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California’s New Minimum Wage

California’s New Minimum Wage

April 12, 2024  |  954 words  |  Economics, Philosophy

Any suggestion to raise the minimum wage is countered with how such a mandate would adversely affect businesses that use low-wage workers, forcing employers to cut hours, lay people off, or switch to a more automated system.  We are also told it would invariably result in higher prices to consumers.

And when California’s new minimum wage law for workers at fast-food restaurant chains with at least 60 locations nationwide went into effect April 1, it was met with predictable howls of protest and breathless reports of one large pizza chain closing certain California locations, another even larger pizza chain eliminating its delivery drivers, and a smaller fast-food brand in the state deciding to close its doors completely.

But there is another side to this familiar scenario of wage-increases-equal-job-losses-and-higher-prices-to-consumers that usually escapes scrutiny.

Yes, raising wages increases operational costs.  And managing operational costs to achieve a competitive price point for your product that attracts the maximin number of potential customers is the first order of any business.

But if you are a successful operator in the fast-food space with at least 60 locations nationwide you have cracked the code and found the formula.  It is no longer a question of survival.  It is now a matter of trying to maximize the bottom line, not only to enhance the take-home for you and your executive team but also to make things more appealing for potential investors.

At the franchise level, one of the stories to appear in the wake of California’s new law came from the Associated Press, and quoted an owner of 10 Auntie Anne’s Pretzels and Cinnabon locations around the San Franciso Bay Area.  The individual reports the new wage increase will force him to come up with an additional $470,000 a year in payroll-related expenses, and he will have no choice but to raise menu prices 5 to 15 percent to offset the additional costs.  What this gentleman declines to share with us is what his 10 locations currently spin off in profit.  

This is the missing piece of the puzzle.  What if business owners decided not to maximize profit at every turn?  If you have climbed the mountain, if you have a successful business that essentially prints money, it should be okay to adjust the wage structure at the bottom of the organization so the grunts who get your product into customers’ hands can share some of the fruits of their labor.

Of course, this analysis extends up past the franchise owner and lands in the lap of the major fast-food corporations that maintain 60 or more locations nationwide.  Those entities should probably recalibrate the fees they demand of their franchisees, which in turn would allow the individual franchise owner some breathing room to pay its hourly line workers a better rate.

Not to pick on McDonald’s, but it has a net annual income of something like $2 billion on gross revenues of $6.5 billion.  That comes out to a pretty healthy profit margin of just over 31%.  Maybe good old  Mickey D’s could squeak by with, say, a mere 25% in profit.  The problem, of course, is how a slim-downed margin may make your enterprise less attractive to Wall Street.  And no one wants to risk that.

This is where we come face-to-face with an unsettling step on the road to achieving a more equitable (not equal) economy:  People at the top of the food chain who expect their money to “work” for them must scale back their expectations and settle for making a little less on the disposable income they choose to invest.

What of the many retirees of modest means who depend on a steady return on investment to fund their later years, you ask?  When high rollers cite this as a sign of solidarity with common folk it comes across as a diversionary tactic designed to preserve their own outsized gains.  Scaling back returns to a more reasonable level is not the same as slashing them.  As for those older Americans on fixed incomes:  Their concern is funding a retirement they have successfully reached; people whose career is at a fast-food restaurant are trying to get there in one piece.

Next is the argument that paying someone $20-per-hour to flip burgers or make pizza is just downright crazy.  It is the same complaint levied at unionized auto workers and the compensation package they receive for screwing nuts onto bolts.  This belligerent stance implies only people who do ‘important’ things deserve to make a living wage.

But that is the beauty of the American economic engine!  It is what distinguishes us from, say, Guatemala.  Through ingenuity and hard work, and harnessing an abundance of natural resources, some exceptional souls among us have created industries that mass-produce products to address social needs and/or make life easier, while delivering a measure of profitability far exceeding anyone’s wildest dreams.

