Across the Great Divide

Doing the Tip Credit Shuffle.

Michael Saltsman's op/ed today on Minnesota's tip credit purports to explain the issue from an employer's and a economist's point of view. (Commenters at the Strib have already outed the PR-firm-created Employment Policies Institute with which Saltsman is affiliated.)

He paints a picture of the financial impact of a tip credit on a

hypothetical restaurant with part-time employees [that] averages 300 employee hours per day, 365 days a year. An extra dollar per hour translates into an additional $109,500 a year in labor costs (before you add additional payroll taxes), meaning the restaurant will have to generate an additional $2.2 million in revenue just to break even.

and says " it's hard to figure out where that much extra money — $6,000 a day, to be exact — would come from."

Exactly. Especially if you're looking at the colorful scarf while he pulls the rabbit out of the hat.

His restaurant would require 37.5 tipped employees working eight-hour shifts every day to hit 300 hours. Not exactly your struggling neighborhood bistro.

Second, there's no "additional" labor cost required to break even, because Minnesota is not taking away a tip credit. Menu prices, staffing levels and profits are set by the owner taking into account the local market and a law that's been in place for decades.

So, yes, the hypothetical owners with the hypothetical staff under a hypothetical change in the law will  compensate in this way:

Avoid the expense altogether by cutting labor costs in other ways. Restaurants that used to employ servers who took care of three tables each now have a single server waiting on four or five. As a customer, you get your food but with less attention paid when you need something extra.

And hypothetical customers, through their tips, can decide to pay servers directly for better service, just like they do today — while the middleman looks on and pays a little as possible to his employees.

Are Tips Really a Jobs Issue?

A lot has already been written about GOP candidate for governor Tom Emmer's claim that forcing restaurant owners to pay minimum wages for workers who also receive tip income burdens the businesses.

Minnesota prohibits a "tip credit" that would allow these employers to avoid paying the full minimum wage. Both Emmer and Independence candidate Tom Horner contend that this potentially hurts businesses in the food service industry.

Too many pixels have died from bloggers and commenters focused on the wrong part of the question, doing speculative math because the Strib's story didn't ask the basic question: Is what Emmer said about $100,000 waiters true?

Strib columnist Jon Tevlin did talk to the owners who supposedly told Emmer about the highly compensated waiters they employed. Not surprisingly, the owner claims a misquote: "No way, shape or form did I [tell Emmer] anyone made $100,000."

The truth is, tips already enable the industry to get away with paying its hourly workers less. Minnesota eating and drinking establishments account for 7.6% of the state's hourly workers — but for almost 54% of all hourly workers at or below the federal effective minimum wage of $6.55 [Download]. And 69% of these workers receive overtime pay, tips or commissions. (The reports don't break out tips individually.)

The conservative spin on Emmer's position comes from Mitch Berg, who says:

This is entirely about bringing jobs back to the hospitality business in Minnesota.

If you've been paying attention at all to claims from Camp Emmer, you know you have to check these things.

According to the state's Department of Employment and Economic Development, jobs in the hospitality industry did fall off starting in late 2007, about the time the recession began to gain steam. Before that, jobs, number of establishments, total wages and average wages grew steadily.

Industry codes changed in 2000, so it's difficult to compare earlier data, but I found a study that showed steady growth in personal income from Minnesota eating & drinking establishments from 1969-1999 [Download].

If the lack of a tip credit has been killing jobs, it apparently didn't make a difference until the whole economy took a dive.

Economist and GOP legislative candidate King Banaian finds there's scant evidence to support the idea that higher tipped minimum wages do much to boost server pay. So who benefits?

To put this all another way, as a group, proportionately more workers who receive tips are already paid relatively lower wages than hourly workers in other industries and occupations. The claim that restaurant owners are hurt because they can't lower their wages even more doesn't seem supported by the data.

And they aren't going to bring in more business by hiring more servers at even lower wages. At least, the past growth didn't occur that way.

This brings us back to Mitch:

So here’s the question:  are the “workers at the bottom of the pay ladder” better off hustling for tips (which can be volatile and low, and can also be really really good money), or out of work entirely?

Because in this economy, that’s pretty much the choice.

