There has been much written about the wage gap in America and how the middle class is being squeezed out of existence. Proponents of this theory point to statistics that show income for the top 10 percent earners has steadily risen over the years while income for the remainder of society has stagnated or declined.
A few large corporations including Walmart, Target and McDonald’s recently announced they would be raising the wages of entry level employees in excess of the current minimum wage. This announcement comes amid a national push to raise the federal minimum wage. The federal minimum wage is currently $8 per hour, but 29 states have minimum wages above that rate. President Obama has been advocating for a federal minimum wage of $10.10 per hour, and the Service Employees International Union has been campaigning for the minimum wage in the fast food industry to be increased to $15 per hour.
What’s interesting about the Walmart and McDonald’s announcements is these companies are known as "low cost” providers of goods and services. Any increase in wages will add to their cost structure and will surely be passed along to customers in the form of higher prices. Will customers still flock to these businesses if prices need to be increased by 5 percent or more to offset the cost of wage increases? It’s hard to know for sure. But companies such as these are hyper-sensitive to customer wishes, so you can be sure they have their ear to the ground.
What these large corporations are starting to learn is paying workers the legal minimum wage may not be in their long-term best interest. In addition to the public relations benefit they received by making this announcement, they believe paying higher wages will attract better workers and create less turnover in the workplace.
Raising wages and the standard of living for people has many benefits. However, there is much debate among economists if raising the minimum wage will actually result in economic stimulation. Many argue the increase in spending by workers receiving wage hikes will be offset by further job eliminations as corporations try their best to contain costs.
But this is a construction magazine, so why am I writing about fast food establishments and retail merchants? Quite simply, the construction industry has a wage disparity of its own. In large metropolitan areas where construction workers typically belong to trade unions, the base wage for a carpenter can be nearly $50 per hour. Compare that to the hourly wage for a misclassified, undocumented carpenter where in some parts of the country the wage might be around $15 per hour. That’s more than a 300 percent difference and doesn’t even account for taxes and benefits such as Social Security, workers’ compensation insurance, health insurance and pension contributions that can increase the gap even further.
I can’t think of another industry where two workers performing the exact same job in different parts of the country have such a large disparity in income. Admittedly, the cost of living varies from region to region, and that plays a part in wage differential, but that doesn’t account for a 300 percent difference.
So is the $50-per-hour wage too high, or is the $15-per-hour wage too low? Perhaps the answer is both. But one thing is for certain: If McDonald’s is paying a counter workers $15 an hour, who will be willing to hang wallboard all day for that same wage?
In addition to being 2014–2015 president of the Association of the Wall and Ceiling Industry, Casabona is president of Sloan & Company, Inc. in West Caldwell, N.J.