If only we could adapt our sophisticated business-school model of how best to run these burgeoning industries, so the people on the lower rungs of the economic ladder, the ones with no leverage, did not have to scratch and claw for steady hours, safe working conditions, and decent pay.

One surefire way to prevent cumbersome government interference with our robust free-market economy is to continually improve the level of fairness and justice it yields.  Some organizations have made this a serious component of their corporate mission, but not enough to turn the tide.

Until we reach a critical mass in this area, when, for example, an international fast-food conglomerate deigns to rethink the 31% profit margin it earns on the backs of a low-wage work force, we can expect government to keep butting in with its ponderous, bureaucratic dictates regarding minimum wage laws.

Robert J. Cavanaugh, Jr.

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Labor Freedom

Labor Freedom

April 3, 2024  |  200 words  |  Economics, Philosophy

“Economic freedom” is a phrase conservatives and libertarians are fond of.  It expresses their belief in the power of a free market to effectively address all of society’s needs in an equitable manner, with regulation or outside intervention only muddying the waters and gumming up the works.

But “labor freedom” is a new one on me.  It was recently cited by The Wall Street Journal in a short editorial criticizing the nefarious efforts of Big Labor and its Democratic allies in Congress to unionize the new, government-subsidized auto plants in our Southern states.  

In this way those staunch defenders of freedom at the WSJ are standing up for the rights of these working men and women to earn roughly half what their unionized counterparts typically make.

According to the prevailing conservative/libertarian wisdom, if down-on-their-luck locals don’t like what’s being offered at a government-subsidized auto plant that blew into town with great fanfare and a promise to revitalize the community, they have a choice.  Those employees can exercise the freedom they enjoy to find a different, better employer and go work somewhere else.    

Even if that means pulling up stakes and relocating far from their family and friends.  See, problem solved!

Robert J. Cavanaugh, Jr.

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Pursuing Happiness

Pursuing Happiness

March 6, 2024  |  577 words  |  Philosophy, Economics

In his latest book Jeffrey Rosen tells readers the famous phrase in our Declaration of Independence about life, liberty, and the pursuit of happiness was not intended as a license to be a selfish, self-centered bore.  Mr. Rosen points out how our most influential Founders studied the moral philosophy of classical thinkers such as Xenophon, Seneca, and Cicero, along with that of contemporary Enlightenment stalwarts John Locke (1632-1704) and David Hume (1711-1776), and therefore defined happiness as the pursuit of virtue – as being good, rather than feeling good.

So why has the pursuit of happiness devolved into little more than a license to be a selfish and self-centered bore?  Why has feeling good taken precedence over being good?

Opinions vary, but for me this drift away from virtue can be traced to a particular strain of Enlightenment-era (1687-1804) thinking, which formed a credo that sought to emancipate the individual from all previously held belief, custom, and tradition.  

Not that I am a complete stick in the mud on the subject, mind you.  I am aware of the Enightenement’s fabulous reputation of ushering in our glorious modern age, making possible all the things we can no longer  live without, like science and reason and pluralism and democracy.  In the process it rescued us, the Enlightenment did, from the onerous medieval constraints of dreadful things like monarchy and superstitious religious belief.  Yes, of course, we all hold these truths to be self-evident.

But now in my later years I have come to gently question the tidy package of progress we have been gifted.  In sifting through the conventional understanding of what just happened over the course of these last 500 years, the full-out emancipation of the individual in the pursuit of happiness has come to seem a bit like we have thrown the baby out with the bath water.  

I grant that to be hidebound by tradition is not necessarily a good thing, and may express a lack of active engagement with the specific circumstances of one’s own life, in deference to the circumstances of someone else’s.  Such blind fidelity might also be the result of a certain lack of intelligence and/or creativity.  In its worst guise, custom and tradition can even stifle potential and interfere with flourishing.  

