Big Oil Generates Big Profits
July 28, 2006 – 11:25 amNo matter how dysfunctional the United States government’s fiscal policy may be, and no matter how long it’s been since minimum wage workers have received a raise, we can at least celebrate the fact that “big oil” is generating record profits. Here’s a list of some companies that have reaped such rewards:
Enough about the oil companies for now. I knew that the last time the minimum wage was raised was in September 1997. But I didn’t know what the history of congressional pay looked like. I went hunting around the web, and sure enough, I was able to find some information. The first thing I came across was this post from GOOFYBLOG, titled “Congressional Pay .vs. Federal Minimum Wage”. It pretty much had exactly the information I wanted.
I decided to go ahead and reproduce those numbers, though. I found the histories of the minimum wage and Congressional pay (PDF), and I used Consumer Price Index data to perform the adjustment for inflation. I collected the Congressional pay data since 1938, the time of the introduction of the minimum wage via the passage of the Fair Labor Standards Act.
I have the results in a few formats:
I used OpenOffice to generate the spreadsheet, and I strongly recommend using it to view the data as opposed to Microsoft’s Excel. The formatting may be off in Excel; I don’t know. You can always download OpenOffice for free, and it works on almost any platform (Windows, Mac OSX, Linux, etc.).
There is plenty of data in this table, but I found a few things particularly interesting. First, since the minimum wage was raised to $5.15 per hour in 1997, Congress has given itself eight pay raises, for a total raise of over $31,000 (more than three times what a minimum wage worker makes in a year). Second, in the twelve years before the Contract With America (the policy proposals Republicans promised to enact when they took a majority hold of the House of Representatives in the 1994 election), Congressional pay averaged $159,878.05 (in June 2006 dollars), and a minimum wage salary averaged $12,209.84. In the twelve years since the Contract With America, Congressional pay has averaged $169,341.89, while a minimum wage salary has averaged $11,747.01.
That’s right, since the Republicans won a majority share of the House of Representatives, which they have retained to this day, the purchasing power of Congressional pay has increased while that of minimum wage has decreased. Between this fact, the record profits for big oil companies (and thus the boon to rich oil executives), and President Bush’s tax cuts for the wealthy, how are the poor in this country not supposed to feel like they’re getting f*cked?
13 Responses to “Big Oil Generates Big Profits”
I think getting upset with Big Oil because of their profits is very short sighted and reactionary. Oil is expensive because we waste so much energy. If we weren’t all driving around in SUVs and taking our toy boxes to the desert for race around in our dune buggies or go to the river to race around in our power boats or build ridiculously big houses with cathedral ceilings that we have to heat or cool oil might not be so expensive. The smart thing to do is buy energy efficient products (like your Civic) and buy stock in ExxonMobile or ChevronTexaco.
The Big Oil companies really have little control over the prices. OPEC does far more to manipulate things than the companies you’ve listed. But like I said before, I think the prices are high because of how wasteful we are of it.
My two cents.
By Ted on Jul 28, 2006 at 12:26 pm
I think you’re right that getting upset at big oil companies is reactionary, but I wouldn’t describe it as “short-sighted”, for reasons I’ll soon explain. The oil companies are doing what they’re designed to do: generate profits and take care of their shareholders. And they’re doing that well, so how can you blame them?
You can blame the federal government, though, for lavishing wholly unnecessary and environmentally damaging tax relief on these big oil companies. With gas prices the way they are, these companies have empirically shown themselves quit capable of generating substantial profits. We don’t need our federal government to further line their pockets.
Conservation and energy efficiency are two incredibly important arguments, and those arguments need to be made visibly and forcefully. In addition, it would be nice for our government to help the cause by shifting as many available resources to R&D and other efforts that are designed to aid our transition to a sustainable energy infrastructure.
By jjk on Jul 28, 2006 at 12:36 pm
You don’t need to argue that our government does not need to subsidize the oil industry. Preaching to the choir here. But also, don’t rely too heavily on the government to fix the problem. While it would be nice if they would take the future into consideration, if it doesn’t apply to the next election cycle it probably won’t happen. If anything it’s been the government subsidizing our “lifestyle” that has gotten us in the predicament we’re in.
