Posted on 06/15/2019 3:50:23 AM PDT by Kaslin
Could everyone in America live above the poverty line if only employers were less greedy? Sen. Bernie Sanders thinks that. He also thinks that Medicaid, food stamps and other poverty programs are subsidizing corporate greed -- because they make it possible for employers to pay low wages.
Rep. Alexandria Ocasio-Cortez (AOC) calls the federal minimum wage of $2.13 an hour for people with tip income “indentured servitude.” What’s her answer? The government should force employers to be more generous.
Welcome to the greed theory of wages. It has a long history. Charles Dickens believed it. A long list of muckraking, left-wing writers have promoted it.
But no economist has ever believed it. Not even Karl Marx. If you look over the writings of every reputable economist for the last quarter century – going all the way back to Adam Smith—I don’t believe you can find a single instance of a scholarly defense of greed theory.
What do economists believe? There is surprising consensus. You can find it in just about any economics textbook you pull off the shelf.
In a competitive market, a worker’s income tends to equal his physical contribution to the firm’s output multiplied by the price consumers pay for that output. Technically, workers get paid the “value of the marginal product of labor.” Put colloquially, they get paid the value of what they produce – where value is determined by consumers, not by employers.
By the way, there is something inherently appealing about this conclusion. It is easy to show that you get economic efficiency when you pay every input its contribution to output. And although economics has nothing to say about ethics, it’s hard to escape the feeling that it is inherently fair when each person’s share of the pie is equal to his contribution to the pie.
Now in a complicated, complex world things can be amiss, and all economists know that. Costs of information alone can cause some workers to be temporarily overpaid. Others might be temporarily underpaid.
But one market where the theory seems to work really, really well is in the restaurant business – where servers receive tips. This is the market where AOC has registered the loudest complaints.
Hillstone is a national restaurant chain that goes under several other names, including Houston’s, R&D Kitchen, Honor Bar, etc. At the restaurants near me in Dallas, a typical waitress (they are almost all women) can expect to earn $50,000 a year. A server at the bar might reach $70,000, but I think $50,000 is the norm for the dining areas.
These employees get only $2.13 an hour from their employer, however. That means that more than 95% of their income comes from tips. Of course, different customers will value service in different ways and tip different amounts. But at the end of the day, these waitresses are getting the value of their marginal product – without any interference from employers, government, or anyone else.
What waitresses contribute to the dining experience is service. The value of that contribution is determined by the people they serve.
It is only fair to say that not anyone can work for Hillstone. Only one of every hundred applicants is hired. Those who are hired are extensively trained and they learn to work in teams to maximize customer satisfaction.
Other restaurants are not as particular; the service may not be as good; and server income may not be as high. But the same economic principles apply.
Suppose we required restaurant owners to collect all the tips and give every employee an equal share. There would be no way for the waitress to benefit from forming a special relationship with her customers. That would also be the result if we outlawed tips altogether (as some want to do) and required everyone to be on salary.
Are you beginning to see why a lot of waitresses want to tell AOC to take a hike?
Almost everyone who works for a living understands marginal productivity theory intuitively. Even our ancestors, who lived in small tribes thousands of year ago, understood it. A hunter who took risks and was especially productive in bringing down dangerous game, for example, would have been rewarded with the choicest piece of meat.
People who don’t understand the theory tend to work in occupations where the relationship between work and reward is weak or non-existent. For example, the income of most teachers is completely unrelated to the value of what they teach their students. For many other government workers, the relationship between income and social contribution is also tenuous. For politicians, the relationship may be negative – the more harm they do, the longer they seem to stay in office.
As for what economics says about the minimum wage laws, David Brooks reviews the scholarly literature on what can go wrong in the New York Times. James Freeman does the same thing in the Wall Street Journal, noting that the victims tend to be older workers, women and blacks.
In recent years, Republicans have taken heat for their reluctance to accept evidence of man-made global warming. But the refusal to accept science is far worse on the other side of the aisle.
As I wrote previously, the typical delegate to the Democratic National Convention believes that if a price is too high, government can push it down and nothing bad will happen. If a price is too low, government can push it up and nothing bad will happen.
These folks not only reject the economic theory of wages. They reject economic science as such.
They also have very strange views about ethics.
Bernie Sanders thinks the Walton family (which owns Walmart) should pay higher wages as a gift. But if you were in a position to give money away, would you give it to Walmart employees? Or would you give it to people who are trying to survive on less than $2 a day?
Case closed.
My wife worked as a waitress for years going to college. She started out at a sit down 100 different burgers place but ended up in a place with stained glass booths and had to wear an evening gown and gloves (The Broker in Boulder). She made friggin’ astronomical tips and waited on people like Mick Jagger.
The first secret to high end waitress? Memorize everything. No writing. The next? Learn how to anticipate what they need and make it appear like magic at their elbow. Don’t be part of the experience. In fact be no part of the experience.
