Minimum wage means if they could pay you less, they would

Today, the price of hiring someone got a little higher.

I’ve worked minimum wage jobs, but not since my time at the University of Massachusetts.  I’ve also hired people at minimum wage – and, more importantly, NOT hired people because of minimum wage.  Today’s $7.25/hour federal minimum wage comes nearly a decade after Massachusetts hiked their $5.25/hour rate to $5.75, then $6.25, then $6.75 over the course of a year and a half.  That sucked for me – I didn’t have work-study assistance, the program where the federal government pays two-thirds of a student’s hourly rate, so while I cost an extra $1.50/hour, others would only cost an extra $.50.  It also sucked for Chris, the guy who ran the Coolidge Snack Bar.

The Coolidge Snack Bar was a business venture undertaken by us nerds who participated in the dorm council for Coolidge Tower at UMass.  Using some seed money from what can best be called tax dollars, the snack bar provided a social space for the 550 people who lived in the building.  The initial business plan called for a manager – a glorified term for someone to work the cash register, serve the customers, and make sure things like health codes were followed.  Enter Chris.

That was the spring of 1999.  Summer came, and with it a scheduled increase in the state minimum wage.  When fall rolled around, we simply couldn’t afford to hire Chris back.  He lost his job because the Massachusetts legislature wanted to help people making minimum wage.  Good work, fellas.

A decade later,with a national economy in rough shape, we’re seeing stories which pose the question: is a minimum wage hike really the best thing for America’s workers? No one expects minimum wage earners to receive pink slips en masse tomorrow, but it may have something to do with the fact that unemployment as been rising steadily over the last few months.

I bet folks who find themselves today in the position Chris was in ten years ago might have an opinion, though.

Dot-com 2.0?

I talking about social networks and online environments with a colleague this week, the 400-pound gorilla of the web 2.0 world came up: nobody is making any real money yet.  “What people don’t realize,” he said, “is that YouTube has a lot of views, but has been losing its shirt.  Facebook doesn’t make money.  Twitter doesn’t make money.”

It’s a good point.  Just as the “dot-com” craze launched a bubble and an eventual bust in the late 1990s and early 2000s, the Web 2.0 industry has a bubble of its own.  Outside of Google – who has made tons of money, but is seeing their business model coming under attack from privacy groups – most companies have been supported by venture capital.

For all their popularity, Facebook and Twitter will have to figure out some way to make money off the masses who use them or they could find themselves endangered. And while some recent innovations (like Facebook opening up it’s back-end programming) make these sites more useful to more people paradoxically make it harder to make money.

For the past year and a half especially, people have tracked and managed Twitter accounts via third-party programs either on their laptop or mobile phone – people rarely go to Twitter.com.   With Facebook opening up their programming, it invites the same pattern of usage.  In other words, both these sites promise to offer infrastructure for people to use for sharing content – but without having eyeballs on their actual sites, they can’t rely on the advertising revenue stream that so many other online companies have used as their bread and butter.  That’s why there’s some speculation that browser companies might take over social networking as an attractive add-on to Firefox, Chrome, or Internet Explorer.

At the same time, outside groups have an interest in keeping these services afloat.  Politicians and advocacy campaigns come to mind immediately as entities who have benefited from online networks.  But wherever monetization ultimately comes from, at some point the monied interests who have supported the web 2.0 bubble will look for a return on their investment.  If that return isn’t there, this bubble may burst, too.

Catching up with John Galt

From CNN this week came news that the capitalism-themed works of Ayn Rand are in high demand.  As politicians on the right form their messages, this is worth paying attention to.

The only Rand book I’ve read is her most famous volume, Atlas Shrugged.  A 1200-page brick of a book, it was nevertheless a page-turner – and despite the set of beliefs and philosophies behind it, it was first and foremost an extremely well-written story.  Rand’s characters are interesting and her plot is compelling.

That’s exactly why big screen rumors have persisted for years – and there’s no time like now.

The genius of Rand’s social commentary is in its separation of the seemingly synonymous concepts of free market capitalism and “big business.”  She skewers lobbyists for large corporations who seek control of the cogs and wheels of government – in other words, she would have no sympathy for the automakers, banks, or other large companies parading, hat in hand, to Capitol Hill.  In Atlas Shrugged, as is the case today, big businesses are often the first to call for government involvement in the economy because they have the resources and influence to frame the policy.

And there couldn’t be a better way to deliver these messages than through compelling entertainment.  Inside-the-Beltway conservative talking heads just aren’t going to get it done.

