Freedom From Work is Here

The unthinkable has happened. Millions of Americans have embraced freedom from work and have now reclaimed their lives from the dreaded grind of employment. So many have walked away that businesses can’t fill job openings. We did it! Freedom is in the air and so many people have the opportunity now to build that business, find that calling, or go bohemian.

There’s no longer a need for a blog called “Quit Your Job” these days. It’s already been done.

But back to reality. While the above sounds utopian, that’s not what is going on exactly. At the moment, unemployment is high…but companies are also struggling to hire anybody. A recent article from the New York Times titled “Unemployment is High. Why Are Businesses Struggling to Hire?” lays it out:

“…the data tables produced every month by the Bureau of Labor Statistics, which suggest a plentiful supply of would-be workers. The unemployment rate is 6 percent, representing 9.7 million Americans who say they are actively looking for work…[while] businesses, especially in the restaurant and other service industries, say they face a potentially catastrophic inability to hire.”

So we’ve got jobs and people looking for jobs, yet the jobs remain unfilled and the people remain unemployed. What gives? Recently, a McDonald’s in Florida is offering people $50 just to come in to interview for a job because they’re so short staffed and unable to hire. You read that correctly. McDonald’s — once the employer used as a threat for people who didn’t want to go to school or study (as in “You’ll end up working at McDonald’s”) — can’t even hire right now. McDonald’s is also offering a $400 signing bonus if you end up getting the job. The state of Montana is bribing citizens with $1,200 if they go back to work, “blaming an expansion of unemployment benefits for a labor shortage in the state.”

We’re through the looking glass here people.

Do people not need jobs anymore? Is work outmoded? When the pandemic started, millions of Americans were let go or furloughed, feeding huge unemployment numbers to all-time highs. American had staggering food lines not seen since the Great Depression in 2020.

Now states are reopening up, restrictions easing off, and businesses trying to return to normal. But the workers aren’t coming back. Is it because of COVID fears and aversion to risk being around people? Maybe that’s part of it. According to the Chicago Tribune, “A Census survey taken in late March shows that 6.3 million didn’t seek work because they had to care for a child, and 4.1 million said they feared contracting or spreading the virus.”

There’s also something else at work here. From the same Chicago Tribune article, entitled “Where Are the Workers?”:

The National Federation of Independent Business found in a March survey of its own members that 42% had job openings they couldn’t fill. Owners cited higher unemployment benefits as one factor. And a study released last month by the National Bureau of Economic Research found that a 10% increase in unemployment benefits during the pandemic led to a 3.6% drop in job applications.

“Unemployment benefits allow workers to be able to wait longer before they take a job, which can make hiring harder,” said Ioana Marinescu, a University of Pennsylvania professor who co-authored the study.”

Unemployment benefits, particularly Federal ones, have caused disruptions in the labor market. A ZeroHedge article, “Biden’s Trillions” Spark Historic Labor Shortage” puts it [perhaps oversimplified] as “trillions in Biden stimulus are now incentivizing potential workers not to seek gainful employment, but to sit back and collect the next stimmy check for doing absolutely nothing in what is becoming the world’s greatest “under the radar” experiment in Universal Basic Income.”

Universal Basic Income (or UBI) is an eventual topic I plan to cover in this blog.

As I was writing this post, the US Chamber of Commerce came out after a dismal April jobs report and suggested to the government to shut off the $300 in extra unemployment benefits: “Based on the Chamber’s analysis, the $300 benefit results in approximately one in four recipients taking home more in unemployment than they earned working.” [Emphasis mine] And just this morning in the local Dunkin Donuts drive-thru I saw a huge poster advertising a free car for getting hired in a management position (I’m assuming it’s a company car but the poster didn’t elaborate).

Between DD and McDonald’s, businesses are literally bribing people to come work for them. Gone are the days, it seems, where winning a job and earning an income were admirable achievements. I guess it comes down to if you can make $900 a week working a job, or $800 not leaving the house…why not take the $800? You don’t have to drive anywhere, do anything, change clothes, or actively participate in society.

