The new law that helps workers eclipse the poverty trap
The new law that helps workers eclipse the poverty trap
It's slowly spreading acoss the nation
Welcome to a Monday night edition of Progress Report.
Did you see the eclipse today? Were you reminded of the sweeping majesty of nature, astonished by the gravitational pull of the event? These aren’t rhetorical questions — I didn’t get a chance to go look up at the sky this afternoon, so I’m curious as to whether the moon delivered on the hype and excitement promised in the days before it slid in front of the sun.
While I’m at it, I’ll also admit that I didn’t feel the earthquake that shook New York on Friday. There is construction being done on my building and the streets below, so I’m used to randomly vibrating during the day. I got a lot of texts about the quake, but only now am I willing to admit my failure there.
Speaking of magic skies and seismic fan activity, there’s a new law and government regulation that could together reduce income inequality and change the balance of power in our economy.
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More than half a million workers at large fast food restaurants in California received significant pay raises last week, marking the successful conclusion of a yearslong political battle and revitalizing a model of what could become a powerful new tool for working people nationwide.
AB 1228, signed by Gov. Gavin Newsom last fall, went into effect last Monday, setting a $20 per hour minimum wage for workers at fast food restaurants with more than 60 locations nationwide. The law also creates a council of labor, franchise owners, and government regulators that will oversee conditions in the industry and make decisions about annual wage increases.
The new minimum represents both a huge win and a compromise for the Fight for $15 movement, which has spent years organizing workers in the fast food industry. AB 1228 was crafted during negotiations between labor and fast food chains, the latter party forced to the table.
Had it gone into effect, that law would have raised the minimum wage for fast food workers to $22 per hour, a rate that corporate headquarters vowed to fight with a ballot initiative in the same vein of Prop 22. A compromise was in everyone’s best interest, even if not everyone is on board with it.
Franchisees were livid when AB 1228 went into effect last week, citing projected payroll increases and alleging that parent corporations negotiated the deal without their input. They did not have to be party to the talks, however, because AB 1228 isn’t a traditional collective bargaining agreement, but a version of sectoral bargaining.
A New Lever of Power for Low-Wage Workers
More common in Europe, sectoral bargaining brings together representatives for workers and major employers to set minimum standards in any given industry. Sometimes those agreements are codified in contracts — see Hollywood studios and their deals with the writer, director, actor, and crew guilds — and in other cases, a state or local government passes a bill that cements those terms into law.
These contracts can be especially useful for workers in industries with high turnover, job-hopping, daily hires, and a handful of powerful employers. They’re starting to come back into vogue, as well, especially in more progressive parts of the country.
This past December, New York City Mayor Eric Adams established a minimum wage of $17.96 per hour for delivery workers, following through on legislation passed by the City Council in 2021. Last week, the mayor announced that pay would climb to $19.96 per hour next April.
Nail salon workers in New York have also spent the past few years organizing and pushing for legal protections and pay bumps, which they want to see devised and implemented by a state-sanctioned council.
The downside to the process is that companies are sometimes able to pour millions into lobbying and ballot initiatives that entrap workers into terrible contracts that carry the force of law.
A settlement reached last November here in New York required Uber and Lyft to provide drivers better pay and benefits while allowing the companies to continue classifying drivers as independent contractors. The settlement did come with more than $300 million in backpay for drivers, cushioning the blow.
In Massachusetts, dueling ballot initiatives sponsored by drivers and ride-share companies will determine whether Uber and Lyft drivers can bargain with the companies as employees or will be forced into permanent contractor status with terms more advantageous to the app companies.
Crybaby Corporations Pitch Tantrums Over Minimal Disruption
Some business owners in California didn’t wait to announced preemptive layoffs and hour reductions for employees, which they made sure to publicize through the local news and conservative media.
Note: It always tends to be guys who inherited a small network of Cinnabon locations or dozens of McDonalds’ franchises who are most outraged over the wage increases, which sometimes (and temporarily) cut into what are the largest profit margins in the business. They also always seem to be the ones most involved in lobbying and building up their own brand. Woof.
Other restaurants have also begun raising prices of menu items, presenting it as a necessary evil to compensate for the increase in the minimum wage. And while that may be true in some situations, especially in rural areas with less customer foot traffic, those are anecdotal and not indicative of the true impact of these laws.