Unless you look at the facts.

Shelter Report: How High Unemployment and Worker Shortage Coexist.

Between my shift at the Day Center and attending a trial (for background research on the prosecution of child abuse cases), I stopped for lunch at a Main Street Pizzeria. Grand Junction's Main Street is being reconstructed, a few blocks at a time, so the businesses in those closed off blocks must rely more than normal on pedestrian traffic for a few months.

[The redo is an update of a pedestrian-oriented, serpentine mall lined with trees, planters and sculptures that was originally built in 1962 — six years before work began on Minneapolis's supposedly groundbreaking Nicollet Mall.]

As I walked down the street, I noticed virtually the entire workforce doing concrete finishing work and other construction was Hispanic. Inside the pizza joint, which was doing a good business, I came across a newspaper with this story describing the challenges of local orchards finding good local labor. This, in a town with unemployment hovering around 10 percent.

More than 300 local job-seekers have trooped into Talbott Farms' office this year to inquire about jobs in the orchards and vineyards.

Still, out in the fields, most of the workers doing the early thinning and spraying have come here on temporary guest-worker visas from Mexico.

It is not that Talbott and other growers don't want to hire fellow Americans hurting from extended unemployment. But many of those job-seekers aren't willing to tackle the tough, low-wage, long-hour farm labor.

Coincidentally, I had spoken with a number of men at the Day Center about their efforts to find work.

One man has been doggedly pursuing a dish washing job at local pub. Nearly a month after his first contact with them, he headed out today for an interview and was optimistic about landing something.

"I always want to work," he told me, "but I haven't had a job since November. It's been really tough."

Another man, who showed up here last week from Moab, now has his feet under him and has lost that dazed look he had when he arrived at the Day Center. One of the regulars escorted him around town and showed him where he could get assistance, a daily meal, a bus pass and a bed at a shelter.

He, too, wants work. He has been to the Workforce Center, which told him about a meat cutting job. "I have experience — you need it to cut meat — but it only pays $7.50 an hour," he said. "A skilled job like that should pay at least $12."

This man likes it here, better than Moab, where there's no shelter that accepts homeless men and the only soup kitchen serves leftovers from the school lunch program. He has some serious psychological effects from his alcoholism, bad enough that he has stopped drinking for eight months and takes antabuse and other medications. He seems determined to be productive, but he will struggle for the rest of his life.

"Are you taking your medications?" is a serious question I hear all the time here.

The third man talked to me about his plans to leave town. 

His theory, the opposite of the other man's, is that smaller communities are more receptive to homeless people who want to work. Because there's no safety net in those towns, there's no identifiable homeless population, so he can look for employment without being branded as "one of those."

He is intelligent and very presentable. He keeps himself busy here playing guitar or reading, and at the end of the day he helped with the clean up. But like the other two men, he exhibits the stream-of-consciousness talk that signals other issues at work.

I like all three of these guys and wish them luck. But I also see how Hispanic laborers can come to town and "take jobs away from the locals."

Language and cultural barriers are a piece of cake compared to what some of these guys carry.

How the GOP Views Itself on a Trip to Target.

Kevin Watterson is the director of public affairs for the Minnesota House Republican Caucus. That means he is a government employee who works for people who derive at least part of their livelihood from the government, and he draws a pay check from the tax payers.

So it's curious that he would tweet something like this:

Sat on a bench in Target for 20 wating for pharma 2 open. Guy next to me the whole time gets up & opens it. Imagine when he's a govt worker.

Got that? A guy who's a government worker observes a private-sector employee and uses him to impugn government workers.

I'm not going to argue that government at any level is a total paragon of efficiency, enterprise or long-term decision-making. But the people arguing the loudest for defunding the public sector seem to believe that government  is incapable, while the private sector is a model of efficiency, creativity and adaptation that will save America from the cesspool of creeping socialism.

Got that? Watterson sits apparently inert waiting for a private business to open — presumably at the time it has established its business hours — and uses the occasion to demean any government employee who might do the same.

Self-loathing, anyone?

Bonanza Revisited.

