Minimum Wage Still Raising Concerns

During this politically charged election year, one of the driving issues involves wages: Gender inequality, overall income inequality and the controversial movement to increase the national minimum wage. 

The fast food industry would likely feel the most effects from a minimum wage increase, and recently some of the largest companies have announced varying plans of action if a raise is instituted. McDonald’s said it wouldn’t reduce jobs in light of a mandated wage increase, as its focus moving forward is on customer service. 

A former CEO of the company pointed out that this may not be the best fiscal approach, as it’s more costly long term to pay workers $15/hour than it is to install a $35,000 robotic arm that bags french fries. The cost may be worth it, as recent numbers demonstrate that McDonald’s focus on employee wages and benefits has improved its customer service scores, which increased by 6 percent in the first quarter compared to the same period last year. 

However, this philosophy is hardly widespread. The CEO of Carl’s Jr. and Hardee’s recently hinted that the overall food and beverage industry would likely engage in more automation if the government mandates a higher cost for labor.1 

The thing about wages is that there is a minimum standard by which a person can live, and any amount of money earned above that reflects his or her lifestyle choices. If you’re not earning what you need to meet all of your expenses — including saving regularly for retirement — then you may need to re-evaluate how you’re spending your income. We all need an insurance backstop for unexpected events such as an automobile accident, major repairs to your home or a health emergency. We’re happy to help you to find options that can optimize your income, so that one high-expense event doesn’t devastate your finances. 

Like most partisan issues, valid arguments can be posited on both sides of the wage war. While corporate profits may decrease by raising wages, those who receive increases have the opportunity to improve their quality of living. This is particularly true for low-income earners. One study revealed there are no U.S. states where a full-time minimum wage worker ($7.25/hour) could afford a one-bedroom apartment at the average fair market rent.2 

Similar arguments can be made for expanding government-sponsored health care benefits. It may cost more for taxpayers, but one recent study demonstrated that there could be direct benefits to employers. When comparing the numbers for low-income, childless adults living in the 14 states that expanded Medicaid in 2014 with those living in the 22 states that did not, two interesting findings emerged. 

First, in the Medicaid-expansion states, adults’ access to preventive care improved. Second, the average number of work days lost due to poor health in those states dropped by 12 percent, which works out to about a full day per month.3 

On the gender income equality front, a new study from the University of Notre Dame revealed the impact of having more women on corporate boards. The research found that public company boards with a large share of female directors correlated to significantly fewer mergers and acquisitions. The study observed that the women’s presence more likely led to smarter conversations about risk management, challenges and things that could go wrong. Indeed, previous studies have found that a more diversified boardroom is associated with better stock performance in tough markets, higher return on equity, fewer leadership-related scandals and less costly mergers.4 

In other discussions about wages, analysts have studied the tradeoff between today’s corporate expectation of boundary-less 24/7 accessibility and less engagement during the regular eight-hour workday, even suggesting that workers make a greater effort to appear busy than to get their work done efficiently.5 

There also are new innovations in the area of flex pay, such as the ability for workers to tap into wages for time already worked without having to wait until payday. One such innovation, called PayActiv, received a Best of Show award at FinovateSpring 2016 for its use of technology to ease the “cash flow struggles of working families.”6 

Content prepared by Kara Stefan Communications 

1 Kate Taylor. Business Insider. May 27, 2016. “McDonald’s CEO reveals how the fast-food chain will use robots in the future.” http://www.businessinsider.com/mcdonalds-wont-swap-workers-with-robots-2016-5. Accessed May 27, 2016.
2 Kelsey Ramírez. HousingWire. May 26, 2016. “It’s officially impossible to rent at minimum wage in most of the country.” http://www.housingwire.com/articles/37130-factsheet-its-officially-impossible-to-rent-at-minimum-wage-in-most-of-the-country. Accessed May 27, 2016.
3 Allison Bell. LifeHealthPro. Mar 26, 2016. “How has PPACA affected people’s health?” http://www.lifehealthpro.com/2016/05/26/how-has-ppaca-affected-peoples-health?page_all=1. Accessed May 27, 2016.
4 Danielle Paquette. The Washington Post. May 24, 2016. “The weird thing that happens when you put more women in the boardroom.” https://www.washingtonpost.com/news/wonk/wp/2016/05/24/when-women-rise-to-power-in-companies-a-weird-thing-happens/. Accessed May 27, 2016.
5 Ilan Mochari. Inc.com. May 18, 2016. “Why Your Employees Pretend to Work 80-Hour Weeks.” http://www.inc.com/ilan-mochari/managing-high-stress-workplaces-employees-work-life-balance.html. Accessed May 20, 2016.
6 Suzanne Woolley. Bloomberg. May 25, 2016. “You Worked Monday. Why Not Get Paid Monday?” http://www.bloomberg.com/news/articles/2016-05-25/you-worked-monday-why-not-get-paid-monday. Accessed May 27, 2016. 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 

 

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