I see you don’t have a spell checker. I’m sure I have many mistakes.
By Ted on Jul 28, 2006 at 1:47 pm
I remember a discussion about congressional pay from a while ago that made an interesting point. A lot of congressmen have both a home in DC and a home in their home state. Maintaining a single home isn’t cheap; maintaining two is quite expensive, especially when one is in DC. Now obviously, at ~$170k/year congressmen aren’t going to be bad off, but for someone who only has one or two terms, the pay isn’t so unreasonable. It would be interesting to compare congressional pay to housing prices in DC (and home states). My point here is that the pay that congressmen get isn’t necessarily outrageous.
Now there’s the issue of the congressional/minimum disparity. First of all, let me point you to the Wikipedia’s list of minimum wage by state. You’ll notice that while most of the country follows the federal minimum wage, many states and cities have minimum wages that are much higher. In general, the states that have high population density (and high cost-of-living) have minimum wages that are higher than the federal. Places like San Francisco, LA have substantially higher minimum wage rates.
Congress, by keeping the minimum wage steady, is allowing the states and cities to adjust things as needed based on the local conditions. This makes sense. While $10/hr may be reasonable for LA, for someone living in Missoula, Montana, the current $5.15/hr is probably not *that* far off. Now, I’m not saying that the minimum wage shouldn’t get a bump every now and then, but it’s not as black and white as you’re making it sound. On the other hand, congress is paid for by… congress (essentially). While the general populace has the states and cities to look after their incomes, congress basically just has itself. (Yes, that’s not entirely a good thing, but do you see my point?)
Finally, raising minimum wage isn’t a trivial thing. There are many companies that would suffer if the minimum wage is raised substantially. One response to a raised minimum wage is to lay people off. So you have to ask, which is better? Is it better to have a somewhat-too-low minimum wage or to be out of a job alltogether? Here’s an example: Chicago recently voted to raise minimum wage in stores like Walmart and Target to $10/hr + $3 benifits/hr. Walmart and Target’s response? No new stores in Chicago. Now, while I may *HATE* Walmart (I do like Target, however), each store typically employs a couple hundred people. And many low-income familys rely on Walmart’s low-low prices in order to survive on their minimum wage incomes. So, if you raise minimum wage across the board, stores like Walmart, K-Mart, Target, Sears, etc. will either respond with layoffs or higher prices. The result is either higher unemployment or you have the raised minimum wage offset by raised prices at stores where minimum wage earners shop.
So, my overall point is that the numbers you’re looking at don’t tell the whole story. You need to look not just at congressional pay versus federal minimum wage, but you also need to look at state and local minimum wages, cost of living, housing costs, etc. Also, how many minimum wage workers are: a) high-school students, b) college-students, c) post-retirees (Walmart employs lots of them), or d) young people just starting out. For a, b, and c, minimum wage is often all they need. For people just starting out, the assumption is that they’ll move to higher positions at some point (bag-boy to manager to supervisor, etc).
By Adam on Jul 28, 2006 at 2:41 pm
I don’t like arguments like this: “It’s complicated, so we should let the poor stay poor, after all we don’t want to inconvenience any businesses” or “It’s complicated, so we should just let the environment go straight to hell, after all we don’t want to inconvenience any businesses”.
It isn’t complicated. If businesses could afford to pay $5.15 a decade ago, they can afford to pay more now. That’s inflation. Goods cost more, businesses are making more, employees should be making more as well. Businesses are around to make money. If they could make money a decade ago paying people $5.15, they can make money today paying $5.15 + inflation. Now if a business can take extra money out of the worker’s pocket they will. If Chicago raises its minimum wage, WalMart will say “Let’s move out to the suburbs, where we can exploit workers”. That’s exactly why a federal minimum wage is needed.
Also, I don’t think the argument that young people and old people don’t deserve to get paid fairly for their work makes sense. The minimum wage is all they need? Oh, I see, as long as they can survive off their parents or children, companies should pocket the extra money that they “don’t need”. The logic is inescapable.
By gv on Jul 29, 2006 at 1:11 pm
I seem to have touched a nerve Greg, and you also seem to have missed my point.
