Mayor Gray, Veto the D.C. Living Wage Bill!

July 22, 2013July 22, 2013Danny Vinik 1 Comment

It’s been almost two weeks since the D.C. council passed it’s living wage bill and Mayor Vincent Gray will have to decide soon whether to veto the measure. The law would require large retailers – defined as having operating revenues of $1 billion or more and store size of at least 75,000 square feet – to pay their employees a minimum of $12.50 an hour. The current D.C. minimum wage is $8.25/hour. The law is aimed directly at Wal-Mart, which had been planning on opening six stores in the D.C. region, but has since threatened to scrap most of those plans if Gray signs the bill.

Wal-Mart may cancel its D.C. stores.

He should veto it.

The new stores will bring in 1,800 jobs to the region which still faces high unemployment. While D.C. proper’s unemployment rate is low (PDF), the entire region’s is still at 8.5% (PDF). Those jobs would be very helpful for those unemployed workers. And you should take Wal-Mart’s opposition to the bill seriously. They aren’t bluffing. If Gray signs the bill and Wal-Mart still opens the stores, it will be a sign to every other city in the country to follow a similar tactic. Wal-Mart simply cannot afford to be bluffing here.

So that leaves Gray with two options.

1. Veto the bill and Wal-Mart will open its stores.

2. Sign the bill and Wal-Mart will walk away.

On CNN this morning, D.C. council member Vincent Orange justified the law by saying that Wal-Mart’s low wages force the government to pay more in benefits and thus cost taxpayer’s money. But in Orange’s alternate scenario where Wal-Mart doesn’t open the stores in D.C., those 1,800 workers are unemployed and are entirely dependent on the government for food stamps, unemployment benefits, etc. That costs taxpayers more than if Wal-Mart opened its stores.

Now, if the labor market were at full employment, things would be different. Those workers could find jobs elsewhere, but they may be at the minimum wage ($8.25/hour) as well. The government would have to pick up the tab anyways. And if those jobs weren’t at the minimum wage? Well, then Wal-Mart couldn’t hire those workers at $8.25/hour even if there was no law against it. Any worker making more than the minimum wage isn’t going to switch to a minimum wage job at Wal-Mart. The company would soon find itself facing labor shortage when it opened its new stores and would have to offer higher wages anyways.

With unemployment high, the living wage bill eliminates 1,800 potential jobs and forces the taxpayers to pay more.

With unemployment low, the living wage bill causes those 1,800 workers to take jobs at a different firm at either the minimum wage (leaving the government with the same financial responsibilities) or at a higher wage (which would’ve forced Wal-Mart to raise wages anyways).

The choice is clear: Mayor Gray should veto the bill.

Flightcar: Rent Out Your Car While It Sits at the Airport

July 19, 2013July 19, 2013Danny Vinik Leave a comment

A startup out of San Fransisco is looking to revolutionize traveling to and from the airport. The service is actually pretty intuitive: instead of just leaving your car parked at the airport, rent it out to fellow travellers. It’s pretty simple. You list your car online and drop it off at the Flightcar station at the airport. Renters see your car listed on the Flightcar website and can book it for whatever days they need (that you list as available). The startup checks the renter’s driving history, cleans the car and insures it up to $1 million in damages. The company even cleans it afterwards and pays for parking. Of course, the service takes a chunk of money from each rental, but a traveller can still make $5-$20 per day from renting their car instead of paying costly parking rates. The rental prices are cheaper than most rental car agencies so the renter saves money as well.

Unfortunately, it’s running into some legal hurdles.

Other rental car companies are furious that Flightcar operates as a rental car company without following any of the regulations and San Francisco has taken it upon itself to go after the startup:

The city has filed a lawsuit against FlightCar, hoping to shut it down until it complies with the regulations, including conducting pick-ups and drop-offs at a special area, paying 10 percent of gross profits to the airport and paying a $20 per rental transaction.

This is utter crap. Flightcar is very much like a rental car company except for two major differences: it pays for parking and doesn’t use airport land.

Rental car companies must operate in specific locations to avoid confusion and prevent traffic jams at airports. These firms have dozens of cars and must keep them near the gate so that travellers can rent a vehicle quickly without waiting. This requires that all of those cars be nearby and readily available. In exchange for giving them space to have those cars close by, the airport demands 10% of the gross profits and a $20/rental transaction fee. That’s the price of doing business.

But Flightcar doesn’t need to enter into that transaction. Instead of having all of its cars readily available in one location, it pays for airport parking, communicates with its customers in advance and meets them at the gate with their car when they arrive. No traffic jams. No need for an agreement between the airport and the company.

The firm has already taken care of the possible liability issues by insuring cars for up to $1,000,000 in damages. It checks renters’ driving history before they are given the car and makes sure the vehicle is clean. The company will undoubtedly run into obstacles as it grows in size. Bringing cars from the parking lot to the curb is labor-intensive, especially compared to a rental car company which needs just a couple of people to check travellers in and give them the keys to their car. And Flightcar cannot right now rent cars to people right when they arrive. It must be done in advance online, limiting the firm’s customer base.

This is a perfect example of the “sharing economy.” Travellers save money on parking and a make a bit renting out their cars. Renters save money too. The company takes a cut from each transaction to make the business profitable. Cars are used more efficiently as they don’t sit around in parking spots for the duration of the traveller’s trip. That opens up more parking for other customers. Everyone wins – except the entrenched interests of the rental car companies. They lose and they aren’t going down without a fight.

So, while Flightcar will have to overcome a number of structural issues as it continues to grow, there’s no reason for San Francisco to step in and try to shut down the company. It’s not doing anything illegal. Like the lawsuit against Airbnb, the case against Flightcar is yet another example of a city sticking up for its business interests and not for its people.

Americans are Not Engaged At Work. Is that a Problem?

July 18, 2013Danny Vinik Leave a comment

A new poll from Gallup out today looks at whether Americans consider themselves engaged at work and breaks it down by education level. Here are the results:I’m not actually that surprised by this data. It means an entire 20% of our workforce doesn’t care whatsoever about their jobs – I almost find that lower than expected. Lots of people perform jobs that they don’t particularly care about and do them just to make a living.

But is the fact that nearly a sixth of college educated workers and 14% of workers with a postgraduate degree are actively disengaged at their job a problem? Actually, contrary to popular belief, it may not be.

A study from Leadership IQ a few months ago found that in 42% of companies, the lowest performing workers were the most engaged employees. The reason for this is unclear, but it’s important to remember when looking at the Gallup poll above. Just because a fifth of the workforce is actively disengage from their work, it doesn’t mean they’re subpar or poor performing workers. In fact, some of the best worker’s in the country are actively disengaged and some of the worst workers are engaged.

Does that mean that firms should care less about how much their employees care about their company? No. It just means that level of engagement is not a good way to evaluate worker performance. A firm would certainly rather hire a high-performing engaged worker than a high-performing disengaged one. Even if the employees’ performance is identical, an engaged worker will likely be happier in the office and more likely to raise the performance of their colleagues. But don’t necessarily assume a disengaged worker is a poor performer. The evidence is still unclear.