What's the Difference Between a $5.60 Big Mac and a $4.80 Big Mac?

One of them comes with a living wage for the server, and the other doesn't.

In today's New York Times, Liz Alderman and Steven Greenhouse explore the difference between a Big Mac purchased in Denmark and one bought in the United States (full article, here). For the consumer, the difference is 80 cents (16.67%), which was actually a lot less than I had expected, given how loudly U.S. franchises have been prophesying the end-of-the-world should living wages become the norm here.

Cross-cultural comparisons are always risky. Denmark has a much higher cost of living than most of the U.S., higher taxes, high levels of unionization, etc.

But... the Danish example proves that it is possible to have that Big Mac and not penalize the McDonald's worker for the sin of being poor.

I've written before about the appalling way that U.S. capitalism concentrates on going lower and lower (example here). A living wage is a moral issue, not an economic one, but it's nice to know that the economics work too. 

The base wage for a McDonald's employee in Denmark is $20 an hour, "two and a half times what many fast-food workers earn in the United States," and much higher than the $15 an hour for which  many U.S. workers have been campaigning. Note that:

Denmark has no minimum-wage law. But ... [a Danish worker's] $20 an hour is the lowest the fast-food industry can pay under an agreement between Denmark’s 3F union, the nation’s largest, and the Danish employers group Horesta, which includes Burger King, McDonald’s, Starbucks and other restaurant and hotel companies.

By contrast, fast-food wages in the United States are so low that half of the nation’s fast-food workers rely on some form of public assistance, a study from the University of California, Berkeley found. American fast-food workers earn an average of $8.90 an hour.

Most corporate fast-food companies won't discuss employee wages because "those decisions [are] made by its franchise operators", which is disingenuous at best, since corporate will train franchisees on how best to keep down labor costs.

But it's not just the wages that are different:

In Denmark, fast-food workers are guaranteed benefits their American counterparts could only dream of. Under the industry’s collective agreement, there are five weeks’ paid vacation, paid maternity and paternity leave and a pension plan. Workers must be paid overtime for working after 6 p.m. and on Sundays.

Unlike most American fast-food workers, the Danes often get their work schedules four weeks in advance, and employees cannot be sent home early without pay just because business slows.

In other words, Danish workers are treated like valuable human beings, not simply as "costs". Not surprisingly, fast-food worker turnover is low and front-line employees even think about their jobs as potential careers, not something to move on from as quickly as possible. Turnover is expensive, but you don't see U.S. fast-food companies looking for good ways to reduce that, do you?



True, Danish fast-food franchises appear to be less profitable than American ones (by how much is not clear, but they're certainly not unprofitable, or they wouldn't be around for long). And those burgers are certainly a little more expensive, but Danes seem OK with that:

“We Danes accept that a burger is expensive, but we also know that working conditions and wages are decent when we eat that burger,” said Soren Kaj Andersen, a University of Copenhagen professor who specializes in labor issues.

That U.S. Big Mac still taste as good to you? Mine seems to have some straw in it.

Still Waiting for Stronger Action

The numbers of states banning a particular type of guardrail has now grown to ten. In the event of a vehicular collision, the guardrail and its "redesigned" end terminal are supposed to slide along, cushioning the impact of the vehicle; instead, the ends are sometimes malfunctioning, effectively driving a spear into the vehicle itself. (I first wrote about this issue about ten days ago - original post, here.)

The issue is that redesigns are supposed to be tested and approved by the Federal Highway Administration before installation.... and they weren't. A Texas jury found that Trinity Industries, the guardrail manufacturer, had defrauded the government, and awarded $175 million (which, under federal law, will be tripled to $525 million; complete New York Times article on the jury findings, by Danielle Ivory and Aaron M. Kessler, here).

Ivory and Kessler reported on Tuesday (full story, here) that the Federal Highway Administration had finally ordered more testing on the guardrail design. Meanwhile, "At least 14 lawsuits blame the guardrails for five deaths and more injuries." The Trinity "ET-Plus" units have been installed in virtually every state.

Ivory reported today that there are now ten states that have banned the ET-Plus: Colorado, Hawaii, Massachusetts, Mississippi, Missouri, New Hampshire, Nevada, Oregon, Vermont, and Virginia.

I'd like to see my state added to that list. And could we hurry up on the testing please?

Happy Endings Can Happen!

...but it helps to have The New York Times watching.