Here’s what I was trying to say: “The issue is more complicated than a couple of columns of numbers indicate, therefore we should look at more than just those numbers and then act appropriately.”
Can businesses afford to pay more than minimum wage? Yes. Are they willing to? No. Does that mean that the minimum wage should be raised? Not necessarily! If a company is forced to pay a higher wage but then decides to lay off 10% of its employees to maintain its current profit levels, then the issue becomes complicated. I’m not trying to protect the businesses here. I’m simply stating that a blanket increase in the federal minimum wage may not be the answer. A small state-wide bump in minimum wage, with a slightly larger bump in local minimum wage in some places (like Chicago), might be more appropriate.
Also, as for the whole “exploitation”/”paid fairly” issue, I certainly agree that workers shouldn’t be exploited, and they should be paid fairly. But “fair pay” varies from place to place, which is why increasing the federal minimum wage is not as useful as more locally applied minimum wages.
There are places where $5.15/hour is both a fair wage and all that some businesses can afford. There are also places where $5.15/hour isn’t nearly enough and businesses can afford more. There’s also the issue of small stores having much tighter profit margins than big places like WalMart. Would you like to see mom-and-pop places across the country go out of business because of an increase in the federal minimum wage?
Getting back to where all of this came from: congressional pay versus minimum wage. Saying that congressional pay should be tied directly to minimum wage, while ignoring all of the other relevant issues, details, and arguments is no more or less blind than your rather insulting (and false) paraphrasing of my previous comment.
By Adam on Jul 29, 2006 at 8:54 pm
QFT
Although much could be said about the incorrect assuptions in some of the above comments, I’ll just address the matter of the poor, poor Congressmen who are forced to maintain two households while being wined and dined by lobbyists. It’s possible to live cheaply in DC. I know because I did it on a fraction of what these people make.
On $50K/year, a person could add a couple comforts like air conditioning and some nice suits to ensure one looks good on the Senate floor. Perhaps even a modest car, for those rare times one needs to get somewhere the Metro doesn’t go. $170K is excessive. A federal minimum wage that would place a person working 40 hours/week below the poverty line is excessively low.
By Dixie on Jul 31, 2006 at 10:03 am
Adam said:
————
Here’s what I was trying to say: “The issue is more complicated than a couple of columns of numbers indicate, therefore we should look at more than just those numbers and then act appropriately.”
————
You’re exactly right. Almost every situation is more complicated than one is led to believe by studying two columns of numbers. But we have to start somewhere, and that’s where I chose to start.
Now, let’s talk in an absolute sense. An employee who works full time over the course of the year at the federal minimum wage makes less than $11,000 per year. Is that enough money to live on? Maybe. Like you said, it depends on where you live, and how you define “to live”.
I, like you, am a big fan of federalism. I prefer to let each state govern itself as completely as possible, and I prefer to use federal involvement as a last resort. Now, while some states and localities respond to an abysmally low federal minimum wage appropriately, by increasing their own minimum wages to ensure workers are earning livable incomes, other states and localities don’t.
Look at some of the states on the Wikipedia page to which you linked in one of your earlier comments. Do you think $5.15 is a livable wage for all localities within the state of Georgia? Or do you think Atlanta, like Chicago, may be worthy of having an increased minimum wage, given that the cost of living is so much greater in Atlanta proper than it is in rural Georgia? What about Texas? Should Houston or Dallas be affording its minimum wage workers a higher quality of life than the current federal minimum wage dictates?
Obviously some localities respond to the challenge, and others don’t. The natural response is, “Let the cities decide for themselves. If the citizens are pissed off enough that the minimum wage is unlivable, they will demand change, and their votes will be their power.” That’s a great response in principle, but the situation in quite different in practice. Minimum wage workers generally have very little available time and effort to become critically involved in the local political machine. Advocacy groups exist, but their effectiveness is empirically limited. The best chance many minimum wage workers have is at the federal level, where their plight tends to be the most visible. It’s not a perfect system, but these people need advocates somewhere, and the federal government provides a baseline level of protection for minimum wage workers.