Which makes having a blog called “Quit Your Job” all the more abstract.

So government altruism is disrupting the job market. How long can it go on? Businesses still need employees to function. Not having enough employees is also severely disrupting supply chains, causing shortages and empty shelves. Another article from Zerohedge, this one entitled “Biden’s Stimulus Checks ‘Wreck Labor Pool’ As People Get Paid to Stay Home,” quotes the Federal Reserve Bank of Kansas City: “It is very difficult to handle the increased business with supply chain issues across all materials and finding anyone who wants to work. The federal government has incentivized people to stay home and not be productive.” This, combined with extra cash being handed out by the government, is very inflationary (also a future topic on this blog).

As mentioned above, surely this can’t go on, right? Hopefully not. The Federal unemployment bonuses are scheduled to expire in September of this year. If the Federal unemployment benefits expire, people will be making below what employment would bring in, so it only makes sense to return to work. Employers need it. The supply chain needs it. Then again, if the supply chain disruptions cause shortages prices of things increase, which would offset the extra unemployment and people would need to return to work just to afford basics. The only thing that doesn’t make sense is to leave the Federal unemployment bonuses permanent, especially as the country continues to reopen.

Which is exactly what some lawmakers want.

The idea behind this blog and “Quit Your Job” is to build something — a business, skills, expertise, ultimately bettering yourself so you no longer need to work for someone else. Taking money from the government and choosing not to work is not bettering yourself. Choosing to do nothing over working is not in the essence of Quitting Your Job.

Just remember, there’s no such thing as a free lunch.

The Other Side of $15 Part 3

Beware of strangers bearing gifts

The following is part 3 of an on-going series. The first part dealt with the immediate impact on business costs and barrier to entry; part 2 looked into the result of $15 per hour in the New York restaurant business. This section will cover big box retailers pushing for higher minimum wage in 2019. You can read part 1 here and part 2 here.

If you recall from part 1, the sudden spike in labor cost creates an immediate burden on lower paying employers. In the case of my fictional restaurant (and later shown in real life results in part 2), hours are cut, prices increase, and in some cases layoffs occur. Considering all of this, I was (at first) surprised to see big box retailers like Walmart calling for a $15 minimum wage.

This past summer, Walmart CEO Doug McMillon called out the federal government for the minimum wage being “too low:”

“The federal minimum wage is lagging behind,” Doug McMillon said at Walmart’s annual shareholder meeting in Bentonville, Arkansas on Wednesday. 
Congress has not raised the minimum wage since 2009, but McMillon’s surprise comments may give lawmakers an incentive to act. McMillon’s call may also ease pressure on Walmart. Senator and presidential candidate Bernie Sanders, along with workers’ rights groups, have called on Walmart to raise its wages above the company’s current $11-an-hour minimum.

As of 2010, Walmart employs 1.4 million Americans – 1% of the country’s working population. Certainly not all of them are wage employees, but the number of wage earners is large enough that Walmart will absolutely feel the increase (again, these are 2010 numbers, so the number of employees could even be greater). Even if 1 million of the 1.4 million are wage earners, a few-dollar increase per hour quickly translates to millions of dollars per hour in labor costs. That’s huge! So why publicly push for $15 at such a great company expense? (It’s also worth noting here that when Walmart bumped hourly wages up to $11 per hour last year, they also closed numerous Sam’s Club stores at the same time.)

A reactionary thought is that it’s good PR. Just like politicians calling for a “living wage” of $15 per hour for the good of the people, Walmart leading the charge for $15 per hour gives a boost to public perception: Walmart cares about its employees. Walmart is listening to the people. You can make a living working at Walmart. Walmart and Amazon have become targets of the $15 per hour camp as of late. By embracing the higher minimum wage, it relieves public pressure and image tarnishing.

