevin has $40.

Is that a lot? Is it a little? We can't say, because we lack any context for the money to have value. We must determine the purchasing power of those dollars. So let's keep things simple, let's say a whole Big Mac cost $1. So after a day of work, we know that Kevin can get 40 big macs. Well let's break that down further. Say a big mac is all Kevin needs for a meal. 3 meals a day, for 7 days a week, comes out to 21 meals need to survive a week. So of Kevin's pay, just over half of it can be spent to feed Kevin for a week, meaning he can save 19 big macs for a rainy day. Note: this is what is meant by the time value of money. It would be a pain for Kevin to try and keep 19 big macs in a freezer, much easier to keep $19 in the bank.

Now let's now imagine our good hearted do-gooder to declares Kevin isn't making enough, he needs more money. Yet our do-gooder isn't totally stupid, he knows the money must come from somewhere. So let's increase the price of the Big Mac by $1 and pass that dollar STRAIGHT onto Kevin. Congrats, Kevin! You're now making $6 an hour! So after an 8 hr day, Kevin now walks home with $48 in his pocket. All's good, right?

Well... except Big Macs now cost $2, remember? So after a day of work Kevin can actually buy... 24 big macs. But a week's worth of meals is still 21 meals. Meaning now he covers an entire week's worth of eating, and only has 3 Big Macs left over for saving. By increasing Kevin's pay, we've now made it so he can purchase a bit more than half of what he used to. So has Kevin actually gotten a raise?

And that's in our super-simple model. Now start to imagine adding in taxes and housing prices and interest rates and gas prices and all the rest of life, and we can start to see how the chase after a living wage ends up being a treadmill run with no end in sight.

Nate Winchester said...

Did my previous comment get eaten or is it still in moderation?

David said...

It's so clear. Why Mark cannot see it, I do not understand.

Bless you for the work you do. I could not do it. I may be the world's worst nurse.

BTW, you won't see me comment on Mark's blog, seeing as how I was banned for excessive snark. But I read it anyway, especially the comments, and I really enjoy yours.

Arkanabar Ilarsadin said...

Nate: er, it was left in moderation. I neglect this blog horribly.