The World Is Changing… Why Shouldn’t Jobs Change Too? The Effects On Income Inequality…

Yesterday was Labor Day so between enjoying some bar-b-cued meats and cold beverages on that day off I was looking a little closer at what has been happening in the Job Market lately and what it means for Income Inequality…

A recent New York Times article had the disturbing headline: “Low-Income Workers See Biggest Drop In Paychecks“. The article went on to discuss the plight of workers in the home health care, food preparation and retailing sectors.  One example shows how a guy who worked at a KFC in the Mid-1990s earned an equivalent in today’s dollars of $8.61 then went away for two years of college and two military tours in Iraq. He came back and now earns $7.25 and hour.

What’s up with this? Why the pay cut?

This really seems crazy when you consider the recent U.S. Government employment report that tells us 173,000 new workers were hired in August and the unemployment rate is down to 5.1%. It has not been this low since April 2008.

So with what appears to be an extremely tight labor market, low-wage workers are seeing a drop in real wages. It should be the other way… Wages should be going up! If you look at the basic economics of the situation you would think that as fewer workers are available employers would need to raise wages to fill job vacancies.

If we assume the Labor Department has not botched the data there could be two forces at work here below the surface that smart people seem to forget…


1. Pay is more than just the cash you get in an envelope at the end of the week.

The recent New York Times articles on how pay has gone down for low-wage workers focuses on the actual cash people take home. But a huge change has happened over the last few years. That change comes under the umbrella of Obamacare. In most cases the huge costs of providing healthcare has added significantly to the cost of hiring workers. And this cost is reflected in lower wage increases. And… Workers should be spending less of their pay on health costs. At least that’s was the promise made when Obamacare was pushed through congress and into the laps of the American people.  Yes wages are relatively lower but healthcare cost for employees should be lower too.

ice_man12. The world is changing. 

This just may be the bigger factor influencing low-wage worker take home pay.
The world is changing… It has been for years.

Fast food workers are in direct conflict with people who are striving for healthier eating habits and may be eating at home more. Or just up-scaling their restaurant meals to places with fresher choices, better menus, and fewer employees.

blacksmiths2Home Healthcare workers are being squeezed because with better healthcare coverage people might go to the hospital or other higher end choices for healthcare. Maybe they are able use better health care to stay healthier and not need as much home healthcare services.

Retail workers are cruising stores with fewer shoppers since more and more people are shopping online. Online shopping is easier, takes less time, usually has what you need, and costs less.

These three worker categories are not in as much demand in a changing world. To push for higher wages when jobs that are falling out of favor will only result in fewer (if any) workers making more money while higher consumer costs push the few last consumers to other lower cost/higher quality alternatives or totally out of the market.
In the past when the world changed did people worry about the declining opportunities and pay for blacksmiths and buggy whip workers?  Did front page articles document the plight of lantern wick weavers as electric lights started to spread? Did the government push for higher minimum wages for ice delivery men as electric refrigerators started popping up in homes?

I don’t think the plight of these past job holders received much ink in the New York Times.

Workers in these low wage areas today are paid what the market will bear. That is a directly decided by the demand for their services/skills combined with the number of potential people to fill those positions.

Right now in an environment we have now low-wage workers need to up-skill to get higher paid positions in areas with higher demand.

The same way blacksmiths ran out of horses to shoe and became car mechanics, lantern wick weavers became electricians, and ice delivery men decided to sell and serviced refrigerators low-income workers in low demand areas need to find their next job based
on where the world is going. The wrong way to increase their wages is to cling to jobs in low demand with low-wages.

 

Can Aetna’s CEO Teach Obama The Realities of Minimum Wage and Income Inequality Economics?

aetna2Today Mark T. Bertolini, Aetna’s Chief Executive Officer, announced that the health insurance company would boost the incomes of its lowest-paid workers by as much as a third. The move by the big health insurer affects around 12% of Aetna’s domestic work force who will see a raise to a floor of $16 an hour. These are primarily employees in customer service and billing-related jobs.

