Okay, here are my notes on this. Background: Text in gray is a reader email. It’s a response to a show we did off an Orlando Sentinel article about Mike Beaver, Tomorrowland CM who lives in a motel and commutes 45-minutes each way to his job in Tomorrowland. Mike makes $13.02 per hour. Here's the original article.
Text in blue is my set of show notes to points raised in the letter. This is my opinion only, not necessarily Jim's.
Hi Len,
Just listened to some of the most recent podcasts on band camp.......we drove back and forth to NYC from Orlando and you and Jim really helped to entertain us on a rather dull drive.
One of the recent ones you and Jim were talking about the cast member who spends a lot of time getting to his job on the bus, I saw his story on the local news a few weeks ago. And I was interested in your view point about a living wage. We are originally from one of what I like to call the welfare states/city NYC where this very issue is a hot topic. I am not sure what a living wage is and what the entitlement should be.
For the record, as you’d expect, I’m generally a “what do the data say?” guy when it comes to policy and politics. But everyone’s outlook on these things has a political leaning. Mine is basically the love child of Angela Merkel and Paul Krugman.
Let’s talk about a living wage. More information is here: http://livingwage.mit.edu/pages/about. I paraphrase/copy some of that next.
The living wage is the minimum income standard that, if met, draws a very fine line between the financial independence of the working poor and the need to seek out public assistance or suffer consistent and severe housing and food insecurity.
The living wage model is an alternative measure of basic needs. It is a market-based approach that draws upon geographically specific expenditure data related to a family’s likely minimum food, childcare, health insurance, housing, transportation, and other basic necessities (e.g. clothing, personal care items, etc.) costs. The living wage draws on these cost elements and the rough effects of income and payroll taxes to determine the minimum employment earnings necessary to meet a family’s basic needs while also maintaining self-sufficiency.
The living wage model is a ‘step up’ from poverty as measured by the poverty thresholds but it is a small ‘step up’, one that accounts for only the basic needs of a family.
The living wage model does not allow for what many consider the basic necessities enjoyed by many Americans. It does not budget funds for:
Pre-prepared meals or those eaten in restaurants
Entertainment
Leisure time for unpaid vacations or holidays
A financial means for planning for the future through savings and investment or for the purchase of capital assets (e.g. provisions for retirement or home purchases).
The living hourly wage for one adult is $11.51 in Osceola and Orange counties. So Mike makes $1.51/hour more than that, around $60/week or $3,100 per year.
For two adults both working full-time, it’s $9.06/hour each.
For two adults with one full-time and one part-time it’s $12.08.
For two adults and one child it’s $13.54 per adult
For one adult and one child is $24.07.
Those numbers are interesting, because they combine with Disney’s hourly wage to tell you that Disney thinks of front-line customer service as something that a household of “one or two people with no dependents” does. Because that’s what the pay can support.
Do I think an excellent attitude and work ethic should be rewarded? Yes I do, merit increases is the way to go, but many times unions prevent that......not sure if this is the case within disney.
Merit raises and unions is an interesting idea, because when we think of unions and wages, we think primarily of collective bargaining, which is on the opposite end of ‘merit raises’.
There are lots of studies on the wage effects of unions. The results are generally predictable by political affiliation. And here I’m using the political affiliation rankings of https://mediabiasfactcheck.com. You can look up there where your favorite news outlet sits on the political spectrum.
The National Bureau of Economic Research is one of many organizations rated “least biased” by MediaBiasFactCheck. And it happens that the NBER has a number of studies on the effect of unions and wages. In one 2002 study of 17 countries including the U.S., by David Blanchflower and Alex Bryson, it was reported that unions raise wages about 12% higher than they would be otherwise. http://www.nber.org/papers/w9395
That’s in line with a 2013 report from the Bureau of Labor Statistics that looked at U.S. union and non-union hourly wages annually from 2001 to 2011. It showed that hourly wages for unionized workers were 18-24% higher than non-union jobs. https://www.bls.gov/opub/mlr/2013/04/art2full.pdf
So there’s some indication that even if unions prevent merit increases, the overall effect of unions is higher wages for workers.
I checked with the BLS to see if they could tell me what the average hourly wage is for non-union theme park workers. It turns out that they actually track this too (https://www.bls.gov/oes/current/oes393091.htm). And the average wage in 2016 for the quarter-million non-union theme park workers in the U.S. was around $10.58.
