Cross-Currents in the Minimum Wage Debate

usmap-minimum-wages-2017This past November, there were increased minimum wage measures on the ballet in four states – Arizona, Colorado, Maine and Washington. They were approved by voters in every instance.

But are views about the minimum wage actually that universally positive?

A survey of ~1,500 U.S. consumers conducted by Cincinnati-based customer loyalty research firm Colloquy around the same time as the election reveals some contradictory data.

Currently, the federal minimum wage rate is set a $7.25 per hour. The Colloquy research asked respondents for their views in a world where the minimum wage would $15 per hour — a figure which is at the upper limit of where a number of cities and counties are now pegging their local minimum wage rates.

The survey asked consumers if they’d expect to receive better customer service and have a better overall customer experience if the minimum wage were raised to $15 per hour.

Nearly 60% of the respondents felt that they’d be justified in expecting to receive better service and a better overall experience if the minimum wage were raised to that level.  On the other hand, nearly 70% believed that they wouldn’t actually receive better service.

The results show pretty clearly that consumers don’t see a direct connection between workers receiving a substantially increased minimum wage and improvements in the quality of service those workers would provide to their consumers.

Men feel even less this way than women: More than 70% of men said they wouldn’t expect to receive better service, versus around 65% of women.

Younger consumers in the 25-34 age group, who could well be among the workers more likely to benefit from an increased minimum wage, are just as likely to expect little or no improvement in service quality. Nearly 70% responded as such to the Colloquy survey.

One concern some respondents had was the possibility that a dramatic rise in the minimum wage to $15 per hour could lead retailers to add more automation, resulting in an even less satisfying overall experience. (For men, it was ~44% who feel that way, while for women it was ~33%.)

Along those lines, we’re seeing that for some stores, labor-saving alternatives such as installing self-service checkout lanes have negative ramifications to such a degree that any labor savings are more than offset by incidences of merchandise “leaving the store” without having been paid for properly.

Significant numbers of consumers aren’t particularly thrilled with the “forced march” to self-serve checkout lines at some retail outlets, either.

Perhaps the most surprising finding of all in the Colloquy research was that only a minority of the survey respondents were actually in support of raising the minimum wage to $15 per hour. In stark contrast to the state ballot measures which were supported by clear majorities of voters, the survey found that just ~38% of the respondents were in favor.

The discrepancy is likely due to several factors. Most significantly, the November ballot measures were not stipulating such a dramatic monetary increase, but rather minimum wage rates that would increase to only $12 or $13 – and only by the year 2020 rather than immediately.

That, coupled with concerns about automation and little expectation of improved service quality, and it means that this issue isn’t quite as “black-and-white” as some might presume.

One thought on “Cross-Currents in the Minimum Wage Debate

  1. In Thailand, where I live, the minimum wage for 2017 is 305 Thai Baht per day. At current exchange rates, assuming 8 working hours per day, this is equivalent to $1.12 per hour – less than one-sixth the current Federal minimum wage in America.

    However a fairer comparison would reflect an adjustment for purchase price parity (PPP), using deflators (adjustment factors) from agencies like the World Bank, or popular measures like the “Big Mac Index” or “iPad Index,” which rely on price surveys for a fixed basket of goods conducted in America and in other countries.

    In Thailand, the most recent World Bank PPP deflator was 2.66 which means Thailand’s living costs are considerably lower, on average, than they are in America. $1 spent in Thailand will buy a quantity of goods which would cost $2.66 if purchased in the U.S.

    So, after adjustment for PPP, Thailand’s minimum wage is equivalent to $2.98 per hour, or a bit less than half the current Federal minimum wage.

    It has to be said that service quality is much, much better in Thailand than practically anywhere else in the world – including America.

    Go figure.

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