The CEO stated that the reason the company is raising wages is not because they want to be good guys. They are raising wages because it is becoming increasingly difficult to fill open job positions and retain employees. That is what could be called natural economic forces.  Better know as competion!

With the entire health insurance industry growing because of of the government’s healthcare law insurers are having a harder time finding people to do important jobs like customer-service, billing, claims-processing and similar tasks.

Aetna1Aetna is only the first to move on this increased wage front. Within months don’t be surprised when most of the other insurers are forced to do the same to get all their essential tasks done. Empty desks and unfilled job requisitions will push employers to raise wages. Then,  as wages increase, more potential workers may be enticed into the workforce to fill these open jobs.

Maybe even workers from other industries with similar skill sets will make there way to higher wages offered in the insurance sector. People will certainly consider the move if it is for a nice high pay raise. Some may even go back to school to pick up a few extra classes so they can qualify for these new higher wage jobs. Pishing up the entire wage scale.

This is how the natural forces of economics works.

And what about the lower wage jobs newly vacated?

As long as the government does not interfere and force wages up the new vacated job will still be there and waiting for someone who wants to jump on the first rung of the career ladder. You always have to start somewhere.  At the lowest wage levels employers are willing to take risk and spend more on training. But at some of the government imposed minimum wage rates for entry level positions employers may just get by with fewer workers. Not a good thing for anyone. This how you break an economy.

callcentreNext… All these Aetna employees will just need to worry about the number crunchers in the back room who will be looking for a way to bring labor costs down. At these higher levels it may start to make more financial sense to move these tasks offshore at a fraction of the costs.

If you think it won’t happen think again…

Can these service jobs be more complicated than technical support for computer gizmos, booking a flight, reading an x-ray. or preparing income tax forms?  All these used to be done by U.S. based employees. Pay levels went up, desks were empty, employers and customers suffered… Then the jobs were sent to India and the Philippines.

 

Why Do Minimum Wage Economic Experiments On The People Who Can Be Harmed The Most?

minimum-wage-increase-800x800Some of my holiday travel took me through the fine city of Chicago. You know, that big city on Lake Michigan that happens to be in the state that is currently one of the top contenders for going broke at any minute.

And now it seems like they have put the same smart politicians in charge of experimenting with the economic future of the city and it’s fine people.

The Chicago City Council approved a plan to boost the minimum wage in the city from $8.25/Hour up to $13/Hour by mid 2019. That’s over a 57% increase!

There are plenty of studies that have looked at the effects of raising the minimum wage and it seems proponents and opponents pointy out the ones that support their current positions.

This Bloomberg article titled, “Everything we don’t know about minimum wage hikes” seems to be one of the first that takes a more balanced view of the subject. But the real issue is that we live in an economy with built in checks and balances. This is better known as a free market as opposed to the kind of economic system they have in countries like Russia, China, or Cuba where the government controls the economy.

In a free market, supply and demand factors for goods, services, and workers defines prices and wages. These all come together is something that can resemble gravity when it all works properly. You can cheat the system with tweaks and intervention but eventually you can’t alter the real effects the same way you can’t cheat gravity.

What does all this mean?

Somehow the smart rulers of the kingdom of Chicago have it in their head that by artificially pushing up wages people will be better off. They will have bigger paychecks and a better life. These glad handing politicians just don’t get it that they are messing with strong economic forces that will at some point snap.

Here are a few things these smart Chicago Council Members have probably not considered when concocting this potentially dangerous experiment:

raisewage1. They are abandoning workers trying to get on the first rung of the work ladder and hurting current low skilled workers. 

When a business is forced to pay well above the “Market Rate” (that is the natural free market price people would be willing to work for) they will need to hire employees that can get the job done quickly, reliably, and efficiently. And if a current employee can’t rise to the job requirements they will be let go.

