Companies Can’t Deny the Math of Employment


According to Nathaniel Meyersohn, of CNN Business, Target’s pledge of a $15 minimum wage came with exactly the consequence that free marketers warned of beforehand:

Two years ago, Target (TGT) said it would raise its minimum wage to $15 an hour by the end of 2020. The move won praise from labor advocates and put pressure on other companies to also move to $15.

But some store workers say the wage increases are not helping because their hours are falling, making it difficult to keep their health insurance and in some cases to pay their bills.

Those who are skeptical of the free market tend to misunderstand the argument.  The point isn’t that the market will always come up with the best solution for every economic challenge, supplying a guide for morality along the way, but that market forces exist independent of our desires, and we need to recognize them and meddle only warily.

The store’s revenue and competition are what they are.  The value of employees’ labor is what it is.  Unfortunately, there is a good bit of educated guessing to put numbers on these things, but simply pretending revenue will cover an arbitrary number for compensation (or a number determined by something other than the store’s financial position) won’t work.

So, the store increases its minimum rate of pay above where the market would put it.  The pay rate necessary to hire executives doesn’t go down correspondingly.  The cost of products doesn’t go down.  The cost of operations doesn’t go down.  The revenue doesn’t go up.  All that can be done is what the article describes:  Shifts are reconfigured to be more efficient:

Target has overhauled operations at its 1,850 US stores in recent years to create more specialized positions for staffers, who now often focus on a single department, instead of the entire store. Target also eliminated backroom shifts at some stores. Backroom teams used to unload boxes and make sure inventory was in stock, but Target moved some of those employees to the sales floor. The new model is known as “modernization.”

Additionally, some tasks are automated, and managers schedule more carefully in order to avoid employees’ hitting expensive thresholds, like the number of hours required to be eligible for health care.

One gets the impression that progressives believe there’s some pot of money that The Man is withholding from workers.  There isn’t; if there were, competition would leverage it for market share.  Yet, progressives refuse to reevaluate their approach:

Lawmakers are starting to respond to address erratic hours and volatile weekly pay for retail and service workers.

Cities like San Francisco, New York, Seattle, Chicago and others are passing “fair workweek” legislation. In some cases, laws require businesses to offer their existing part-time workers more hours when they become available before hiring additional staff.

In the short term, these schemes will only make things worse for low-wage employees.  In the long term, the more regulatory barriers government creates, the fewer competitors there will be, thus powerful people will be better able to create the pot of money progressives imagined in the beginning.  Putting things that way, however, one must wonder whether getting the hand of big, progressive government in a pot like that wasn’t part of the plan all along.

We’d be better off letting employers and employees determine the balance of what can be paid and what can be accepted as pay.  They — both sides of that negotiation — are the market.