Yesterday, I wrote about the woman who was essentially fired from her job for being pregnant (that's a simplification, but it's a long story, and if you want the details, you'll find them here). Her employer's move appeared to be a clear violation of a New York City ordinance protecting pregnant workers, but I was more taken aback by the simple lack of compassion and decency.

Today, it turns out that the woman is being offered her job back.

In a followup article, reporter Rachel Swarms writes that the woman - now unemployed for nearly three months - can return "immediately without loss of seniority and without fear of retaliation," in the warm and welcoming words of her employer's lawyers.

The lawyer, of course, is "not admitting that [the company] had violated any laws or fired Ms. Valencia," and that the health and safety of employees is "of utmost importance."

Why do I find that last statement a little hard to believe?

What Ever Happened to Common Decency and Compassion?

At the workplace, apparently, it's being forced out by the Almighty Bottom Line.

Today's New York Times carries a deeply depressing article by Rachel Swarns about the risks of being pregnant in the workplace. No, not the risk of harm to your developing child, the risk of getting fired for the fact of being pregnant. Oh, and: to hell with the legality of that action.

According to the article, the 39-year-old woman, who had suffered a miscarriage the previous year, arrived to work with a note from her doctor saying that her current pregnancy was again high-risk and she should work no more than eight hours a day. Eight hours a day, five days a week -- that sounds like a fulltime job to me.

And the job was critically important to her financial stability. She earned $8.70 an hour (after three years on the job -- there's another whole post in that comment alone); her husband was a driver for a private bus company. Together, they earned enough to cover their expenses, including a "studio apartment in Corona, Queens." Not exactly high living, but they were getting by.

What would her bosses say? She worried and prayed.

...[It] was the busy season at the Fierman Produce Exchange, and her bosses had already told her she had to work overtime. So as Ms. Valencia sorted potatoes on that Aug. 8 morning, she worried: How would her supervisors respond to the doctor’s note? At the end of her shift, would she still have a job?

Stop right here and think what you would do if you were Ms. Valencia's employer.

Here's what happened: 

...[When] Ms. Valencia told her supervisors in July that she had a high-risk pregnancy, they told her she could work only without restrictions, she said. After taking time off to try to negotiate an accommodation with the company, she returned when her co-workers volunteered to handle the heavy machinery and lifting.

In August, she said, her supervisors insisted that she work overtime. Ms. Valencia felt so ill after two lengthy shifts that she went to the hospital and then to her doctor, who gave her the letter that she handed to her boss.

....

Ms. Valencia said she begged her managers to excuse her from overtime as her doctor had recommended. She pointed out that the company’s busy season typically ended in September, and that overtime was rarely needed during the rest of the year.

But her managers insisted that she could not work without a full-duty medical clearance. So Ms. Valencia turned in her company identification and wept as she started the long commute home.

 Excuse me?

This seems like a clear violation of the Pregnant Workers Fairness Act, a New York City ordinance which took effect in January of this year, and

...[which] requires employers to make reasonable accommodations for pregnant workers — such as providing rest and water breaks, modified schedules and light duty — so long as the accommodations don’t cause undue hardship for the employer. Makes sense, right? It’s actually critical, particularly for low-income women who sometimes get pushed out of their jobs — and into poverty — when they become pregnant.

But I actually care less about the legality than about the stunning lack of basic human decency. We are, after all, talking about a temporary disability. What if Ms. Valencia had broken a bone or strained muscles? Would that be grounds for pushing her to leave? (And note: the story does not make it clear whether she was actually fired, in which case she would be eligible for limited unemployment insurance, or pushed into resigning, in which case she wouldn't.)

Ms. Valencia's co-workers had the decency to offer to help with the most physically demanding elements of her job. But her bosses didn't have the decency to hire temporary workers to pick up the slack during the their busy season.

And some people still wonder whether there's a need for unions today. Ask Ms. Valencia. 

Who Guards the Guardrails?

I grew up in hilly, curvy New England, and still love nothing more than driving some of those hilly, curvy roads. Probably at speeds in excess of posted limits.

But some of those roads make me just a little nervous, and so I'm grateful for guardrails.

At least I was, until I read an article by Danielle Ivory and Aaron M. Kessler in Monday's New York Times that warned that the guardrails installed in nearly every state in the country may not be safe. In fact, "some guardrail heads had apparently malfunctioned, in essence turning the rails into spears when cars hit them and injuring people instead of cushioning the blow." (Full article here; followup article from today's Times, here; the issue has also been covered by Brian Ross of ABC's 20/20 newsmagazine, television clip here)

Missouri has banned further installation of these guardrails, as have Nevada and Massachusetts. Virginia is considering a similar move, and is threatening to remove those currently in place.

