Living Wages: Earned and Due

Arguments against raising the minimum wage, based purely on economic factors, ignore the reality that economies cannot exist in the absence of humanity. And humanity cannot exist in the absence of morality. Even arguing strictly on economic factors, opponents of increasing the minimum wage tend to state as fact issues that are subject to debate and evidentiary challenge.

For example, the argument that increasing the minimum wage leads to significant loss of employment has been shown to be specious. A 2013 study authored by John Schmitt for the Center for Economic and Policy Research (Why Does the Minimum Wage Have No Discernible Effect on Employment?) summarizes a review of research data by saying:

The weight of that evidence points to little or no employment response to modest increases in the minimum wage. The report reviews evidence on eleven possible adjustments to minimum-wage increases that may help to explain why the measured employment effects are so consistently small. The strongest evidence suggests that the most important channels of adjustment are: reductions in labor turnover; improvements in organizational efficiency; reductions in wages of higher earners (“wage compression”); and small price increases. Given the relatively small cost to employers of modest increases in the minimum wage, these adjustment mechanisms appear to be more than sufficient to avoid employment losses, even for employers with a large share of low-wage workers.

Arguments suggesting that industries like fast-food cannot afford to pay higher wages because their margins are so low are subject to dispute. Aside from whether profits are sufficient to sustain higher wages in the fast food industry, though, a 2013 study by the University of Illinois and UC Berkeley Labor Center (The Public Cost of Low-Wage Jobs
in the Fast-Food Industry) reported that taxpayers pay about $243 billion each year in indirect subsidies to the fast food industry because the industry pays wages so low that taxpayers must put up $243 billion to pay for public benefits for the industry’s workers. So, in effect, taxpayers are subsidizing the fast food industry’s unwillingness to pay a living wage to its workers. But back to their profits. McDonald’s profit margin in 2012 was almost twenty percent, whereas the industry average that year was just 2.4 percent, according to Capital IQ. McDonald’s significant profits, opponents to a minimum wage increase point out, do not translate into big profits for the franchise owners. Those folks, the opponents would suggest, are barely scraping by. Frankly, I do not buy that, inasmuch as (as I understand it) getting a McDonald’s franchise is not easy and is very expensive; franchisees are not living lives of abject poverty, as I see it. Even if their profits were extremely low, their parent company’s were not; so, if McDonald’s and its shareholders would simply allows its franchisees to absorb a meager $2.25 billion of the parent’s $5.5 billion in profits, franchisees would have ample money to pay a living wage.

A separate study by the Center for Economic and Policy Research (The Minimum Wage is Too Damn Low) says:

Between the end of World War II and 1968, the minimum wage tracked average productivity growth fairly closely. Since 1968,however, productivity growth has far outpaced the minimum wage. If the minimum wage had continued to move with average productivity after 1968, it would have reached $21.72 per hour in 2012–a rate well above the average production worker wage.

If the rapidly growing wealth of the richest of the rich in this country has to be taken without their consent to achieve some degree of reason and balance, then so be it.

In examining the arguments for and against raising the minimum wage, I find myself–as usual–more apt to accept those in favor than those opposed. However, I think it’s reasonable to assume the vehement arguments on both sides of the issue contain more than a bit of overblown hyperbole. Clearly, though, reins must be placed on the accelerating growth in the enormous wealth of people who already own the vast majority of wealth in this country. I don’t pretend to know exactly what mechanism those reins should take, only that it must be done. The greed that drives the engines of wealth at the expense of the majority of other people is symptomatic of values gone badly astray. At the other end of the spectrum, though, attacking wealth and the people who accumulate it as the embodiment of evil should look at their own behavior and their own circumstances; how do they compare to people whose wealth is a fraction of their own? Are they willing to drastically reduce their own standards of living to allow others less fortunate to achieve parity with them?

As I read back over what I have written, it is evident that dispassionate discussions about the issue of raising the minimum wage will be hard to come by. Even in my attempt to be even-handed in my assessment of the issue in yesterday’s and today’s posts, I quickly see that my biases and my tendency to judge quickly rose to the surface. Cooler heads than mine must prevail in this conversation.

That having been said, I believe these words of Franklin D. Roosevelt, from his statement on the National Industrial Recovery Act, made on June 16, 1933, should always guide our philosophy on the matter of employment:

In my Inaugural I laid down the simple proposition that nobody is going to starve in this country. It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By “business” I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level–I mean the wages of decent living.

About John Swinburn

"Love not what you are but what you may become."― Miguel de Cervantes
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2 Responses to Living Wages: Earned and Due

  1. Thank you, Juan. It appears I began a thought but never finished it; thanks for pointing it out. I have corrected it!

  2. jserolf says:

    Beautiful piece, John! Edit the “I am” out in Center for Policy Research paragraph, and this is perfect. You are an essayist!!!

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