This means that only people with the higher level of expertise will be offered and keep jobs. There will be no room for those low-skilled people just starting out in the work force. There will probably not be room for some of those who currently hold jobs at the current wage rate. Instead of opening their first paycheck of 2015 and seeing a bigger dollar amount they will also see a pink note telling them they don’t have a job anymore.

As the wage rate increases higher skilled but currently unemployed or underemployed people will filter back into the workforce taking jobs from just the people the Chicago City Council wanted to help. What’s better $8.25/Hour or $0.00/Hour?

2. Businesses will need to make adjustments

Basically businesses and the economy is a closed system. That means we really can’t create money out of thin air. The government is the only one with a printing press. In a business you can only spend the revenues your company brings in. Sure you can take out loans to make it through a temporary cash crunch but eventually the cash that goes out can’t be more than what comes in.

That’s how business works.

So as wage expenses per hour go up business owners will have two basic choices… 1) Cut work hours or 2) Raise prices.

Seattle-minimum-wage-555x285Businesses may not cut actual workers on the payroll but they will certainly cut the total number of hours worked. Sure they will be making $13/Hour but they will be working fewer hours so their paychecks and the business’s payroll costs will be the same. A classic example of this is how most fast food restaurants now have self serve drink stations. You thought they were doing this because they loved you… Nope they are forcing you to serve your own drinks so they can get away with fewer paid workers. That’s right, when you pour yourself a drink at McDonalds you just became and unpaid worker. Next you may be assembling your own burger.  Think about this the next time you fill your plate on one of those grocery store food bars and then pay for your food by the once. You just became an unpaid worker of that food store.

Raising prices is always an option for a business but as prices go up volume will probably go down. And that does not even take into account the effects of competition from other businesses in the area. Plus when prices go up your customers may stop and consider if they really need your product or service right now. Not necessarily a good thing for your weekly sales numbers.

The other kind of adjustments business can make should really scare the people on the Chicago City Council… I am referring to things like moving their business out of the city, paying people cash under the table, going with cheaper non-labor inputs (like worse quality food), outsourcing labor, or just shutting down because the business can’t be profitable.

If you think this shutting down a business concept is a little harsh remember that for most businesses labor is their largest cost component and the Chicago City Council just artificially increased those costs by over 57%. If a business was on the edge or barely profitable before then this will certainly finish the business off. No business. No jobs. No tax revenues. Collapsed real estate market. Sounds a little bit like Detroit, doesn’t it?

3. Costs will rise and that $13/hour will just not go far enough. 

Lets assume Chicago business don’t leave and workforce size is not reduced…

Happy workers will see a nice big jump in their weekly pay checks and since it’s a closed system, those increased costs will result in higher prices. The same workers who just received a nice raise will now be paying more for just about everything they buy. And they will be paying more in taxes too.

These Chicago City Council Members and the other fat-cat politicians will probably feel no real pain from this wage increase. It’s the vary people they are trying to to help that will bear the pain when this wage experiment starts to run off the rails.

Will Chicago Look Like Detroit Some Day?

Will Chicago Look Like Detroit Some Day?

So then you must be thinking that it is futile to raise the minimum wage because most of the pay raise will be eaten up by higher living costs.

You are only half right… It’s fine to increase wages. No problem with that. But wage increases need to be a natural part of the economic system. That means that increased wages are because of increased labor demand or increased productivity not because of artificial government intervention.

The last time wages were manipulated was during the rise of labor unions… You know, the unions that wiped out the U.S. steel industry and bankrupted General Motors and Chrysler. And… turned Detroit into a wasteland. Are we ready to play that game again?

By the way… According to the CNBC article the minimum wage is set to rise in 21 states this week.  Most are not raising it as much as Chicago but it is still going up.

Is Better Education Really The Key To
Solving Income Inequality?

thwTwo interesting articles popped up over the weekend. One article looks at how the trucking industry is having a hard time finding people to take their driving jobs even at $50,000 a year plus benefits.  The other article basically blames most of a persons bad luck and poor choices in life on their parents.