And that may be the biggest impediment to a silver screen adaptation for Atlas Shrugged.  Despite a riveting and topical story, its core philosophy isn’t exactly in lockstep with the prevailing Hollywood liberalism.  Don’t get me wrong – there won’t be a conspiracy.  But if I’m a liberal studio executive, and all my friends are liberal studio executives, and most of my political conversations are with other liberals, it won’t take much to convince me that the only audience for Atlas Shrugged would be packs of black-clad anarchical-capitalist “Randroids.”

Perhaps a small, independent studio will take a chance on the product despite the paralyzing group think of industry leaders.  Given the story, that may be more appropriate.

Workers of Detroit, unite!

It’s a red-letter May Day, as working comrades in the UAW are taking over Chrysler.  By the looks of things, they same fate may befall GM if they cannot work out a deal with their creditors.

Some analysts feel this is a good thing – reasoning that the union would have to abandon a single-minded quest for higher wages to think about the company’s broader needs.  But in the era of bailouts and government safety nets, there really is no incentive to do that.

Novel concepts from the 30s

Mashable mentioned an interesting trend yesterday: businesses are building blogs that are focused on their area of expertise, but not necessarily on their products. The idea is simple: by building a media outlet that interests their target demographic, businesses hope to lure more customers.

As the post notes, some journalists would argue that private companies are not credible sources. You can probably find these journalists’ stories on the pages of your favorite newspaper – right next to the ads that fund those pages. Mass media has always relied on sponsorship – entertainment or information nestled around product pitches. Why take offense when the same thing happens on the internet that happened on the DuMont network in the 50s?

From the companies’ perspective, using online media makes perfect sense. There are few better ways to extend your brand – for instance, Whole Foods runs a blog about food and recipes to help establish itself as an expert in groceries. And it’s cheap to do – all the company really needs is the mental discipline to update a blog daily.

With ventures like this cheaper, easier, and more effective than traditional advertising, you can see why advertising revenues are declining. It’s another way the business community will have to adapt to a changing world.

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Lessons from the Calvin Coolidge Snack Bar: Diet Sprite, the Stimulus, and Creating Demand

I took two economics classes at the University of Massachusetts. One was ECON 103, a course in basic macro economics that taught freshman how to draw basic supply and demand curves. It was taught by a professor in a big lecture hall with smaller sections on Friday mornings (which were mercifully taught in classrooms that were just a few hundred yard from my dorm). I slept through most of it, and if it had been the only economics class I took, I might be shrugging my shoulders right now and saying “Stimulus? Sure, why not.”

The second class I took was in a building named, appropriately, after Calvin “Silent Cal” Coolidge (a staunch supporter of free market economics) when our dorm’s House Council decided to found a snack bar in the 19th floor lounge. I was one of the nerds involved in House Council – a quasi-governmental body which, up to that point, had focused on putting on educational and social programming that no one cared about and no one went to. We decided to put the tax money we had collected to a better, more productive use by launching a social hub for Coolidge residents. It also taught me a great deal about how business works.

We launched simply in Spring 1998, and sent one of our volunteers out to buy the first run of supplies. She came back with one twelve pack of every type of soda she could find – assuming that we needed variety. We learned that demand didn’t call for a wide variety – people were just happy to have a place in the building where they could get soda cheaper than the vending machines. We also learned that no one likes Diet Sprite. To get rid of the supply, I gamely purchased about eleven of the ten cans our supply director bought (so I can personally attest to how horrible it was – seriously, don’t ever buy Diet Sprite).

Essentially, I subsidized the purchase of a product no one wanted. If we had only looked at raw data about which sodas sold quickest for our next supply run, we might have thought Diet Sprite was selling like hot cakes and bought more. Luckily, we were a tight knit group, so I could express my distaste for Diet Sprite. (Have I mentioned it’s sickeningly sweet? Stay away from Diet Sprite.) What I had done is artificially create demand.

Eleven years later, our economy is lagging and President Barack Obama – in a phrase uttered last week that has been retooled for this week’s speeches and press conferences – is blaming lost demand. People are simply not spending money, so the government will start spending for them.

When I created demand, it was 50 cents per can and I spent my own money. But now, with this stimulus plan, we’re all chipping in.

And this is the problem with any government action under the umbrella of a so-called “stimulus package.” Government doesn’t seem to understand the world of business – which is why President Obama can say, with a straight face, that an entity with a trillion dollar operating deficit “is the only entity left with the resources to jolt our economy back to life.” (Seriously – he actually said that.)

Since government doesn’t understand business, and doesn’t operate by the same rules, how can we expect government activity to turn the business world around? Maybe Obama is wrong to say doing nothing is not an option. Maybe doing nothing – for a change – would be the best option.