Note that that’s less than the living hourly wage in WDW. In fact, the 75th percentile wage is $11.38, still under the living hourly wage for one adult.
So while we can’t know what Disney would set wages at without a union, and we don’t know what Mike’s wages would be without a union and just based on his personal merit, there’s some evidence that Disney’s overall wages would be lower without the union.
All of that being said how much more are you willing to pay for admission and meals on property? Because the increases have to come from somewhere.
This is a great question.
Around 37,000 WDW workers are represented by the unions. http://money.cnn.com/2014/02/11/news/companies/disney-workers-union/index.html
Let’s say we wanted to get Mike to where he could get married to another CM and support a kid on a living wage. We’d need to bump up the Mike’s wage by $0.52/hour. Let’s assume that all 37,000 union workers get the same wage, they work 2080 hours per year, and they all need the $0.52 raise.
That’s an additional cost of 37,000 x 2080 x 0.52 = $40,019,200 per year
According to Trefis.com, a site that breaks down SEC reports, Disney’s domestic parks made $15.4 billion in 2016. 2/3rds of Disney’s theme parks are in Orlando, the vast majority of its hotel rooms, and all of its water parks. Let’s say 75% of its domestic theme park income - around $11.5 billion - comes from WDW. Source: https://www.trefis.com/stock/dis/model/trefis?easyAccessToken=PROVIDER_a94faf1b357166681dc8d8f6232d98165778fd8d&from=widget:forecast
$40 million is about 1/3rd of 1% of $11.5 billion, so Disney’s prices would need to go up by that amount in order to cover this wage increase.
A bottle of water would rise in price from $3.00 to $3.01. A bottle of Coke would similarly rise from $3.50 to $3.51.
An adult dinner buffet at Biergarten would rise from $40 to $40.14. A room at Pop Century during a peak weekend night currently costs $208. That would increase by $0.73.
One thing we in Orange County could do would be to provide lower cost housing, subsidized so that this CM could get out of that hotel room. As for his one hour bus ride, that was my commute in NYC everyday.......I cannot get to excited about that.
This is an interesting scenario. If a company doesn’t provide a living wage to its full-time workers, taxpayers subsidies can help. It’s similar to what we see with Walmart, where a substantial percentage of their workers
Lastly I am not sure these entry level jobs are or were meant to be careers and the wage is not meant to support someone.
Part of this seems to be a true assumption: the median tenure for all service workers in the US, according to the BLS, is around 3 years.
Also, we can look at the wages and say “Your paycheck is telling you that this is an entry-level job.” You can see by the living wage analysis that the job pays enough for one person not to regularly depend on government assistance. It doesn’t pay enough to raise a child or care for anyone else.
Plus, you know, some portion of these workers have spouses with much better-paying jobs. I know of a few CMs for whom this is literally their ‘retirement job’. They own their home and make enough money here to pay their food and utility bills each month, so they don’t have to use their savings.
On the other hand, the average job tenure for Disney is around 8 years. So clearly, lots of people are making this their job. (http://articles.orlandosentinel.com...SNEYWAGES20_1_wage-scales-unions-disney-world)
Why is the average tenure 8 years? It could be that Disney pays higher-than-average wages for the area. In Orlando, for example, restaurant workers average $12.53/hour and service workers average $11.99. (https://www.bls.gov/regions/southea...tionalemploymentandwages_orlando_20170608.pdf)
Our property taxes are pretty high in Orange County so I am not sure where the money could come from to help on the housing issue. Maybe 1/2% in sales tax could help fund this. It is an issue every large city is coping with.....affordable housing but it needs to be done in such a way that it just doesn't turn into tenements. In brooklyn there is a development called starrett city which is 40 years old and as nice as it was when it was built. The criteria for getting an apartment was that you had to have a job, there was no welfare recipients. It has really worked.
I’d ask the question this way: Disney made $2.8 billion in profit off its theme parks in 2016. Why do taxpayers have to subsidize Disney’s employees so those employees can earn a living wage? Shouldn’t that fall on Disney’s shareholders and customers first?
Even if you say "a company's only responsibility is to make money for shareholders", and that occasional tax transfers from taxpayers to private corporations are in the public interest, it's not clear that subsidizing Disney's low wages for decades on end, is a net positive for Central Florida. Why not require Disney and Disney shareholders to pay back the taxpayers from profits, when profits are made?
Put another way: lots of states have laws that limit how much any one person can get from social safety net programs over that person's life. Why don't we treat companies the same way?
