The Minimum Wage: $15 or $10

I'm really not one for conspiracy theories, but I'm starting to wonder if there isn't a grand design at work behind the current rash of labor demonstrations by fast food workers.

For  most of this year, I have been reading news stories about the push to increase fast food wages up to $15 an hour.  There have been several multi-city event built around this theme.  They get a lot of media coverage, but no real impact that I can see so far.  The fast food industry has not been brought to its knees by the union organizers behind the demonstrations.  It is too widely dispersed, and the ownership is too fragmented for a few small demonstrations to create a big change.

And we are talking about a big change.  A $15/hour wage rate would close to double prevailing wages at most fast food outlets.  That's a pretty big jump for someone whose primary job skills are showing up on time and pushing the button with the picture of a large order of fries when the customer orders it.  So it seems like a pretty absurd demand on the face of it.

But maybe the true goal is not to increase the minimum wage to $15/hour.  After all, the White House is also pushing for an increase in the minimum wage.  The Obama administration has set a target of $10/hour.  That is a 38% increase, which seems steep to me.  But compared to $15/hour, it is not so extreme.  And the White House has been relatively quiet on this.  All the noise is being made by the organizers of the $15 campaign.

There is a concept in psychology called anchoring bias.  In a nutshell, we tend to make decisions based on the first piece of information presented.  The initial position presented sets the anchor, and then the ultimate decision is made in relation to the anchor.

You can see how this would work in regard to the minimum wage.  The position set out with a lot of fanfare is $15 an hour.  Even though it sounds outrageous, it sets the anchor.  Then alternative positions are compared, not to the current minimum wage, but to the anchoring position.  Suddenly a $10 per hour minimum wage seems much more reasonable.

Since the Obama administration has strong allies among labor unions, I can easily envision policy makers in the White House collaborating with union organizers on a plan to define the terms of the debate on the minimum wage.

Conspiracy?  Nah!  Its just politics as usual.