Battle Over Minimum Wages
The conservative pundits are out in full force, scolding those of us who
didn't learn our economics 101. The brashest is Washington Post columnist
James Glassman, whose favorite obsession is the minimum wage. In a recent
column, he intoned: "All else being equal, if you raise the price of
something (for instance, labor), then the demand for it (for instance, by
employers) will decline. That's not just a theory; it's a law."
Glassman's assertion of the law-like nature of labor markets may seem like
hard-nosed realism. Nonetheless, during those periods in our history when
we adhered to these laws and let corporations and markets exercise sole
control over workers' wages, the 1880s and the 1920s, our market economy
collapsed. Small business bankruptcies, economic growth, and even profits
were at their worst levels ever.
Recent proposals to increase the minimum wage by a dollar have evoked a
nearly hysterical business response. Nonetheless, there are six good reasons
why Congress should revoke Glassman's laws and vote to increase the minimum
1) History justifies a wage increase. Even after the recent boost, today's
minimum wage jobs pay 30 percent less in real, inflation-adjusted, terms
than 30 years ago. Steady increases in the minimum wage in the '50s and
'60s were accompanied by dramatic job growth and reductions in inequality.
Profits and economic growth continued to escalate even after the recent
boost in the minimum wage.
2) Corporations can afford the increase. Today's economy is 50 percent more
productive than a generation earlier. Here in Maine, State Senator Peter
Mills has frequently observed that in Skowhegan, where he represents many
small businesses, it is not primarily the Maine-owned companies on Main
Street that actually pay minimum wage, but more often franchise operations
of highly profitable multi-national companies with headquarters and highly
paid executives out-of-state. As long as demand remains strong, there is
little doubt that employers can keep adding workers even if wages rise modestly.
3) Many of the jobs at or just above the minimum wage are service sector
jobs. They cannot easily be relocated to other nations in search of cheap
labor. Several states in my region, including Vermont and Massachusetts,
have recognized that the current Federal minimum is too low. They have already
set higher state levels, and it is hard to detect any adverse consequences.
4) Workers aren't just another productive input. How they are treated has
a major impact on their productivity. In an article on a minimum wage ordinance
in Los Angeles in The Nation magazine, University of California Riverside
economist Robert Pollin reports that firms paying $7.25 an hour were competing
successfully with firms paying far less. He suggests: "The key to their
competitive success was a high morale/high productivity work environment,
which included almost no absenteeism or turnover."
5) Workers, unlike other "inputs," are also consumers. Our current
economic growth is heavily dependent on consumer debt. That cannot continue
forever. Only if we raise the bottom layers will we be able to put economic
advance on a sounder foundation.
6) Society neither can nor should allow working Americans to persist in
starvation and hunger. Public policy has driven many off welfare. This agenda
has been premised on the popular assumption that if one works hard, one
can escape poverty.
Maine is one of the few states where this assumption has received careful
scrutiny. Recent studies of poor women by Stephanie Seguino and Sandy Butler
for The Maine Center for Economic Policy indicate that many of those driven
off welfare receive below-poverty-level wages. They will continue to need
assistance, either in the form of private charity, restored welfare, or
increases in the earned income tax credit.
The last is the best public policy tool because it creates an incentive
to work and is broad-based without being unduly intrusive in citizens' lives.
Nonetheless, even this tax credit costs taxpayers and is an implicit subsidy
to businesses that choose a low pay, high turnover work strategy. The strategy,
subsidized by us all, works for business in the short run but imposes severe
costs on the rest of us.
If our social commitment to replacing welfare with work is ever to become
more than an attack on the poor, we will have to amend Glassman's dangerous
law. Modest boosts in the minimum wage, especially during a booming economy,
can leverage greater worker productivity and continuing consumer demand.
And business screams to the contrary, it is hardly micromanagement. It encourages
high road competition among business and brings out the best in democratic
entrepreneurialism. Indeed, it beats the inadequate and demeaning paternalism
to which we must inevitably resort when the worst ravages of poverty grip
John Buell lives in Southwest Harbor, Maine and writes on labor and environmental
issues. He is co-athor, with Tom DeLuca, of Sustainable Demcracy: Individuality
and the Politics of the Environment (Sage). He may be reached via email
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