First let’s look a little closer at this Truck Driver shortage…

Because of increased government safety regulations truck drivers are not allowed to drive as many miles as they did a few  years ago hence their income has been capped a bit. These weekly maximum mileage regulations are probably good for any of us who drive on our nations highways because they certainly help reduce driver fatigue and make the roads safer. The downside is that drivers just can’t earn as much money.

Truck Driver GraphThat said… The starting annual pay for entry level long haul truck drivers is around $50,000 plus benefits. Not a bad paycheck and definitely will get a person on their way to a middle class lifestyle.

What kind of education is needed to drive a truck?

Trucking employers do not require a college degree. I don’t even know if they require a high school diploma. To drive a truck you will need to attend a several week driver training course paid for by the trucking company then you are ready to go. No college debt to worry about.

I wonder how many June college graduates wish they had a $50,000/year job waiting and no college debt?

TDI-truck-keys-to-office-rev-DSC00948So this is an example of how piling more public money into education may not really get the desired end result. Unfortunately once someone earns a four year degree they seem to think they are above anything that even looks like physical labor. Unfortunately their high priced college education may have forgot to give them any marketable skills.

Truck driving may not be the most glamorous job you could have but if you can stay sober, don’t have a nasty arrest record, and can read a map it could be a way onto the rolls of the productive Americans earning a solid paycheck. Sure you might have just earned a degree in Political Science, Psychology, or Fourth Century Latin Literature but what’s better, living in your parents basement or a life on the open road?

bad-decisions-tatOn to the second article… The New York Time’s Nicholas Kristof makes the journey back to his childhood home in Yamhill, Oregon and sees so many people with drug and alcohol problems plus long prison records so he comes to the conclusion that no matter what you do if your parents took the wrong path it is pretty much a done deal that your life will be hard.

All you will have to look forward to is addiction, crime, unemployment, and prison.

Not a pretty picture. and it’s sad to think that with all the public money spend on education, according to Mr. Kristof, if your parents had a hard life you are in for more of the same. And your children are destined to repeat the painful cycle.

Prison-barsMaybe it really takes more than a good education system to move up the economic ladder. Educational opportunities could really be just like the cover of the book. Those school buildings, yellow buses, high paid administrators, rows of shiny new computers, and libraries are only part of the story. The part that can be bought with tax dollars.

The difficult part is getting the kids motivated for the hard work of becoming productive citizens. But that can’t be solved with a fatter government check book.

 

 

When Robert Reich Speaks It’s Always Scary…
What’s The Latest He’s Saying About Income Inequality?

111229_robert_reich_ap_328I’m always ready to listen to a smart economist. They usually have some great things to say that can help make things a little clearer.

I have listened to many Robert Reich commentaries on NPR and its seems that about half of what he says makes a lot of sense. It’s the other half I worry about. Unfortunately that may be the half that some people believe the most.

In Mr. Reich’s latest article he tries to debunk the biggest myths of Income Inequality and what he says is just scary. Like most of the politicians in D.C. he has probably never tried to run an actual profit making business and this shows in his systematic explanations he uses. They hard firmly founded in some other world than the actual one we live in and the same one real people have to establish and operate businesses to make profits.

Has Mr. Reich actually Walmart_USforgotten that without business making profits there will be no taxes for the government to collect to pay for the essential services needed to keep the country moving.

Let’s look at what he claims are “lies” why his income inequality positions just wont work in the real world….


Lie number one:
The rich and CEOs are America’s job creators.

Mr. Reich says “The truth is the middle class and poor are the job-creators through their purchases of goods and services. ” But he forgets that without the companies to provide jobs there will be no place for these people to work.  And without the proper profit incentives those companies will go elsewhere as many of them already have. But Mr. Reich may be partially correct on this one since the US Government is really the largest single employer. China’s army comes in number two followed by Walmart in third place.

