Productivity Math: A $ 15 Minimum Wage Is Still Less Than $ 9 Than It Should Be


Conservatives from both political parties want citizens to believe that opposition to a minimum wage increase is simply a matter of economics of supply and demand. If government regulators increase the price of the hamburger, consumers will buy less hamburger. Raise the price (wages) of labor and businesses will hire fewer workers.

They argue that if you want to keep the economy at or near full employment, the government should leave the market alone and let it set wage levels for skilled and unskilled workers. There is, however, a big problem. Supply and demand do not function as textbooks show, and no market could endure without abundant regulation and support.

In theory, the market price of unskilled labor reflects its productivity. Given that the wages of unskilled workers in inflation-adjusted terms are lower than in the late 1960s, one might infer the counterfactual conclusion that there has been no increase in labor productivity. work for over a generation. This statistic alone should make us suspect simplistic market models. James K. Galbraith of the University of Texas contests “the proposition that, with a average salary, fewer people will necessarily be employed. This is a manual truth, often repeated and appreciated by corporate lobbies. But this is eminently dubious in the real world. The real world is marked by high unemployment in low-wage regions and fuller employment in high-wage regions. “

Why this is the case could be clearer when you consider the difference between a hamburger market and a hamburger fin market. Burgers do not alter their aspirations or actions in response to movements in their selling price. An increase in wages is a cost to business owners, but also a possible but undetermined source of future expenses for their products. In the real world, as burger wages rise, public health groups release new reports on beef’s health effects, advertisers find new ways to glorify their product, wholesale beef prices respond to an unexpected reduction in the beef cattle herd.

In such a scenario, multiple supply and demand factors act in intersecting markets. Periodic patterns and regularities emerge, but these are also vulnerable to internal tensions and surprises. Sustainable and fully predictable balances are a myth. Prices are often imposed through tacit or explicit collaborative interaction between economic oligarchs, legal requirements, fiscal policy, price leadership by big players, contracts.

In the quarter century following World War II, this combination was often contested and partially controlled by another combination, the large industrial unions. John Kenneth Galbraith’s countervailing powers helped ensure steady increases in wages and benefits equal to the productivity gains of workers. Minimum wage standards that were periodically increased and adjusted for inflation were an essential part of the system of countervailing powers.

As it stands, the weakening and weakening of unions, fiscal policy, urban and suburban planning, and minimum wage standards that are no longer adjusted for inflation have left an obscene gap between the productivity of workers and the wages and benefits of the poor and the working class. Julie hollar, editor-in-chief of Extra, quotes Dean Baker’s conclusion that “if the minimum wage had kept pace with productivity gains, as it did from 1938 to 1968, it would not be today 15 $ per hour, but $ 24. “For African Americans, the gap is even worse.

A more generous minimum wage is just one tool that allows us to work towards a more just society, but it is important. He is very popular, even receiving the support of a large minority of Republicans. With worker productivity in many sectors well above current wages, there is ample room for the injection of purchasing power.

In addition, increasing their wages helps to overcome ugly stereotypes about the poor. Higher wages also make management more concerned with the long-term development of its workers, whose self-esteem is boosted. Most importantly, a living wage gives workers more opportunities to participate in the political and economic issues of the day.

In addition to deflating the simplistic claims of its opponents, progressives may well tackle the moral flaws of market fundamentalism. Its advocates tout it as an absolute when it comes to regulations in the name of social justice, even though their businesses often quietly depend on the government.

here is one progressive entrepreneur reaction to hypocrisy: “I might be old fashioned, but I think I shouldn’t rely on government grants to stay in business. If I pay my employees to a level where they depend on food stamps for eating and Section 8 for housing, the government takes note of my below-standard wages. It is not an ethical business; it is stealing from the taxpayers ”.

After World War II, wage growth translated into consumerism, but it was a collective social choice, not simply the product of market forces. Political culture and the climate catastrophe today will demand other choices if we are to shape compelling visions of compensatory powers.

Gains in worker productivity could spark more interest in more leisure time and / or a greater voice in workplace decisions. While periodic or regional episodes of unemployment may be inevitable in dynamic market systems, perhaps it is time to talk about a new safety net, the guarantee of paid employment.

John Buell has a doctorate in political science, taught for 10 years at the College of the Atlantic, and was associate editor of The Progressive for 10 years. He lives in Southwest Harbor, Maine and writes on labor and environmental issues. His most recent book, published by Palgrave in August 2011, is “Politics, Religion, and Culture in an Anxious Age”. He can be contacted at [email protected] This piece was originally published by Informed commentary.

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