Giving Workers Their Due
Recent debate in Washington and many cities and states on proposals to raise
the minimum wage suggests an obvious question. Why, in the midst of an unprecedented
boom, do we need an increase? Two major trends within our political economy
bring this issue to the fore. The boom itself is unprecedented not only
in length but also in its parsimony toward the typical worker. Even as late
as 1997, five years into this expansion, median wages were 33 cents an hour
less than in 1989. Only in the last 18 months have working-class wages started
even a modest move upward. Here in my home state of Maine, with nearly 30%
of workers at or below poverty-level wages, slow wage growth in the midst
of an economic expansion presents a severe challenge. That challenge has
been exacerbated by a second trend, the push to get welfare recipients off
assistance and into paying work.
Since most of the poor, contrary to the popular stereotype, work, the elimination
or reduction of their benefits makes it imperative that jobs pay a living
wage. The recent minimum wage debates are symbolic of a hidden crisis. The
job market that now must increasingly sustain our citizens leaves a startling
number in poverty and government is ever less willing to pick up the slack.
Even in an economic expansion, our private welfare system, including especially
the church-centered food pantries, are stretched to the breaking point.
Would a higher minimum wage improve their plight? Some large considerations
ought to frame this debate. The small business community has long maintained
that increasing the cost of labor always reduces the demand for it. Maine's
independent governor, Angus King, recently speculated that a hypothetical
firm hiring 20 workers might have to lay off three if wage standards rose.
He implies that this is simple supply and demand and that interfering with
the magic of the market is always counterproductive.
These conservatives, especially small business leaders, should devote as
much time to economic history as to the abstractions of market theory. University
of Massachusetts economist Robert Pollin points out that the era of small
government (1875-1941) when unions were repressed and wage and hour legislation
generally voided by the courts, saw higher levels not only of unemployment
but of business failure than the classic era of big government.
There is good reason to suspect, contrary to conventional business wisdom,
that trickle-up economics works better than trickle-down. Keeping wage growth
strong, through both unions and rising minimum wage standards, is more than
simply a moral imperative. Conservatives consistently forget that wages
are not only a cost to business, they are also about two thirds of all the
dollars spent on consumer products.
The current federal minimum wage is still about a third less in real terms
than two decades ago and productivity gains have been substantial in these
years. The argument that employers can't afford this increase seems tenuous
at best. Nor is this point simply speculative. A 1998 survey of small business
by Bard College economists found that fewer than 3% of small businesses
would reduce employment if the minimum wage were pushed even to $6 an hour.
It is more likely that fewer than one in 20 workers of the governor's hypothetical
workers would be priced out of his or her job by a modest boost in the wage
standard. Furthermore, increasing consumer demand would likely create openings
elsewhere for that worker, especially if adequate worker training and placement
options are available.
Do higher minimum wages enacted at the state level send a signal that such
"progressive states" are tough places to do business? Ideally,
minimum wage standards should be adopted at the federal or even international
level. But there is good reason to suspect that in many instances improved
state and local standards would be sustainable. Vermont and Massachusetts
have higher minimum wage standards than does Maine, but there is no evidence
of businesses moving across the border to exploit Maine's cheap labor.
The real issue facing many states is how they want to compete in the national
and global economy. Is the primary competitive strategy going to be reliance
on cheap labor? Conservatives often argue that you get what you pay for.
That logic applies in spades to labor. Numerous historical and cross cultural
studies of workplaces suggest that when workers are paid badly, both absenteeism,
lethargy, and even sabotage increase. Where workers are paid fairly and
offered job ladders that encourage increasing levels of responsibility,
performance improves dramatically.
Low minimum wage standards in effect rely on social subsidies for low road
economic development. Workers' families cannot live on the current minimum
wage. Either public welfare or private charity must pick up the difference.
In the process human resources are badly squandered. An adequate minimum
wage will not by itself solve all these problems. Nonetheless, a higher
"price" for labor, especially a standard indexed to changes in
the cost of living, would provide a constant and predictable signal to business
to re-evaluate labor practices.
In addition, since state governments and private charities inevitably end
up subsidizing the labor market, subsidies and contracts should be targeted
to businesses that adopt progressive labor policies. Such state dollars
will go further in terms of new jobs created for the state. And state universities
can play a major role in examining the ways humane workplace organization
contributes to long term productivity. Since an adequate minimum wage is
both a matter of immediate justice and a catalyst of other humane changes,
it deserves its growing role in our politics.
John Buell lives in Southwest Harbor, Maine, and writes on labor and
environmental issues. He is co-author, with Tom DeLuca, of Sustainable
Democracy: Individuality and the Politics of the Environment (Sage).
He invites comments via e mail at: email@example.com
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