Lie number two: People are paid what they’re worth in the market

P1-AW426A_EXECP_G_20100726194903He says… “The facts contradict this. CEOs who got 30 times the pay of typical workers forty years ago now get 300 times their pay not because they’ve done such a great job but because they control their compensation committees and their stock options have ballooned.” That’s right, in effect the CEOs are the owners of the companies and in a free society like ours the owner gets to set his own compensation along with the compensation of the people who work for him or her. If the company does not choose to pay enough then they will have a hard time finding employees. But as long as qualified people are standing in line outside the company’s employment office door at the current pay rate then why pay more. I would like to see if Mr. Reich doubles the pay for the person who washes his car, or serves him a meal in a restaurant, or starches his shirts. I doubt it. He lets the market determine how much those workers are paid. And that’s the way we do it here in this country.

small-businessLie number three: Anyone can make it in America with enough guts, gumption, and intelligence.

Now this is really an insult to everyone who has landed on our shores over the last few hundred years. Plenty of people have started successful businesses here with little more than guts, gumption, and intelligence. Everywhere you look you will see individuals who have perceived though many hardships to start their own businesses and eke out a good living for their families. That is really what this country is about. How can he forget that? Take that away from the next generation, make them believe that they will never achieve their dreams for what ever reason, and you will have poisoned the well for the future. And that is just what I am afraid could happen. If you tell someone enough times that they will not make it on their own (for what ever reason) eventually they will start to believe it.

What’s the better foundation for building a stronger America? Telling people they can’t make it on their own or getting out of their way and telling them that with enough guts, gumption, and intelligence they can do what ever they want. Keep telling them that and they will certainly start to believe it. Especially with all the great examples out there.

Earns McdonaldsLie number four: Increasing the minimum wage will result in fewer jobs

On this one Mr. Reich says… “In fact, studies show that increases in the minimum wage put more money in the pockets of people who will spend it – resulting in more jobs, and counteracting any negative employment effects of an increase in the minimum.” Then he goes on to give some details on studies in adjacent counties in the country and how no one lost their jobs.

Again Mr. Reich is missing some of the practical aspects related to raising wages above market rates.

Unfortunately if all these fast food restaurants and the like raise wages the owners will need to raise prices. And those higher prices get passed along to the same people who just got a pay raise. And… As I have discussed in previous posts on this subject, the person who has that fast food job at an $8/hour wage will not be the same person $14/hour. When the annual pay for fast food and other low-skilled jobs starts tp get closer to $30,000/year watch how fast those college educated unemployed zombies living in their parent’s basements come out of hiding and finally get jobs. That’s right, if the minimum wage is artificially increased instead of set by the market the exact people who need those jobs will be unemployed. The new educational minimum will be a college degree for those entry level jobs. And at a higher wage those people will be required to work harder than ever.

Robert Reich is one of the smartest guys in the world. But before he can scare anyone else I wish he would go run a corner hot dog stand for a few months so he can see what the real world looks like.

What Could Gap Stores Be Hiding About Their
Minimum Wage Stunt?

gap2Gap stores made a surprise move this week and has informed its employees that over the next year their minimum wage would move up to $10/Hour. The company said that this would raise pay for 65,000 of their 90,000 U.S. employees, including those at Banana Republic and Old Navy.

How can they do this?

It seems like businesses are fighting Washington tooth and nail to keep wages as low as possible then these guys at Gap come in and voluntarily raise wages.

Are they just being nice guys?

No… They are being shrewd business people.

Lets compare your neighborhood  Gap Store to your neighborhood Walmart store… You go into Walmart and fill your cart with stuff them check out at one of the cash register. When you go to a Gap Store (or Old Navy or Banana Republic) and pick out a pair of slacks you can bet you will not get out of the store without at least one salesperson suggesting a shirt (or sweater or socks) to go along with those slacks.

Could you ever imagine checking out at the Walmart and the cashier asks, “would you like a flashlight to go along with those batteries?”  It will never happen.

