Tag Archives: minimum wage

HBCU Money™ Dozen 11/23 – 11/27


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Did you miss HBCU Money™ Dozen via Twitter? No worry. We are now putting them on the site for you to visit at your leisure. We have made some changes here at HBCU Money™ Dozen. We are now solely focused on research and central bank articles from the previous week.

Research

Developers are trying to teach Apple Pencil new tricks l Macworld http://dlvr.it/CqkTNM

Giant sea worms the size of whales? What else will we discover in the ocean? l XPrize http://ow.ly/V2lco

How an ocean-health report card helps better manage fish l Pew Environment http://pew.org/1NM4v75

3D printing can recreate your vascular system for pre-op practice l CIOonline http://trib.al/SnOAi40

U.S. farm sector profitability expected to weaken in 2015 l USDA http://go.usa.gov/cjEsG

The Autowende Is Here: Electric Cars Are The Next Trillion Dollar Industry l Clean Technica http://dlvr.it/CqgsMq

Federal Reserve, Central Banks, & Financial Departments

Lack of legal ID often sidelines #women from electoral processes l World Bank http://wrld.bg/UTRAi

How high can the #US minimum wage go? l World Economic Forum http://wef.ch/1HjPBs7

Loan Growth is Up, So Why Is Profitability Down? l CU Journal http://bit.ly/1XoYVwu

[Chart] Is there a housing bubble brewing on the West Coast? l Housing Wire http://bit.ly/1lHWOrX

How is politics affected by financial crises? l World Economic Forum http://wef.ch/1YrRsiM

Household Debt & Credit Report now includes 2 charts showing auto loan originations by credit score l NY Fed http://nyfed.org/1HbhOBi

Thank you as always for joining us on Saturday for HBCU Money™ Dozen. The 12 most important research and finance articles of the week.

HBCU Money™ Dozen 11/24 – 11/28


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Did you miss HBCU Money™ Dozen via Twitter? No worry. We are now putting them on the site for you to visit at your leisure. We have made some changes here at HBCU Money™ Dozen. We are now solely focused on research and central bank articles from the previous week.

Research

The Konik: a little-known breed of horse equine l KY Equine Research ow.ly/F3FPC

Research addressing environmental concerns that impact tribal health/well-being l EPA Research ow.ly/F3FRP

Advanced drinking water treatment tech, water infrastructure, sensors l EPA Research ow.ly/F3FUn

Bloomberg Explores The Connected Home l Clean Technica dlvr.it/7g3gjH

BlackBerry’s deal to buy voice crypto company Secusmart blessed by German government l CIOonline trib.al/wpnQyiW

5 Ways PCI is Becoming More Security-Conscious Next Year l CIOonline trib.al/5xcpmaR

Federal Reserve, Central Banks, & Financial Departments

Does free food make for a happier office? l World Economic Forum wef.ch/1vXyIwk

$200bn of fake medicines are sold every year. An African entrepreneur fights back l World Economic Forum wef.ch/1Bef8it

Buying power of minimum wage varies across and within states l St. Louis Fed bit.ly/1zu7lez

Trying to get your personal finances in order? Start with these lessons on the basics l St. Louis Fed bit.ly/ViVxYQ

Household Debt Balances Increase as Deleveraging Period Concludes l NY Fed nyfed.org/1y97tNz

Despite Apple Pay buzz, cash is still popular l SF Fed bit.ly/1zviiJj

Thank you as always for joining us on Saturday for HBCU Money™ Dozen. The 12 most important research and finance articles of the week.

A Progressive Minimum Wage: Fair To Business And Labor


By William A. Foster, IV

Most everyone wants to do what’s fair, right, and good, but knowing what that is is often the tough part. – Malcolm Forbes

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Recently, I was accused of being in support of slavery by the AFL-CIO’s chief economist in an exchange on Twitter for not supporting the minimum wage hike. Our discussion stemmed from my article on how a higher minimum wage would hurt African American small business growth capability. While other groups have many times our resources and wealth and since labor cost are the highest expense for any business I was simply pointing out that as a group having limited resources and higher expenses would make it harder for us to start businesses. This compounds a problem of wealth creation through business ownership and favorable taxes for ownership with employment, since businesses tend to hire within their own community, especially small businesses. By the end of the exchange he resorted to telling me I was only concerned about racism and not slavery. Oddly, I thought we were having a conversation about the minimum wage, not about racism or slavery. I sympathize with his position, but let us not throw the baby out with the bath water.

In a more macro example of why I think a blanket minimum wage hike is a problem is based on business size. Home Depot has a market cap of $110 billion, annual revenues of almost $80 billion, profits of $5 billion, and 300 000 employees of which the vast majority are paid minimum wage or close to it. In comparison, around two-thirds of small businesses, the SBA defines a small business as 500 or less employees, generate less than 100 000 annually in revenue and 88 percent of small businesses have 20 employees or less. Are we to treat these small businesses with the same stick as Home Depot and other national retailers? To bump the minimum wage up on a business with a 20 hour a week worker adds almost $2 800 annually to the cost per worker, which is no small bump to businesses making only 100 000 or less annually in revenue. However, make no mistake the SBA’s definition of a small business does propose a bit of a problem.