In the meantime, I hope you like Diet Sprite; since no one is buying it, we’re going to buy a whole lot more of it.

NOTE: After some cursory research, it appears “Diet Sprite” is the same product as Sprite Zero. You’re warned.

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SOMEONE has to be making money…

An economic recession is difficult on a personal level. I know several people who are looking for work right now, and still more who are worried about whether their job – or even their entire company – will exist next week.

That said, slow economic times provide a chance to make needed corrections. In his pro-stimulus stand up act at last week’s Democrat retreat, President Obama mentioned our economy losing trillions in demand. The stimulus, he said, is a way to artificially create demand.

There are, however, industries which are growing by leaps and bounds. Aging baby boomers are making assisted living and home health care major growth industries. Demand for office administrative services is growing – probably because top-heavy companies are recognizing that two or more cheap, administrative-level workers get more work done than an expensive partner-level executive. Outplacement firms are booming, helping laid-off workers with career changes.

I’ve worked at a company that went through what was called a “right-sizing” – and while some employees saw that term as a euphemism for down-sizing, it seemed appropriate to me. Tough times force belt-tightening and discipline – whether in personal finances or a national economy. It promotes efficiency. And the industries that thrive are usually stronger because they find demand that transcends the difficult times – versus boom industries, like late-1990’s dot-coms or mid 2000s real estate, that are based on people gambling to make a quick buck.

I drive less now than I did a year ago. The $4/gallon gas prices this summer led me to be more economical, and now I fill my gas tank usually about twice a month and no more. Similarly, I spend money a lot more intelligently now than I did four or five years ago with the knowledge that, even if I don’t get laid off, raises and bonuses that I was used to in the past may not be available now – realities also make me work harder and strive to expand my job-related knowledge.

As I work with fellow conservative activists to build new organizations, we realize that we cannot rely on an influx of donations to help fund our efforts so we must be streamlined and put an emphasis on providing a deliverable service to potential donors.

Tough times are leading to the development of good habits for me. Hopefully the same will be true nationally.

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Thanks, Washington!

Recent comments on the economy have shown just how much confidence we can place in our representatives. There are lots of companies out there that are failing or in debt because of irresponsible spending. Now that those companies are being supported by the taxpayers, President Obama and his pals are setting strict regulations – for instance, the people who caused this mess aren’t allowed to give themselves raises. And they’ve come out strongly against those fancy “retreats” that are really just subsidized vacations.

It’s good to see that folks with business sense are making decisions on the economic recovery.

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Garth, do you smell bacon?

In order to beg for a piece of the stimulus pie, the U.S. Conference of Mayors released their list of “shovel ready projects” that they feel are good candidates for pork spending with funds from the stimulus package.

StimulusWatch.org is a great way to look at what America’s mayors think is a good idea to spend other people’s tax dollars on. More than a simple listing of projects in the Conference of Mayors report, Stimulus Watch is a wiki that allows citizen involvement – you can vote whether a project is necessary or not, list points for and against it, and make comments.

It seems to be working. Users are leaving comments and actually discussing the reasons for and against many of the projects. And while there are a few proposals which are drawing positive support, most are getting voted down. Citizens are also giving a bit of valuable: in response to a $3.5 million plan to refurbish the sidewalks in Old Town Alexandria, Va., one resident reveals that the city already makes regular repairs.

As Ars Technica notes, by opening the process up with a wiki-style interface, Stimulus Watch is light years ahead of the Obama Administration’s definition of “transparency.”

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Waking up about Wal-Mart

Bruce Springsteen’s Super Bowl halftime appearance came as he apologized for a promotional deal he signed with Wal-Mart to promote his greatest hits album. Springsteen feels Wal-Mart doesn’t treat its employees well.

First off, where does someone nicknamed “The Boss” get off talking about employee conditions? The boss never knows what’s really going on.

Second, there are some people Springsteen should talk to before chiding the working conditions at Wal-Mart. The first is Jason Furman, a key economic advisor to President Obama, who wrote a paper calling Wal-Mart “A Progressive Success Story” for providing low-income workers with affordable goods.

The other is Charles Platt, a blogger who gave an insider’s account of life behind the smiley face as an actual Wal-Mart employee. I think it’s been a while since Springsteen found himself inside a Wal-Mart, so I’ll take Platt’s word on what the working conditions are like.

Most of the criticisms about Wal-Mart come from unions – who would love to siphon off union dues from the paychecks of Wal-Mart’s millions of employees. The bad news for them is that Wal-Mart and its employees have a good thing going – even if the Boss doesn’t know it.

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