And that is a fundamental difference between stores like Gap and stores like Walmart. If Gap can attract higher skilled and more motivated store employees they will sell more product.

Yes… More skills and talent will mean higher wages for those Gap employees. And… more revenues for the company. And… if the Gap computers show an employee is not generating more add-on sales for a store you can bet it will automatically print out a pink slip and that employees will be out on the street again.

This higher skilled employee resulting in increased revenues model just doesn’t work for retailers and fast food businesses like Walmart, McDonald’s, or your local grocery store.

But how will Gap pay for what could be hundreds of millions more in wages?

gap1That’s easy…

Not only is Gap counting on more revenue from a whole army of higher skilled and motivated workers but, for Gap, every dollar that hits their cash registers results in more profits going to the bottom line. That’s what is called “Operating Margin”. And what drives the CEO’s annual bonus.

When you look at Walmart’s and Gap’s operating margin you will see that Gap makes 131% more profit for every dollar of revenue compared to Walmart. That means Gap has more than enough cash floating around to pay these higher wages as long as revenues rise. If revenues and the bottom line don’t go up you can be assured that the next story you will hear out of Gap will be about mass layoffs.

Unless…  Gap’s CEO decides to take a cut in his own pay package. But I don’t think that will happen in our lifetimes.

 

Will Raising The Minimum Wage Help or Hurt
Income Inequality?

Accountantf

I learned a long time ago that it can be a big mistake not to listen to your accountant. Sure, accountants may not be the coolest guys in the room but rest assured they know their numbers. Ignore what they say and you will certainly hear an “I told you so…” at some point in the future.

A report in the New York Times details how the smart accountants at Congressional Budget Office determined that raining the minimum wage from $7.25 and hour to $10.10 and hour will most liking push 500,000 workers into unemployment.

cbo - seal

That increase from $7.25 to $10.10 represents a 39.13% raise. When was that last time a business could pass out a 39.13% wage increase (not to mention all the other tacked on tax increases) without something else being affected. And I can guarantee you that if the cost of a Big Mac increases by almost 40% more people may take up the gentle art of cooking at home. Or eating a bowl of cold cereal for dinner.
To hold price increases to a more rational level you will see a significant drop in the number of employees behind the counter and in the working at the grills.

MESC UNEMPLOYMENT2#67134

The good news from the Congressional Budget office is that at the $10.10 per hour minimum wage 900,000 families would be lifted out of poverty and increase incomes for 16.5 million low-wage workers.

500,000 people lose their jobs while millions see higher wages. Seems like more  Income Inequality to me.  And it’s all sponsored by our fine people in Washington D.C. I thought they wanted to fight income inequality.

And… There are surely two other serious unintended consequences from a 39.13% minimum wage increase…

U.S. Fast Food Worker... "What-a-ya-have?"

U.S. Fast Food Worker… “What-a-ya-have?”

1) Expect that at this higher wage rate a whole new crop of job applicants will be knocking on the doors of your neighborhood fast food restaurant. At this higher wage I would bet  some of those low skilled college graduates now living in mom and dad’s basement could learn to love flipping burgers. All those hard working people with only a high school diploma who may be rough around the edges may be the first of the unfortunate 500,000 to go. And if these newly motivated college educated minimum wage workers can get more done faster expect that 500,000 number to go up. If yo don’t believe this then take a look at who works behind the coffee or burger counter in places like Belgium or Ireland. Higher minimum wage higher quality workers. Where else can you get solid insights on 18th Century French literature along with your morning caffeine fix? It could happen here!

Belgian barista - "Would you like some Poetry with that Latte?"

Belgian barista – “Would you like some Poetry with that Latte, kind sir?”

2) At a lower $7.25 hourly wage an employer can take a chance on someone who with less than stellar experience.  At $10.10 an hour and more qualified people knocking on the door the days of a first job at McDonald’s are gone. Where will people get on that first rung of the employment ladder?