A primary manufacturer of guardrails, Texas-based Trinity Industries, is the object of a federal whistle-blower lawsuit, alleging fraud, following a significant design change.

Trinity’s new design reduced the width of the steel channel behind the rail head at the end of the guardrail, from five inches to four. Instead of sliding along the rail, which collapses much like an accordion, and helping it curl out of the way of the oncoming vehicle, the rail head can become jammed, some state officials say. In those cases, the long metal guardrail does not get pushed aside — instead, it can become a bayonet that can pierce the vehicle and any person in its way, the state officials say.

Design changes, along with detailed diagrams, are supposed to be disclosed to the Federal Highway Administration.

But when Trinity narrowed its rail head design it did not make any such disclosures. In response to a question from The Times, Trinity said it submitted results of the crash tests to the agency in 2005, though it did not directly address whether it highlighted the change to the rail head.

For at least seven years, tens of thousands of the modified ET-Plus rail heads were installed from coast to coast. It was only in 2012, after a patent case in Virginia led to the discovery of the change, that the federal highway agency was alerted.

 At least five deaths, and many more accidents, have been blamed on the guardrails. The Federal Highway Administration continues to claim that the guardrails are safe.

But I'm starting to have my doubts about the FHA's claims.

Especially because, as the Times journalists report, "internal communications and documents from the highway administration show that a senior engineer charged with examining the guardrails expressed reservations about their safety, before he signed off on their continued use about two years ago."

Feel like expressing more than reservations?

Inspections are Easy. Now Comes the Hard Part.

Steven  Greenhouse reported in today's New York Times that two separate groups have completed inspections of more than 1,700 garment factories in Bangladesh (full article, here).

It's an impressive total, especially for those of us who have been appalled by continuing stories of unsafe working conditions (I've written lots of blogposts about it, most recently, here). As I've written, all of us who buy clothes have a responsibility to try to determine that those clothes were made under fair and safe conditions.

But that's far easier said than done: This factory may be safe, but that one not. And the label on my T-shirt only says, "Made in Bangladesh". I can take the easy way out, and not buy anything made in that country, but then I am penalizing everyone, whether it's a factory owner who tries to do the right thing or one who belongs in a Dickens sweatshop horror story, not to mention the millions of workers who are working long hours under terrible conditions to try to support their families.

The two inspection groups -- a European-dominated group called the Bangladesh Accord on Fire and Building Safety, and an American-dominated group called the Alliance for Bangladesh Worker Safety -- found flaws at every factory they inspected. But the range was considerable:

All that is needed at some sites is removing machinery and stored fabric from overloaded floors, while others will need sprinkler systems, automated alarm systems and the strengthening of support columns.

The average cost for factory upgrades, the Bangladesh Accord on Fire and Building Safety found, was $250,000, but in some cases, the costs could exceed $1 million.

The inspections are the easy part. How long will it take for the necessary upgrades to be completed? And will those changes be maintained?

We consumers are the ones who must demand greater transparency. The companies that sell us $2 T-shirts won't care about garment-worker safety if we don't. 

The Road to Hell is Paved with Good Intentions...

... and especially with many little mis-steps.

As C. S. Lewis wrote in this Screwtape Letters,

Indeed the safest road to Hell is the gradual one -- the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts...

Until suddenly, you turn around, see your surroundings, and wonder, How on earth did I get here?!?

Lewis may have been an Oxford don, but he was on to something big. Of all his works of Christian apologia, The Screwtape Letters is by far my favorite. An epistolary novel, the book is a manual on How to Be a Better Devil, full of "wise" advice from the senior Screwtape to his just-starting-out-in-the-family-business nephew, Wormwood.

In the Preface, Lewis noted,

I live in the Managerial Age, in a world of "Admin." The greatest evil is not now done in those sordid "dens of crime" that Dickens loved to paint. It is not done even in concentration camps and labour camps. In those we see its final result. But it is conceived and ordered (moved, seconded, carried, and minuted) in clean, carpeted, warmed and well-lighted offices, by quiet men with white collars and cut fingernails and smooth-shaven cheeks who do not need to raise their voices. Hence, naturally enough, my symbol for Hell is something like the bureaucracy of a police state or the office of a thoroughly nasty business concern.

Lewis could have been a professor of business administration. (How he would have disliked that!)

