A Conversation with a Teamster Driver about Minimum Wage

The Costs of Minimum Wage is an INCREASE in Unemployment
By Thomas J. Zaleski, Economist

Real conversation with a Union (Teamsters) driver from California: The conversation took place on the golf course in Tucson, The Gallery. At the time, the Gallery was members only, and $250 per round. I was the host. Foursome was $1,000.00. Year: 2004 summer before the election. The foursome was me, my older brother (IT guru), Truck driver and my biggest client, a patriot and retired USAF Col.

The truck driver was ‘retired’ on full disability at age 51. Was collecting a pension from the Teamsters AND Social Security disability. Truck driver played gold FIVE DAYS PER WEEK while on FULL disability. I did NOT broach that subject/hypocrisy.

Conversation went like this (remember I paid $1,000 for golf): Bush and YOU Republicans are greedy and are working against the working man. We deserve a fair wage and the minimum wage is too low. It is all Bush’s fault. I stated that the minimum wage CAUSES and increase in unemployment. He of course protested that fact. I demonstrated that by artificially (against the desires of the employer) increasing wage costs increased COGS; thereby, reducing profits which pushed the demand for cost decreases via less labor and/or more innovation/mechanization.

I asked what a ‘fair’ wage was and who determined the definition of what fair meant? He was initially dumb founded. We examined the local costs of housing (rent), car expenses, food, etc. He agreed that $20,000 was a ‘fair’ wage. The Federal Minimum Wage at that time was $5.15. The price of a McDonald’s Big Mac was[1] $3.00.
I immediately trapped him via these numbers. I stated that IF the minimum wage was $10 ($20,000 which is about $10 per hour per 40 hour work week {actually $20,800}). Therefore the costs of McDonald’s labor from the low end would increase by nearly 100% (actual increase would be 94.1748%. I asked, would the near doubling in price of a Big Mac mean that they would sell more or less Big Macs? Again, a dumb look came across his face. The price of Big Mac would necessarily increase by at least that percentage. Would you pay $5.82 for a Big Mac today? He said no, that he could NOT afford that high of a price.
I asked another smart ass question: Should McDonald’s NOT make any profit? He said their profits are too high and that the CEO makes too much money. I stated, with facts, that the number one cost drive of the price of any item is material and labor and that the ‘CEO/Management” costs were typically less than 1% (true) of the total costs. So WHERE would McDonald’s be FORCED to cut costs? Labor. Minimum wage INCREASES unemployment, period!

I trapped him again with this: HOW can a young man support a FAMILY on just $20,000 per year? What about wife, children, etc. Shouldn’t the minimum wage be closer to $32,000 (about $15.38). He gave up as he knew the costs would continue to rise. Eventually he had nothing to say. My older brother said don’t EVER argue with my baby brother, he is always right……

One Response to “A Conversation with a Teamster Driver about Minimum Wage”

  1. admin says:

    A great story

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