But custom and tradition represent a once-upon-a-time social experiment that managed to enjoy some quantifiable success and bear fruit.  In this way it can be a life-giving fountain that actively promotes potential and encourages flourishing.  Reflexively ignoring or flaunting such tradition demonstrates what is at its core a worrisome lack of respect for all that has come before, starting with the experience of one’s parents and immediate ancestors.  In its worst guise the rebellion reflex expresses an ignorance of history, and of human nature.

So while I am grateful to Jeffrey Rosen, currently President and CEO of the National Constitution Center located in Philadelphia, PA, for bringing our Founders high-minded intentions to my attention, I fail to see how this speaks to our current moment, where getting ahead is the sine qua non of human existence, and virtue has been reduced to a sort of consolation prize for those who come up short in their relentless quest for upward mobility.

To put this another way, our Founders may have tried to set our new nation on the path to virtue and righteous self-improvement, but in this regard their political philosophy, and its ideological underpinnings, have proven to be sorely lacking.

Robert J. Cavanaugh, Jr.

Use the contact form below to email me.

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Digital Discrimination

Digital Discrimination

November 15, 2023  |  542 words  |  Politics, Economics

In a recent editorial the Wall Street Journal takes issue with a new rule the Federal Communication Commission is considering to prevent what is referred to as “digital discrimination.”  This proposed action is a by-product of the 2021 infrastructure bill that included a directive for the FCC to monitor disparities in broadband access “based on income level, race, ethnicity, color, religion, or national origin.”

The esteemed WSJ sees such a statute as a simple case of “identity politics” run amok.  Especially since by its own admission the FCC has found “little or no evidence” indicating “intentional discrimination by industry participants.”  But to my way of thinking that is hardly the point, as the agency now seeks to hold broadband providers liable for any actions or “omissions” – intended or not – that result in a disparate impact.

As we all know, high-speed internet access has become a pre-requisite to full participation in the life of the nation, just as access to basic electrical service was in a previous generation.  The Rural Electrification Act of 1936 addressed a glaring omission at the time:  Americans who lived in outlying areas had limited access to electricity because private utility companies claimed it was not economically feasible to run power lines out to them.  Back then those providers worried about recouping the upfront costs of installing the elaborate infrastructure needed to get things up and running.

Sound familiar?  It is amusing (and more than a little annoying) to read the WSJ register the following objection to the FCC’s new rule:  “Wireless carriers might also be prohibited from building out 5G networks in suburbs and city downtowns before inner cities and rural areas.”  Yes, that is correct, Mr. Editorial Writer.  The federal government is trying to prevent inner cities and rural areas from being left behind when it comes to something as vital as broadband access.

The short, punchy piece then gives readers a concise example of what I like to think of as WSJ-style unintended humor, by way of a primer on how the free market operates to elegantly solve all of society’s problems:

Companies don’t have unlimited capital so they typically prioritize network upgrades in areas where they can earn a higher return on the investment, which they then use to finance improvements in lower-income and rural areas.”

Ah, if only the latter part of that statement were true, what a wonderful world this would be!  The FCC would have no reason to draft a new policy rectifying disparate impacts, since the citizenry would already be enjoying “digital equity” from sea to shining sea.  

But of course that is not the world we live in.  Our world requires a regulatory body like the FCC to provide oversight of a burgeoning industry, so the vagaries of the for-profit marketplace do not inadvertently leave certain underrepresented and disadvantaged populations out of the digital mix.

Which, if you think about it, should not really bother the folks over at the WSJ.  Since this proposed rule will merely codify what their editorial board believes is the established and oh-so socially-conscious standard operational procedure of the nation’s kindhearted broadband providers. 

Even if some of the statutory language being employed by the FCC strikes the WSJ as identity politics run amok.

Robert J. Cavanaugh, Jr.

Use the contact form below to email me.

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Is the Pope Catholic?

Is the Pope Catholic?

