Raising Low Wages

Large American businesses think the time has come to increase wages. Not by much, but enough at least to give public opinion the wave of optimism that economic recovery is generating. First was Walmart in February; then came Walmart’s competitor, Target; and now McDonald’s has said it is going to increase hourly wages in its restaurants to $9.90, a 10 percent increase. TJ Maxx and Marshalls soon want to do likewise. The starting wage is low, but what matters — a lot — are the arguments used to explain the increases: There is recovery and this should be reflected in a reduction, albeit nominal, of inequality; growth is riding high, unemployment is going down, Janet Yellen is happy, and Obama has asked that the minimum wage rise to at least $10. These are general arguments, but McDonald’s CEO Steve Easterbrook has added another very specific one: his company’s restaurants need motivated employees.

This is important reasoning, as motivation is fundamental to competitiveness. For the record, and so it’s clearly understood by everyone, let’s reiterate: Improved competitiveness does not happen by lowering wages or reducing employment. Rather, it happens, among other things, by letting employees carry out their work in the knowledge that they are well paid and can aspire to be the best in their profession, with or without qualifications. This idea hasn’t sunk in in Europe, where incentives end up going to university graduates. In the U.S. they start from the beginning — or, rather, the bottom.

Of course — and these facts are fundamental — trade union presence is low, social protection is scarce and competition is almost limitless. On the other hand, businesses are another instrument of global demand. McDonald’s and Walmart think that higher wages mean more demand, and thus more business for themselves too. Deep down in their consciousness lies the idea of expansion, while in the European consciousness there is austerity. Some expert in mass psychology would have to explain the different American and European economic models by the traumas brought about by the Great Depression and hyperinflation. We are all slaves to our fears.