Ordinary people, making it by guess and by God, or not quite making it, are just as susceptible to dreams as the ambitious and greedy, and respond as excitedly to the adventure, the freedom, the apparently inexhaustible richness of the West. And the boosters have been there from the beginning to oversell the West as the Garden of the World, the flowing well of opportunity, the stamping ground of the self-reliant.

[...]

If you believe that the world owes you not merely a living but a bonanza, then restrictive laws are only an irritation and a challenge.

— Wallace Stegner, writing about his father, the boom-and-bust West, and its drill, baby, drill spirit

Take Job Numbers with a Jigger of Salt.

I was standing near the front of a long line waiting to be called for my turn. Two clerks out of about 10 were helping only business customers, and one, whose station was open, began calling the names of various companies.

No one responded.

Then, he spotted someone just behind me. "Bob, I've worked with you a number of times. Come on up."

Bob was a tall, 50-ish man dressed with Man Men formality. His nose and eyes were red and he was more than slightly drunk. He was complaining about the taxes he had to pay and even more about the paperwork involved in filing.

I saw three actual checks; they were all for nominal amounts.

A window opened for me, and the first question I was asked was, "Do we have your travel agency on file?"

If it's not apparent by now, this is a slice from last night's dreams. (Some people dream about sex, and I have nightmares about the economy. That's what I get for reading James Howard Kunstler before bed!)

I got up and found this link (h/t Hal Davis) to a financial blogger's complaint that job losses during the recent downturn had been underestimated because the Bureau of Labor Statistics uses a flawed model to estimate the jobs impact created by the birth and death of companies.

Dead companies don't do a very good job completing monthly paperwork. It can take awhile for evidence of their demise to sift through bankruptcy filings, unemployment claims, etc. 

New "companies" often get created by people who are cut loose from their jobs. These one- or two-person companies don't immediately show up on the federal bureaucratic radar. And, of course, even fewer of them actually feature what we like to think of as "jobs" — regular work activities that bring in revenue and produce a regular paycheck.  

The monthly job change numbers for major industries have to be adjusted for these lags based on a statistical model (see the link for the numbers). But when an fierce economic cycle is accompanied by radical restructuring of industries, those old jobs don't necessarily pop up again. Ever.

So, yes, whether you look at the current carnage through a model or through common sense, job estimates should be taken with a jigger of salt.

Just ask the former journalists, mortgage brokers, construction framers, hospital workers, airline personnel, auto workers, yellow pages salesmen and travel agents about their new jobs.

[After I wrote this, I saw Hal had sent me another piece by the same blogger that spells out in gory and depressing detail the longer-term employment picture I've alluded to here.]

For the Poor, a Bike Can Mean Opportunity and Risk.

For a lot of low-income workers, biking is not a hobby.

In Texas, a drunk driver hits a cyclist and throws him in the car — not to take him to a hospital, but to clean up the scene of the crime. The victim was a local handyman who did not live independently.

An Arizona man vaporizes a cyclist with his speeding BWM, then turns it in to Cash for Clunkers. The cyclist was riding in a bike lane, with a light and flashing rear light. He worked as a security guard at a Safeway and, according to his roommate, he often had to ride his bike the 21 miles to his Phoenix home because the bus stopped running from the north suburban location in Cave Creek.

Drivers may rail about racers in spandex and bike messengers who ride aggressively in city traffic, but a disproportionate number of bike-car fatalities involve poor working stiffs making their way from their cheap housing to low-paying service jobs located in areas not well-served by public transit.

Riding a bike connects them to employment at odd hours, but also puts them at risk with drunks and bad guys.

via Jonathan Turley [h/t Mark Gisleson]

Minneapolis Cop Made a Life.

I never got around to interviewing Sgt. Bill Blake. The Minneapolis police officer was on a short list of names I was accumulating for a potential series of profiles on people who were spending their time on earth "making a life" and not simply making a living.

Now, it's too late. Blake, 45, died Saturday, from complications related to heart disease. He was living with an external heart pump and hoping to get a transplant.

His obituary tells much of his story — about how his daughter's accidental shooting death led him to start a conference and information network to better coordinate law enforcement efforts in the Native American community. Sovereignty of tribes and the movement of members between Minneapolis and reservations in the region complicated the sharing of crime data.