Adam also said:
————
Finally, raising minimum wage isn’t a trivial thing. There are many companies that would suffer if the minimum wage is raised substantially. One response to a raised minimum wage is to lay people off. So you have to ask, which is better? Is it better to have a somewhat-too-low minimum wage or to be out of a job altogether?
————
This is a truly sticky point. You’re right, labor is in many ways like most other goods and services in an economy. If its price goes up, its demand goes down, and a lower demand for labor means fewer available jobs in an economy. Bad news, right? This is where views differ significantly, and everyone has to reach their own comfort level.
When I approach this issue, I don’t think about unemployment numbers. I try to come up with the smallest wage I think a single adult could earn and live a dignified life. Yes, the word “dignified” here is the bugaboo. And some single adults are raising a child (or children) in this country, and it’s important that we give the child a chance at future economic viability by not throwing his or her working parent(s) into acute poverty via an unlivable minimum wage.
Is the current federal minimum wage enough for a single adult to live a dignified life in this country? Well, if this worker works 40 hours per week and 52 weeks per year, s/he will earn $10,712 annually. According to this website, the total federal income tax bill for this worker is $1,229.30, which leaves the worker with $9,482.70 in a given year. I’ll leave out state and local income taxes. This annual income translates to $790.23 per month.
Is that enough money to pay for rent, food, clothing, and transportation? We’ll not even talk about entertainment here. Is this enough money to afford all of these things for one adult and one child? What about health care costs, being that many minimum wage jobs are offering paltry or nonexistent health care overage?
Is less than $800 per a month a livable wage for a working American? I don’t think it is.
By jjk on Jul 31, 2006 at 11:16 am
It’s important to note that at 40 hours/week, a person working minimum wage will be below the federal poverty line by about $2K.
By Dixie on Aug 1, 2006 at 9:31 am
Adam, I believe the idea that local governments should define local minimum wages while the federal government should define congressional salaries is inconsistent. If the problem congressmen face is maintaining two residences (and all that that implies), according to your logic, the federal government should give congressmen a stipend for maintaining a residence in the DC area, and state governments should pay their congressmen whatever is an appropriate salary considering the cost of living in that particular state. Actually, I think this is a very nice idea.
Dixie, why should a full time minimum wage job guarantee being above the poverty line? I don’t see the connection. Is it that, in light of welfare, you may as well do nothing than work a minimum wage job? (Being wholly ignorant of the relevant laws, perhaps I should abstain from the debate….)
By mda on Aug 1, 2006 at 11:15 am
It just seems odd to me that when you put the two laws next to each other, it appears the government is saying it’s okay for an employer to pay a person at a rate that places them in poverty. I pointed it out because one could make the argument that the poverty line defines the level below which a “dignified life” (as brought up by Jeff) is not possible.
Perhaps there is no connection other than the moral dilemma, which is arguably not the government’s problem. Wouldn’t it be in everyone’s best interest, though, for the government to require businesses to pay their employees enough that they’re not eligible for welfare?
By Dixie on Aug 1, 2006 at 3:24 pm
I think the minimum wage debate ultimately comes down to a value judgment. Either you feel that we as a society have an obligation to help people succeed or you don’t. It’s the same as the “we’re in this together†vs. “you’re on your own†debate that going on in national politics in general. If you believe that “we are in this togetherâ€, I don’t see how you could think the minimum wage doesn’t need to be raised.
A couple of points that haven’t been mentioned (at least explicitly):
1. The labor market isn’t equal. The same high-school students, college-students, and post-retirees mentioned above distort the market. Because they have supplemental income or very low expenses, they can live with dignity at much lower wages. This hurts the ability of the others workers in the market to demand better pay.
2. Increasing the minimum wage doesn’t necessarily lead to layoffs. The vast majority of minimum wage earners are in service industries where layoffs are impossible. McDonald’s has to have someone serve their hamburgers and clean their floors. What usually happens instead of layoffs is inflation. This eats into the affect of minimum wage increase slightly, but it is blunted by the fact that wages only make up part of the cost of goods and that some of the cost is passed on to those in the economy that earn higher than minimum wage.
Also, some interesting facts about minimum wage from the Bureau of Labor statistics can be found here:
http://www.bls.gov/cps/minwage2002.htm
By Bobby on Aug 2, 2006 at 3:06 pm