The same cycle plays out any time a minimum wage increase goes into effect, even though it’s long since become clear that putting more money in low-wage workers’ pockets as a net-positive effect for the economy writ large. One study found that between 2013 and 2022, a series of minimum wage increases in both New York and California led to higher take-home pay for fast food workers and an increase in employment.
Fast food restaurants were also hiking raising prices long before AB 1228 was passed. One study found that between 2014 and 2023, the 10 biggest fast food chains raised prices by an average of 60%, just about double the 31% hike experienced across all industries nationwide. McDonalds, the study reported, raised its prices by 100% over that decade.
The Roosevelt Institute found that last year, fast food restaurants raised markups — the difference what consumers pay for something and the to produce it — by an average of 27%, with Wendy’s hitting 76.2% and McDonald’s clocking in with 40%; the Golden Arches wound up with a 52% profit margin last year.
Inflation caused some trouble, but largely only for the consumer. In 2022, when inflation was at its worst, it surpassed wage gains and effectively worked as a 2.7% pay cut. Instead of lowering the cost of food to meet the financial limitations of their customers, fast food restaurants bumped up prices by 14.7%.
Conservatives and corporate apologists tried to blame the inflation on pandemic stimulus and a series of minimum wage increases that took effect across the country over the past few years, but there’s hasn’t been much conversation at all about the way chains have spent profits to this point. Last year alone, the ten biggest fast food companies spent $6.1 billion on stock buybacks.
It’s been especially egregious since people began to emerge from the Covid-19 pandemic. Companies have regularly bragged to major shareholders that they still have room to hike prices on customers, who have no choice but to pay higher prices to companies that have monopolized an industry.
Last year, the Federal Reserve Bank of Kansas City released a study that found increased corporate profits accounted for 41% of inflation during 2020 and 2021. A new report blamed greedflation – profit-padding price hikes beyond an increase in production costs — for 53% of inflation during the second and third quarter of 2023.
The silver lining is that wages climbed faster than inflation in three of the past four years, even as firms invented find new ways to raise prices and tried to force people into returning to the crappy, low-wage jobs that barely paid their rent pre-Covid.
In 2021 and 2022, that took the form of industry groups like the Chamber of Commerce and National Restaurant Association using local media to push a “nobody wants to work anymore” narrative that enabled red state lawmakers to cut off pandemic-era unemployment benefits.
The Future in Flux
Their lobbyists have since spent the past two years successfully steering the dismantling of child labor law in places such as Florida, Iowa, and Arkansas. By unwinding century-old regulations meant to protect kids from exploitation and dangerous conditions, Republicans have sought to undercut the demands of the labor market and ostensibly replace the cheap labor of the undocumented immigrants that they want to banish.
There is a disingenuous song and dance at play: Corporations fund those anti-immigrant Republicans’ campaigns at the same time that they replace American workers with foreign labor that costs even less than what is paid to undocumented immigrants in the US.
In perhaps the most brazen version of this, it was revealed last week that Amazon’s vaunted “Just Walk Out” technology, which ostensibly replaced human cashiers with artificial intelligence that tracked customers’ purchases, wasn’t entirely artificial. Instead, it was at least partially powered by 1,000 subcontractors in India who watched shoppers from all angles, a 21st century mechanical turk that serves as a reminder that nothing ever really changes.
Smaller storefronts, meanwhile, are starting to outsource the work of cashiers to foreign workers who appear on video monitors at otherwise unmanned checkouts. It’s distressing, but at least they’re not hiding the greed.
For all the complaints lodged by corporate executives, lobbyists, and conservative think tanks, the public’s support for higher minimum wages is likely to continue growing beyond traditional partisan borders. Lawmakers in Rhode Island are debating a new bill that would raise the minimum wage to $20 an hour by 2029 and eliminate the lower tipped minimum wage. It’d also provide labor rights to domestic workers so that they could share in on the significant new pay bump.
On the other side of the national divide, voters in both Ohio and Oklahoma are likely going to be faced with ballot initiatives that would raise their states’ respective minimum wages.
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Price gouging. Companies have taken advantage of actual inflation by raising prices and using inflation as a scapegoat. So tell me, why would anyone vote for a greedy person who is backed by these greedy companies, all the while promising them MORE tax cuts, and at the same time bitch about the President who is actually doing something to turn that around?
Everyday citizens have been asking for the things President Biden is bringing them. Finally. So why won't they say 'thank-you', instead of working against themselves?
It's what I talk about with prospective voters when they tout the maga bullshit. (with patience, I might add!) I urge them to vote BLUE this Nov., to keep the good things going.