A second potential reason for hiking wages could be inter-company competition. Amazon and Costco have both recently upped their hourly wage to $15. Amazon claims they are not caving to pressure from Senator Bernie Sanders but doing it for the good of their employees. Their increase will impact 350,000 full-time, part-time, and seasonal workers. Costco raised their wage to $15 this past March. Perhaps it’s about staying competitive with other big box retailers. I can see how no one wants to be caught as the lesser-paying and risk losing employees to the other.

But there’s something else at work here. If it really were about public relations, saving face, and remaining competitive among large retailers, why would these companies champion a national minimum wage hike to $15? If anything, being able to pay $15 when smaller competitors cannot or aren’t willing gives Walmart and Amazon an advantage in the labor pool. In the quote above, Walmart CEO Doug McMillon is pushing for a $15 per hour federal minimum wage. Jay Carney, senior vice president of Amazon’s global corporate affairs, declares that Amazon “will be working to gain congressional support for an increase in the federal minimum wage” and to “advocate for a minimum wage increase that will have a profound impact on the lives of tens of millions of people and families across this country.” In March 2019, McDonald’s ended their lobbying against a $15 per hour national minimum wage.

These companies are free to pay their workers $15 per hour and set an example for others, so why do they want to push it on the entire country? There’s really only one reason.

To crush their competitors.

Walmart and Amazon can afford to absorb the cost of $15 per hour. They can also afford to invest in automation or to cut hours from large store rosters. If need be, they can even close a store or two — as Walmart did in 2018 when they raised their wage to $11. Small businesses cannot afford to do these things.

Imagine Bob’s Discount Bunker is a small chain of discount retail stores. Maybe their prices are competitive to Walmart, or they have stores where Walmart doesn’t. One of the ways they can price their products lower than Walmart is lower labor costs. If these costs are raised on par with Walmart’s, that means Bob’s can no longer afford to charge lower prices. Or they go out of business altogether after a death spiral, like our fictional restaurant. Either way, the higher wage is severely disruptive to smaller competitors; it saddles them with more expensive labor.

Why else would these large corporations be willing to absorb such huge labor cost increases? By flipping the script and embracing the higher minimum wage, politicians and labor advocates are doing big companies a favor.

After the field of competitors is wiped out, big box retailers can then either raise their prices, induce layoffs, or replace workers with automation to bring their labor costs back down. As a CNN article entitled “Why Big Business is Giving Up Its Fight Against a Higher Minimum Wage” puts it:

Although the wage premium for working at a large company has decreased over time, big businesses still achieve economies of scale through centralized HR and benefits departments. They also have the upfront capital needed to invest in automation, such as the purchasing kiosks now in place at McDonalds, that will make businesses less subject to labor costs in the future.

When it’s all said and done, Bob’s Discount Bunker employees will likely be looking for jobs at Walmart or Amazon.

In the case of McDonald’s, it’s not the company that feels the increase of $15 per hour, it’s the franchise owner that the employees work for. As of 2016, 85% of the company’s restaurants were franchisee-run locations. This means they’re not owned by McDonald’s, but by a private business owner who pays McDonald’s a monthly franchise fee to use the name, logo, menu, etc. and purchases their stock directly from the company. It’s up to the franchisee to hire and pay employees. This makes the argument for McDonald’s being able to afford to pay their employees more somewhat disjointed: advocates look at McDonald’s annual company profits when it’s likely not McDonald’s paying their wages. McDonald’s, after all, is really a real estate company. Their primary income and tax breaks revolve around property. So a $15 minimum wage would still impact their competitors, but the franchisees are left footing the bill for the labor.

In the end, the government is just making large companies stronger by raising the wage to $15 per hour. It becomes a win-win-win scenario for Walmart, Amazon, or McDonald’s. It’s a win with the power of the federal government making the decision, coercing all employers in the country to abide by the increased national minimum wage — whether they can afford it or not. It’s a win because it’s good PR, allowing these companies to look like advocates for the common worker. And it’s a win because it wipes out competition and potential future threats.