“noting that the victims tend to be older workers, women and blacks.”
One of the first important things I learned from Uncle Milton (Friedman) was that minimum wage is one of the most racist laws on the books in modern times. IIRC, he said that the unions had a hand in that many years ago to keep the manufacturers and other such places from hiring blacks at cheaper rates.
And the cook is supposed to know what food the guests ordered if the doesn’t write it down?
As I understand it, either the cook remembers what the server tells them, or the server writes it (or enters it in the computer) for the cook to reference the order. This is done out of sight and hearing of the customer.
I've never been excited about such a process, being quite the "check-list" type of pilot and tech writer.
The cook knows by telepathy!
Sheesh...
Just last night, the perceived 'value' of the waitress' service was less than what we expected.
Was it reflected in her tip?
Probably...
Hmm, I have been thinking about this for a very long time. Instead of letting the left misdefine capitalism, why not repeat its most basic definition over and over until everyone knows it as well as they know Marx’s falsehood (from each, bla bla bla)?
Capitalism: let each person be rewarded in proportion to his contribution to society.
In recent years, Republicans have taken heat for their reluctance to accept evidence of man-made global warming. But the refusal to accept science is far worse on the other side of the aisle.
Nope. It isn’t that Republicans refuse to accept the science, but that they demand to see the science. In 30 years or so of anthropogenic global warming (AGW) hysteria, we have yet to see a scientific explanation of the mechanism by which the amounts of a trace gas retains a disproportionate quantity of solar energy to where it actually causes the temperature to rise. In fact, every time we come across mention of AGW, we should challenge its advocate to explain exactly how this works. After all, if it is based in science, it should be pretty straightforward to explain.
Meanwhile, the “solutions” proposed to combat AGW are scary: anything that removes CO2 from the atmosphere in such a way that it becomes unavailable to living organisms is, very literally, an existential threat to ALL life on earth. Although, given the grandiose suicidal ideology of the left, I cannot be sure that global extinction is not the ultimate goal.
To make a long story short, after my husband paid the bill he left several dollars for a tip on the table. I was the last one to get up and I took the dollars my husband left on the table for the waitress and left a penny on the place.
When we were outside my husband asked me if I took the tip, I told him yes, but I left a penny.
To make a long story short, after my husband paid the bill he left several dollars for a tip on the table. I was the last one to get up and I took the dollars my husband left on the table for the waitress and left a penny on the place.
When we were outside my husband asked me if I took the tip, I told him yes, but I left a penny.
To make a long story short, after my husband paid the bill he left several dollars for a tip on the table. I was the last one to get up and I took the dollars my husband left on the table for the waitress and left a penny on the place.
When we were outside my husband asked me if I took the tip, I told him yes, but I left a penny.
If there is only one guest in the restaurant in, I can see that, but if the restaurant is full how is he supposed to know what he should cook?
It is RACIST to impose SLAVE WAGES on LEGAL immigrants by flooding the labor market with ILLEGAL IMMIGRANTS.
The fact is, many, perhaps most, Democrats are unequal for the simple reason they are not equal.
Whining about inequality seems to be more effective than working to obtain equality. Bernie will make them equal
New York is about to pass a law that prohibits retailers from charging more for women's products than substantially similar men's products, under the misguided belief that the cost of the women's products will go down. The reality is that retailers will simply increase the cost of the men's product or resign the products so that they are no longer substantially the same.
[[substantially]]
Q- Who defines “substantially”?
A- Lawyers through lawsuits
I've only observed this; I'm not a professional.
My agent in DC, David Lindsay, used to take me to such places! The practice does work. And according to Dave, the wait staff make an outstanding wage.
Hence why I call foul on this idiocy.
As well (from the article), "Rep. Alexandria Ocasio-Cortez (AOC) calls the federal minimum wage of $2.13 an hour for people with tip income..."
The ignorant are keen to dismiss the language of the FLSA:
"This means that if you’re a waiter, bartender, or other service employee who receives tips, your employer is only required to pay you $2.13 per hour in wages.
However, the total amount earned ($2.13/hour plus tips) must equal the federal minimum wage."
Translated, employers have less paperwork to do and fewer matching payroll taxes to pay by just simply paying federal minimum wage at $7.25 and looking the other way regarding tips. This limits the tax liability and accounting expenses for the restaurant and ensures that servers do a good job. Guaranteed income for servers results in mediocrity. I know: I've been to restaurants who boast of paying their workers more; the result was some of the worst dining experiences I've ever had. To this end, I NEVER leave tips in anything but cash. The $2.13 argument is a red herring for the hysterically-stupid.
Clearly AOC was pathetically-lousy bartender/waitress if she made dick for tips. (no pun intended)
While being ignored in a restaurant we started playing hearts at the table. That got us near instant service.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.