The truth of the "slippery slope" is explored in a 4 September Harvard Business Review blog piece by an HBS professor, a fellow at the University of Arizona, and an assistant professor at the University of Washington. (Yes, I'm a little behind in my reading.)

The authors' research has shown that, given the incentive and the opportunity to cheat a little, people will. No surprise there. The next time? They'll cheat a little more. And then a little more, and a little more. The next thing you know, you're Bernie Madoff. Or at least Ken Lay.

And it's not just about one or two "bad apples":

Unfortunately, the assumption that unethical workplace behavior is the product of a few bad apples has blinded many organizations to the fact that we all can be negatively influenced by situational forces, even when we care a great deal about honesty.

In other words, being around a few bad apples can make us complacent about the bad choices we may be tempted to make. (I've written about this before, here; the point I wanted to make then, and will reiterate now, is that the old saw about a few "bad apples" reminds us that they spoil the whole barrel: you have to take all the apples out, and turn them over, looking for the blemishes that have spread from the rotted ones.)

It doesn't take draconian methods to keep people on that straight-and-narrow:

Environments that nudge employees in the right direction, and managers who immediately identify and address problems, can stop ethical breaches before they spiral out of control.

Who Will Watch The Watchers at the Fed?

It will come as no surprise to anyone who's read even one of my posts if I say that I'm a big believer in regulation.

But only if the regulators actually regulate.

This would seem obvious.

Not so, in the Through-the-Looking-Glass world of the New York Federal Reserve Bank, at least not according to the reports last week from Jake Bernstein at ProPublica and Ira Glass at This American Life, reprised in an article by Nathaniel Popper and Peter Eavis in today's New York Times.

The short version is this: Shortly after the 2008 financial crisis, and near-meltdown of the U.S. economy, questions began to arise as to why the New York Fed -- which is responsible for regulating Wall Street's big banks -- had not seen the crisis coming, had not done anything to prevent the disaster. Was the Fed, people asked, just a little too cozy with the institutions it was supposed to watch?

Or, as someone asked long, long, long ago: Quis custodiet ipsos custodes? (It was the Roman poet Juvenal who posed the question: Who will watch the watchmen?) (How often do I get to use my classics degree in real life, eh? Actually, writing this blog, I get to use it a lot -- most recently, I think, here. Sigh.)

The Fed itself commissioned a report, in 2009, to see what went wrong, and what it could do better. One of the biggest problems uncovered in the report was "regulatory capture". As explained by Mr. Glass on his radio show, 

Regulatory capture is when a regulator gets too cozy with the company he's supposed to be monitoring. He's a watchdog who licks the face of an intruder, and plays catch with the intruder, instead of barking at him. 

Or, as Mr. Bernstein put it in his article:

The New York Fed had become too risk-averse and deferential to the banks it supervised. Its examiners feared contradicting bosses, who too often forced their findings into an institutional consensus that watered down much of what they did.

Either way, the Fed was seeing questionable behavior, but not acting on that knowledge. The report recommended new hires, who would be independent-minded and capable of resisting that "capture". One of those new hires, Carmen Segarra, lasted only seven months  in 2011-2012 before she was fired. She sued last year, claiming that her employment has been terminated because she was too tough on the bank, Goldman Sachs, to which she was assigned (New York Times article on the suit from October 2013, here). That suit was dismissed earlier this year (New York Times article from April 25, here).

Interest heated up again when ProPublica and This American Life published secret recordings that Ms. Segarra had made while she was working for the Fed. As the Times reporters put it,

While Ms. Segarra’s suit was dismissed, the newly released recordings suggest that her supervisor at the New York Fed went easy on Goldman, even after saying he wanted “to put a big shot across their bow” on a deal in which Goldman was suspected of helping make Banco Santander look financially stronger than it was.

The New York Fed has issued a statement (at the ProPublica website, here) that "categorically rejects the allegations being made about the integrity of its supervision of financial institutions." But enough questions are being raised by both House and Senate committees. Yesterday, Massachusetts Senator Elizabeth Warren released this statement:

When regulators care more about protecting big banks from accountability than they do about protecting the American people from risky and illegal behavior on Wall Street, it threatens our whole economy. We learned this the hard way in 2008. Congress must hold oversight hearings on the disturbing issues raised by today's whistleblower report when it returns in November - because it's our job to make sure our financial regulators are doing their jobs.

One of the biggest problems here is the revolving door between regulators and banks, similar to the revolving door between Washington's legislators and lobbyists. If your next (Big!) paycheck is likely to come from the organization you're "supervising" ... just how tough are you going to be?