The American Economy

Snapshot: the Low Wage Problem

In Hot Springs, city jobs start at $12.43 an hour

This article quotes heavily from The Sentinel-Record, our town’s newspaper.

Hot Springs is the boyhood home of President Clinton, a city of roughly 39,000 located in south-central Arkansas, nestled in the scenic Ouachita (“WASH-i-taw”) mountains.

Ouachita means “big hunting grounds.” The pre-European natives enjoyed soaking in the hot springs and drinking some of the best water in the world.

Without the proximity of Hot Springs National Park, this city would rely on local and regional tourists, just like the rest of the “natural state,” but the influx of people from around the US helps shore up the local shops.

The main drag is filled with quaint 1920s and 1930s bathhouses, along with defunct monoliths the government has long since abandoned, like the massive Army Hospital that looms over the city.

Hotels over 100 years old, like The Arlington, do a steady business.

We have three coffee shops, a tiny art house cinema, two pancake restaurants, and the obligatory beef jerky pitstop.

The city is hiring for entry-level jobs, but they have trouble finding candidates because wages start at $12.43 an hour.

The City Manager told the board:

“People who are making $12.43 an hour, I have no idea how they’re surviving these times right now.”

Next, the Manager explained that raising the wage to a livable $15 an hour would cost the city “several million dollars.”

As in any organization, there is a pay scale — in this case, a 16-step one — and all City employees would need congruent pay hikes if entry-level wages go up. This creates a domino effect.

“[It’s a] ripple effect,” the City Manager noted. “[Salary] numbers get huge at 2,080 hours for 644 employees.”

The City budget is $138.4 million for 2022, which includes a 0.25% increase in entry-level pay, along with “nonuniformed” employees getting a step increase.

In 2019, the city conducted a salary survey which revealed the average city employee’s compensation was lagging behind the average hourly “market wage” for the same position.

The City Manager and the Board want to do the right thing, and obviously, they want to attract competitive talent, but if you look at the numbers you realize why there is no easy fix.

Alt Solutions Besides Paychecks

With Walmart-level wages, plus city-subsidized health insurance, working for the City of Hot Springs isn’t appealing. Promotions are slow in coming, so most new employees are looking at a decade or more earning less than $15 an hour.

What about other ways to compensate employees, such as more robust health care, more vacation days, subsidized bus fare or gas funds, or paid furloughs?

So far, they’ve tried bonus pay. Hot Springs has chosen to pay its employees with 20+ years of service an annual bonus of $2,000, which amounts to each long-term employee getting about $165 per month before taxes.

Here’s the rub: even private-sector employers are having trouble attracting and retaining a workforce when they offer $15 to $18 an hour. McDonald’s is a great example. They are offering $15 an hour in Arkansas and they throw in “sign-on” bonuses of up to $500.

“I think we do need to do something to increase that minimum wage,” the City Manager told the Board, then noted: “[Raising to livable wages] hasn’t worked for other areas that have done it.”

What about offering more vacation days, like teachers get, or paid furlough days?

The inescapable truth about essential workers, from McDonald’s to Parks and Rec, is that the work doesn’t get done if they don’t show up. Especially if there are weather events, the City needs bodies.

Maybe the City should start investing in robot workers, stat. Or perhaps they can cut services, which will be politically unpopular.

Ultimately, the City Manager says he will recommend the Board raise wages and consider what’s called a “premium holiday” which means all employees no longer pay their $20-a-month-free for their health insurance.

That $20-a-month fee was the result of changes five years ago because health insurance claims were exceeding contributions by over $2 million.

Thinking Out of the Box

The city could offer cheap housing, gym memberships to offset healthcare expenses, 4-day work weeks, or limit services to the public.

Whatever way you look at it, the public is used to a certain level of service — but we can afford to pay our public sector workers.

Currently, the city’s wellness fund (from employee monthly contributions) is healthy at nearly $1 million — for just the first half of the year.

The manager suggests using the fund to pay for free gym memberships to encourage the employees of Hot Springs to “get healthy.”

This is somewhat laughable. These people often take second jobs to support their families, and now they need to go to the gym?

In some cases, as with landscapers, they are already getting plenty of exercise!

All the Money Is Being Sucked Upward

Our economy is increasingly two-tiered. At the top end, taxes are reasonable and there is plenty of extra income to spend. At the bottom end, housing is barely affordable, and good luck making do with a paltry 40 hours of work each week.

To paraphrase a billionaire: I have plenty of money but I can only add so much to the economy as a consumer. I can only buy so many pairs of pants, so many coffeemakers, and so many couches.

Wealthy people are sitting on riches, like dragons atop piles of gold.

Meanwhile, well-intentioned bureaucrats are trying to figure out how to keep funding the city, and how to balance a budget when they can’t find workers.

We need dragon slayers. Maybe the free memberships will help us buff up enough to defeat the rapacious tax-dodgers at the top.

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Jean Campbell recently started her first Substack newsletter to laser focus on getting her book, City of Lies: A Street Hustler’s Omaha Journey published.