Facebook recently announced plans to require its vendors to pay workers at least $15 per hour, offer at least 15 days of paid vacation and provide a $4,000 “baby bonus” to new parents if it doesn’t offer paid parental leave.
This is worth celebrating—but not for the reasons the White House did.
Facebook Chief Operating Officer Sheryl Sandberg, author of “Lean In,” recognized that Facebook will bear the costs of this policy as vendors will increase their rates. But that didn’t deter her: Sandberg said, “We think it’s the right thing to do,” and “an expense worth bearing.”
Facebook has concluded this move makes sense for its business. This is great for the employees that will receive that higher compensation.
It may also be good for Facebook if it enhances its corporate image in a way that may be more effective with targeted consumers than more traditional forms of advertising. This is supply and demand at work.
A federal mandate on employee compensation may result in subtle discrimination, such as businesses hiring fewer women of childbearing age because they are more likely to require paid leave or a “baby bonus.”
But there are lots of businesses—small and large alike—that employ workers whose efforts add less than $15 an hour to their bottom line. They can’t afford to pay employees more than they produce. Not if they want to stay in business.
That is why a federal mandate on wages and paid leave would do more harm than good.
Businesses can’t just pull the money for higher wages and benefits out from underneath their mattresses. They have to find that money somewhere—whether it’s by lowering other employees’ pay, raising prices, cutting back on investment or even laying off other workers.
And if that’s not enough to cover their bottom line, they may have to close shop altogether.
What’s more, a federal mandate on employee compensation may result in subtle discrimination, such as businesses hiring fewer women of childbearing age because they are more likely to require paid leave or a “baby bonus.”
That’s why this comment from White House press secretary Josh Earnest is so troubling: “We don’t see companies like Facebook doing this out of charity. They think it’s good for business. The president thinks it’s good for business, too.”
What business? The president has never run a business, and the federal government is certainly not a business. It doesn’t have to turn a profit, or even balance the books, to keep operating. The government certainly doesn’t understand the financial situation of every company in America—companies that must do those things in order to employ anyone.
Facebook, on the other hand, is a business, and an active market participant. It supplies a valuable product that consumers willingly pay to receive.
Facebook also has demands—in this case, higher employee compensation—and it is willing to pay the market price for those demands. Yes, Facebook has significant size and clout to obtain what it demands at arguably lower prices, but its contractors can take their business elsewhere if they cannot afford them.
And that is the key difference: Employers can choose whether or not to do business with Facebook, but they can’t choose whether or not to follow federal law.