September 12, 2023 | 1,624 words | Religion, Politics, Economics

Asking whether the Pope is Catholic used to be one of those funny rhetorical question that do not require an answer.  Like asking does a bird fly, or if a bear defecates in the forest.  But these days that first question is not so funny to some people, and not so rhetorical.

In the decade since Jorge Bergoglio of Argentina was elected/elevated to the papacy as Pope Francis, the complaints levied against him by conservative critics, especially conservatives here in the United States, have grown more pronounced with each passing year.  What started as semi-polite sniping over his so-called fuzzy pastoral emphasis has evolved into almost open warfare over much more serious issues.  He is now routinely accused of undermining the faith, and teaching error.  “Schism” is a word his critics are referencing quite a bit lately, when discussing the current pontiff and what lies ahead.

After ten years of this persistent opposition, Francis is now starting to return fire.  At age 86, and with his health having started to fail, he might be sensing the impending end of his run, as older people frequently do.  Last month he described the loudest conservative voices in American Catholicism as backward-looking moralists (“indietristi”) who are disconnected from the roots of the Catholic tradition and its history.  That tradition and history, as Francis understands it, is about the ongoing discernment needed to help live the Gospel message in current realities.

So who is right?  We are each expected to choose a side in this raging controversy, to either condemn Francis and champion his critics, or vice versa.  But my mind does not work that way.  I see merit on both sides.  The concept of unchanging truths the conservatives rally behind resonates with me.  On the other hand, I also think knowing the mind of Christ is no easy task, and is always a work in progress.  With Pope Francis being rather conspicuous in making a case for the latter approach.

I guess I have not been able to muster the same level of outrage toward Francis that his harshest critics exhibit on a regular basis.  Is encouraging priests to welcome and minister to people who are gay, divorced and remarried, as Francis does, a blatant violation of established doctrine?  Instead of dismissing the effort out of hand, as conservatives are wont to do, maybe we should be having an intelligent discussion about what the word “welcome” means in this context.

And why are we arguing about who is more Pro-Life?  Pope Francis has always upheld church teaching on abortion, and has been unequivocal in his defense of the innocent unborn.  Why do conservatives find fault  when he adds: “equally sacred, however, are the lives of the poor, those already born, the destitute, the abandoned.”  The latter concern does not undermine the integrity of the former position.

That Catholics of goodwill are so contentious, with the opposing camp picking apart every utterance and perceived mis-step the current pontiff makes, is a sign of the times.  The relentless partisanship of our politics has spilled over into every other aspect of our lives.  Another factor contributing to the alarm some folks are feeling is how different Francis is, stylistically and in doctrinal emphasis, from his two immediate predecessors, John Paul II (1978-2005) and Benedict XVI (2005-2013).

Both those men participated in and were products of the Second Vatican Council (1962-1965), the big worldwide conclave in which the Catholic Church finally set aside its long-running objections to the American Experiment, and signaled that liberal democracy based on pluralism could be a legitimate form of social organization.  A little late to the party, you might say.  But better late than never, right?

These two helped craft the famous “liberating” documents that came out of that Council’s deliberations, yet as pope each went on to steer the U.S. hierarchy in a decidedly conservative theological direction.  As if to counterbalance what they still considered to be a very real problem, namely, the overwhelmingly secular influence of American culture.  

It has been clear from the start of his papacy that Pope Francis does not see this course-correction project as his top priority.  He is more interested in other things, like promoting from-the-ground-up collaboration within the church, which may lead to including lay people and even women in decision-making roles.  This is a hot-button issue for conservatives, who think such collaboration is opening a Pandora’s box that will result in confusion and error, and possibly even schism.

Hence all the talk of Francis “flipping the script” in a big, dramatic way.  But I find that to be largely a matter of interpretation.  He is, in fact, repeating many of the same themes his immediate predecessors stressed.  JPII and Benedict XVI did more than just push a conservative theological line, after all.  They also spoke and wrote extensively about the much broader mosaic of Catholic teaching around protecting life and promoting human flourishing.  Just as Francis does.