But Blake wasn't just a data cruncher. The obit neglected the story of Blake foiling an armed robbery at Legends Bar two years ago, where he and his cousin were having lunch. The masked robbers burst in and ordered patrons to "give it up." Blake shot the gun out of one robber's hand and both fled, leaving behind gun fragments, blood and teeth that helped tie them to the crime.

Blake was also busy helping educate care givers about the portable heart device he was using and hoping to be able to get back to police work. Instead of giving in to adversity, he rolled it up in a ball and pushed it forward until it stuck to something better.  

And kept rolling.

Paying Gigs.

Just a couple throwaway lines from today's Star Tribune. My connection is slow, so no links...

One says Minnesota's Labor Department investigators respond to 20,000 to 25,000 unpaid wage claims every year. The agency has four investigators.

The other, from a profile of composer/musician Gary Rue. Asked if there's one thing he still wishes for from his career, he replies: Health insurance.

The New Retirement: Work Until You Win the Lottery.

A guy works for the same company for 26 years, likes his job and company and finally achieves the American Dream.

Now he can stop working three jobs to support his family.

Clyde Persley [that's his 1977 high school yearbook picture] won $39 million in a California lottery. But the kicker is that he worked part-time as a limo driver and was on-call at Santa Cruz restaurant, while also working full-time for a company operating candy-making machines.

Here's the quote that really stuck with me:

"I really appreciate my life with Harmony Foods," he said of his 26-year stint there. "I can't say enough how much my work has meant to me."

His story started me digging for statistics about the underemployed. How many Americans work multiple jobs just to stay afloat — because of low wages, inadequate hours, seasonal employment or lack of health care coverage? How many good workers hover near the poverty line and never work their way out?

But stories of real people, not numbers, are what brought the issue home for me.

Nearly a decade ago a researcher studied how rural Utah families met their family's needs despite low-paying work:

Jill, a single mother with four children, is a good example of multiple job holding.

At one time I was working four jobs. It was when I was first divorced ... about four years ago. I was working for the bank in town ... thirty five hours a week. And then because ... I have problems getting child support, I was working also in the evenings about three or four days a week ... for a convenience store for minimum wage. I was doing typing for an insurance agent. I was doing his billing and his correspondence at home on my computer and then on weekends I cleaned house for people.

That year, she told me, she "made $9,000 total," several thousand dollars below the poverty threshold for her family; thus, while working four jobs, she qualified for AFDC. After a spell on AFDC, she wasn't eligible for Medicaid without a spend down or for Food Stamps because of her vehicle, and was uninsured for several years as a result. Two of her children have chronic medical conditions for which they need prescription medication, but health insurance through her job at the bank would have cost her over $200 per month and "we needed that money to live on." Food was watched carefully during that time: "we had a gallon of milk ... this has got to last all week, kids. I was really thankful that my kids could get like free lunches at school and free breakfast. So they could go to school and eat and then they'd get a good lunch and we'd work out dinner."

Jill was able to keep up that schedule for about two years because her oldest daughter assumed many responsibilities at home, including meal preparation and child care. But the strategy of multiple job holding exacted some heavy costs on the family. "I was really lucky because my oldest daughter was very, very responsible and one of the reasons I quit was because ... we still needed the money, but my daughter's grades were dropping in school because she was spending so much time helping" with the younger children. Jill quit the job at the convenience store in order to stay home in the evenings with the children. In addition to the effects on her daughter, Jill found those years took a toll on her, as well. "It was really hard emotionally. I really think I aged a lot in two years ... just worrying. The stress of trying to carry on four jobs, make ends meet, you know, wondering how we were going to pay the next bill.... So I had no choice." During the years of multiple job holding, Jill also availed herself of some church-based assistance, mostly for groceries. In her case, low wage work meant she "balanced" her budget by devoting more time to paid employment, depending on family-provided child care, using local resources for groceries, and foregoing health insurance.

Clyde Persley says "I can't say enough how much my work has meant to me" and he seems to be a pretty centered guy. Yet his secure future is a matter of pure luck.

UPDATE: Bob Herbert talks about today's job prospects of the underemployed, and they're not as good as when Clyde graduated from high school.