Enter asset and capital firms. Hedge funds, private equity, and other asset and capital firms are notoriously small. Appaloosa Management, David Tepper’s firm, reportedly only has 32 employees. Obviously, this qualifies them as a “small” business according to the SBA’s definition. The problem as it were, David Tepper himself made $2.2 billion in earnings through his hedge fund in 2012. A firm which had $25 billion in assets under management in 2012. Why is this problem? Because someone is cleaning Appaloosa’s offices. More than likely the work is contracted out and more than likely that person doing the cleaning is being paid minimum wage to do so – if that. So as you see just defining a business as “small” by its employees can leave a number of loopholes. If you have not been able to tell by the conundrums around the Affordable Care Act, businesses definitely will look for the loopholes to save money.

A better solution to the minimum wage is a progressive wage in the same way the United States has a progressive tax rate. As companies grow revenues, then so should their minimum wage requirement. Even this though is no small cost, even to big companies. If all of Home Depot’s 300 000 employees, of course not all are minimum wage earners, received a $2.85 bump in pay for every 20 hours per week they worked it would equate to an $820 million dollar increase in labor expense or 16 percent of the companies net income. This increase would be passed along to customers which is usually the case when business expenses rise anyway. I would not dare call for a lowering of the minimum wage at small businesses with smaller revenues, but it could be justified if burden were evenly spread out across a simple revenue and net income calculation. This would still raise the overall minimum wage without harming those small businesses at the very bottom trying to grow. It would also require the aforementioned firms like capital firms to ensure any contracted work they pay meets a minimum wage. For instance, if a hedge fund is contracting out its janitorial work and the employer is paying $7.25 a hour to the janitor, then the hedge fund would be responsible for the other $2.85 or whatever range that particular firm falls in based on the progressive minimum wage. This ensures the actual small business based on revenue is not bearing the burden of the higher labor cost.

The populous argument would say 16 percent is no big deal, but most populous arguments have rarely been business owners or investors. They do not take into account capital flight and other things that potentially could cause capital to flee from these companies. This is a problem if your 401(K) happens to have investments in one of these companies, which most often they do. There goes retirement, but at least I can buy that Big Mac today (see below). The high cost of labor is what set auto companies in the United States back as they struggled to compete against foreign manufacturers who could produce the same quality car for a much cheaper price. Save for a government bailout, all of those jobs would be gone today in a true capitalist system or free market economy. Again, be careful what you wish for.

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However, one of the things that could be done to offset income disparity is to give companies who are active in managing the ratio between their lowest earning full-time worker and total CEO compensation based on a five year rolling average could receive special tax breaks. The latter is important for those companies who love to give obscene golden parachutes to outgoing CEOs, which often leaves investors just as frustrated as employees. I am by no means in favor of capping anyone’s compensation, but I do believe that maintaining a proper balance between maximum-minimum is important to the overall health of businesses, labor, and the economy. Currently, the ratio between CEO compensation and the average worker of a S&P 500 company is 354:1 according to a recent report by the AFL-CIO. In 1981, the ratio was closer to 40:1 (see below).

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Unfortunately we exist in a social, economic, and political climate in America currently that everything exist in extremes. The answer in the middle could restore balance, but it would take the belief that there is an actual win-win scenario for both parties also known as compromise. If we do not tax someone who makes millions the same as someone who makes thousands, then why can not the same logic be applied to businesses? Hopefully, we can find moderation because we knows what happens to a boat that leans too much to one side. Now, where did I put my life preserver?

HBCU Money™ Dozen 3/10 – 3/14


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Did you miss HBCU Money™ Dozen via Twitter? No worry. We are now putting them on the site for you to visit at your leisure. We have made some changes here at HBCU Money™ Dozen. We are now solely focused on research and central bank articles from the previous week.

Research

How Risky Is It To Invest In Oil Stocks? l Clean Technica http://dlvr.it/57rXCH

If Microsoft gives away Windows Phone 8, will anyone take it? l Networkworld http://ow.ly/uzp6a

Google shrinks Drive cloud storage prices l CIOonline http://trib.al/rQ2KfE9

SiNode raises seed funding to give batteries more juice l Argonne http://tcrn.ch/1ewXUfI

Snowden revelations raise interest in smartphone spyware for business l Computerworld http://ow.ly/uzpsS

Ecosystem-based fisheries could provide a better way of managing the Ches Bay’s living resources l MD Sea Grant http://bit.ly/1fVZRb2

Federal Reserve, Central Banks, & Financial Departments

In extreme poverty, women’s labor force participation is more about survival than choice. l World Bank http://wrld.bg/uwMVf

After two months of decline, retail and food services sales rose 0.3% in February l St. Louis Fed http://bit.ly/1lClOeI

Tools to help with major financial decisions — paying for college, buying a home & retirement l Richmond Fed http://ow.ly/uzr97

Apartment rents rising faster than home prices in 6 major cities l Housing Wire http://hwi.re/57pxPJ

From the Vault 1987: The minimum wage: No minor matter for teens. l Chicago Fed http://ow.ly/uzcqQ

Teachers: Atlanta & St. Louis Feds offer three professional development options. l Econ Lowdown http://bit.ly/1iG22S9

Thank you as always for joining us on Saturday for HBCU Money™ Dozen. The 12 most important research and finance articles of the week.