For years we have been hearing about the perils of huge minimum wage increases. When even the accountants at the Congressional Budget Office sound a warning may we should listen.

Or… Get ready for a big “I told you so…”

Could This Be a Possible Solution To Income Inequality?

MinimumWageWordCloudOn a recent visit to a friend’s house I noticed a woman running around his place dusting, scrubbing, vacuuming and generally making his place look five star hotel room clean. I always thought he was just a fastidious “Felix Unger” type of guy who quietly and obsessively cleaned his place when we weren’t looking.

I quizzed him further on his cleaning person and realized this could be one part of the solution to the Income Inequality and Minimum Wage Debate.
First of all… My Friend’s cleaning lady was not some young shapely woman clad in a tight black and white uniform. And she most certainly was not a character out of Dowton Abby. She was a middle-aged jeans and sweatshirt wearing busy-bee focused on making fast work of cleaning every corner of the house. She did a great job and was done in two hours. That might not seem

like a lot of time to clean a four bedroom/five bath home but she is a professional with all the right tools and no distractions.

Wecandoit

So how much does this cleaning woman make and what does it have to do with Income Inequality and the minimum wage?  Stay with me on this math. I guarantee you will see a payoff.

My friend’s cleaning lady makes $100 for each visit. She spends plus or minus two hours working at a very fast pace.

Okay so let’s look at the numbers here….

Now lets look at some of the other practicalities… Taxes!Basically she is making $50/hour. Well above any minimum wage. Some might say that just dividing her cleaning fee by the number of hours worked may not be accurate. So then lets say she only does this one cleaning job that day. Then divide her $100 fee by eight hours. That comes out to $12.50/hour.  Well above the minimum wage in most states and localities I know of.

Pictures-of--The-Cleaning-LadyWhen my friend paid his cleaning woman he handed here a crisp new $100 bill. The transaction was between him and her. Uncle Sam and our wonderful representatives in D.C. did not seem to be part of this transaction in any way except that they printed the currency used. I am assuming that this hard working woman probably is not keeping records at a level satisfactory to the Internal Revenue Service or her State/City/Local Taxing authorities so they are not going to get their “fair share” of her hard work that day. This means that her $100 is equivalent to somewhere around $125 earned in a regular W2 reporting job.

That brings her hourly up to $60/hour or in my worst case where she only does this one job a day she is earning $15/hour.

Minimum-Wage1If that $15/hour number sounds familiar it is the dream number hourly fast-food workers have been fighting for. While they dream, demonstrate, and complain this cleaning woman has found her solution on her own. And she is her own boss. She sets her own hours.

But could her real bottom line look like?  This next part may not make a few college graduates living in their parent’s basement too happy.

If this Cleaning Lady is even 10% as good a business person as she is at cleaning houses she probably has three cleaning gigs a day for five days of the week for a weekly tax free equivalent take of  $1,800 or around $93,000 a year. And my friend tells me she did not go to college so she doesn’t have and crushing debt to pay off.

The-Cleaning-Lady-Now the what ifs to think about….

What if the government used the tax system as an incentive for people to do more of these kind of cash-for-work type of jobs? What if there were some type of internet service to match people with jobs to do with those willing and able to do them? Something like TripAdvisor with ratings and recommendations.

And… Do you think the possibility of making $93,000 a year might get an unemployed college graduate out of the parental dungeon?

What about possible unintended consequences?

I’m sure there could be many unintended consequences but the first that comes to my mind is that as hordes of fast-food workers discover the joys of working fewer hours for much higher pay the supply of fast-food workers will drop. And as that supply drops those wages will need to increase on their own. Everyone could win here.

Quick your minimum wage job and get one of these?

Quit your minimum wage job and get one of these?

Oh by the way… If you think that $93,000/year number is a high… When this cleaning lady drove away she was in a bright shiny new red Corvette. When I commented to my friend he said, “Oh did she drive the Corvette today? She has a black Range Rover and a Ford Pickup, too.”