It is certainly true Francis does not mince words when speaking extemporaneously, especially when it comes to the economic stuff.  JPII and Benedict XVI were erudite and maintained proper decorum in their public statements, and this made it possible for conservatives to truncate the elaborate economic teaching they put down on paper, and frame it in a very limited way that flatters their preferred agenda.

Francis may be a little salty at times when responding to journalists, but in his plain-spoken way he is merely reiterating long-held church teaching on economic/social justice and care for the less-advantaged.  And he has made it impossible for conservatives to misconstrue his meaning on that score.

Conservatives really liked the staunchness and fidelity the last two popes displayed on certain theological subjects, and continue to cite those men wistfully.  But only because they conveniently overlook everything else those popes had to say that they do not much care for.

This current pope says quite a lot conservatives don’t much care for, and he seems to draw more than a few moral equivalencies they take issue with.  Such as tying together violations of pelvic theology conservatives consider to be doctrinally pre-eminent, with lying and cheating at the office to advance one’s career.  It seems Francis never tires of calling out those who are pre-occupied with sins below the waist but don’t lose any sleep over the exploitation of workers.  

There’s the rub, as far as I am concerned.  Conservatives can tell themselves their argument with Francis is over sexual morality or worship styles or climate change or a myriad of other things.  But what really sticks in their crawl is the way this pope openly challenges a revered concept like enlightened self-interest, and in the process comes across as anti-American or even worse, anti-capitalist.

In this regard Francis is not flipping the script at all.  Quite the contrary.  He is working from a very old and familiar one, at least in its broad outline.  A script used by every Catholic pope since our nation’s founding, each of whom have regarded the American Experiment with suspicion.

Over the last couple of centuries, a steady stream of pontiffs has issued periodic warnings about “Americanism” and “modernist” trends.  True, in the early days Catholic objections were centered on the separation of church and state, originally feared to be a danger to both individual souls and the state at large.

But Catholic tradition and history is about learning how to live out the Gospel message in current realities.  And so we find the nature of Rome’s complaint about the United States may have changed in some of the particulars, but remains in essence what it has always been:  It is our celebration of the individual, at the expense of concern for the common good, that has come under constant scrutiny.

We Americans have always taken issue with this Catholic critique of our way of life.  We do not appreciate being lectured on the common good.  And we certainly don’t appreciate having this same, tired lecture delivered by an aging pontiff from a backward Third World country who lacks a proper understanding of our singular achievement, a robust engine of economic growth predicated on small government and limited taxation.

Today’s conservatives continue to miss the larger message Rome has been trying to send them for centuries, and are pre-occupied instead by the new emphasis Francis is placing on being more pastoral toward those who have fallen short of their baptismal promise, and more inclusive toward those outside the mainstream.  Or how he consistently decries economic injustice and the treatment of migrants, while insisting on a universal right to health care, housing, and decent jobs.

Even though every pope in the modern era has talked and written at length about the very same things.  Including his two immediate predecessors.  

Accusing this pope of undermining the faith and teaching error is a very serious charge.  I have read the relevant papal documents promulgated over the last decade, the ones now being used as the basis for these mutinous claims.  And I just do not find the egregious violations of doctrine his detractors are coming up with.  If you are worried Pope Francis may be creating confusion and spreading doubt by unpacking the Gospel message and applying it to current realities, as some of his critics most assuredly are, the solution to that problem is to be a better teacher, not to skimp on the teaching.  

Shouldn’t we be trying to educate people in the fullness of the faith?  That is how I see Francis, that is how I experience his pontificate.  His critics strike me as wanting to “keep it simple, stupid” out of fear the rank and file may be too cognitively-limited to grasp the whole truth in all its splendor.

Robert J. Cavanaugh, Jr.

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