Higher Minimum Wage: An Attack On African American Small Business Growth


By William A. Foster, IV

Labor is the great producer of wealth; it moves all other causes. – Daniel Webster

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As often is the case, anytime the populous conversation about raising the minimum wage comes around you will see a huge rallying from the African American community. This is primarily because the majority of African America is labor and not heavily invested in ownership. African American firms with paid employees represent an appalling 1.8 percent of American firms with paid employees and only 7 percent of all American firms. Not even close to an equitable representation since we comprise 15 percent of the country’s population. We are a far cry from the days of Black Wall Street. These days we spend our time begging for employment and entrance into firms controlled by other communities. Then we appear baffled as to why our unemployment rate is constantly double that of the national average and three times that of Asian America or why all of the capital is leaving our communities.

Despite African America only comprising 1.8 percent of American firms with paid employees, these firms employ almost 6 percent of African America’s working population. In comparison, Asian America has 7 percent of all American firms with paid employees and employs almost 34 percent of Asian America’s employed population. The correlation is obvious that businesses started by a community tend to hire their community. This is true in terms of community defined by ancestry, gender, geography, education level, or socioeconomic status. As a result of this more citizens within that community are earning income, buying power increases, unemployment decreases, and social issues decrease. Psychology 101 tells us that people like to associate with people whom they believe have similar values and interest. The very first thing that every person with eyesight uses to make this judgement is a person’s appearance. The politically correct police will argue that is what we have to work against, but while we are waiting on Utopia the rest of us have to work in reality.

President Obama and his administration are bent on a one size fits all America approach to income inequality. However, it is no secret that high levels of asset ownership increases the level of income that a group can accumulate and it certainly benefits them in terms of lessening their tax liability allowing them to keep more of their money. An example is hedge fund owners who pay 20 percent while making hundreds of millions and LeBron James pays 40 percent for earning tens of millions. Also highlighting that even well paid labor is still just that – labor and does not enjoy the privileges that the tax code bequeaths to ownership. The increase in minimum wage will not make that easier for African Americans, but harder.  According to Keeley Mullis of the National Federation of Independent Business, “Big corporations do not have to absorb the cost of minimum wage increases because most minimum-wage jobs are offered by small businesses.” Given the education reality of African America, only 18 percent of African Americans 25 and older hold college degrees which is second lowest in the country and a 62 percent high school graduation rate which ranks lowest in the country, most of our labor force is low-skilled labor and more likely to work minimum wage jobs than almost any other group per capita.

There is also the acute compounding problem of wealth. African America’s median net worth, according to the Pew Research Center is $5,677 leaving us with 24 times less wealth than European Americans and 14 times less than Asian Americans. Is it no wonder then that in our own communities we tend to only see small businesses owned by outsiders. That is to say nothing of the ownership of medium-sized companies and we are virtually non-existent in large company ownership. To the best of my research thus far, there are no African American owned companies that make up the Forbes’ Largest Private American Companies list. A list that requires a minimum of $2 billion in annual revenues. For an African American family starting a small business, they are already facing the challenge of limited resources at their disposal. Both in terms of wealth to get started, access to support capital which is a result of poorly capitalized African American owned banks & credit unions, and even training which has its own cost to acquire both in terms of human capital and economic capital.

Real power and real wealth in capitalism is created through ownership. A father or mother can not pass a job along to their child, but they can pass a business to them increasing the probability of income stability for generations. Why make that harder for a group that has limited wealth to get started by increasing the already largest burden most small businesses encounter? As a consequence, impacting communities which continue to struggle with acute levels of unemployment and thereby the domino effect toward social issues. You can not just magically expect job creation to come to communities. It is communities who create their own job creation. As a result, it must be made obvious that while an increased minimum wage will not hurt other groups who are wealthier, this will have an adverse impact on African America’s wealth and employment growth prospects.

If Democrats and Republicans really want to do something about income equality, then the solution is to find a way to increase the access for entrepreneurship training through HBCU initiatives and create incentive programs to African American owned banks and credit unions to focus on small business lending. The latter should decrease the amount of predatory lending that African Americans historically have faced with banks like Wells Fargo, Bank of American, and others. It is true that the president is not just president of African America, but all of America. However, African America should be slow to support populous policies just for the sake of without realizing the potential of their cascading effect on our own community.