The Minimum Wage, Labor, and Politics

The minimum wage tragedy goes beyond the 15 million US workers now earning $5.15 per hour or $206 per forty-hour week before tax and other deductions.  It goes beyond the facts that $5.15 was already low when Congress set it in September, 1997, and that Congress has since kept it frozen at $ 5.15.  Meanwhile, living costs rose 26 percent since 1997 (including a medical care rise of 43 percent, a 52 percent increase in child care and nursery school costs, and a 134 percent increase in gasoline’s price).  Finally, it goes beyond the low minimum wage’s disproportionate impact on single-adult families, women, and ethnic (especially Hispanic) minorities.

The tragedy lies in this: a $5.15 minimum wage in 2006 teaches a lesson about labor and politics in America, but one that remains unlearned by those who need it most.  To see this, consider that minimum wages in Britain and France are much higher than in the US and are scheduled to increase again this Fall.  Workers in those countries relate differently to politics.  They demand that politicians, whatever their other foreign and domestic actions, attend to some minimum labor interests.  Through their unions or independently, workers there undertake job actions, demonstrate publicly, and vote effectively to punish enemies of labor interests.  The British and French minimum wages reflect their workers’ political consciousness, militancy, and mobilization.

Battles over the minimum wage have always been political.  Workers (not all but most) want higher minimum wages and employers (not all but most) don’t.  Unlike what happened in Britain (under mostly a labor party government) and France (under mostly a conservative party government), in the US across the last decade, employers won, while labor lost on the minimum wage as on most other labor issues.  That loss partly reflected a mistaken political strategy: one focused too much on producing and publicizing “proofs” that the benefits of a higher minimum wage outweighed its costs and too little on mobilizing labor and its friends to defeat its enemies.  Labor apparently could not grasp that arguments claiming to know (to have “measured”) the benefits and costs of higher or lower minimum wages are illusions no matter which side makes them.  They are self-satisfied hot air pretending to be “scientific truth.”  Nor, as we shall show, can cost-benefit analyses deliver what they claim; they never have.

No doubt, a low minimum wage imposes costs on society, including its recipients (and their families) (1) physical and mental deterioration because of inadequate nutrition, shelter, medical care, (2) low investment in education and training, (3) damages from living in unclean, unsafe, or violent neighborhoods, (4) damages from dependence on poor public transportation, public emergency room healthcare, and public welfare, unemployment, and family support services, (5) damages from interactions with police, courts, and prisons, (6) damages from poor job benefits  (pensions, medical leave allowances, medical insurance, etc.), and so on.  Raising the minimum wage would likely reduce the above listed costs plus enhance the consumption, self-esteem, and general well-being for 15 million Americans and their communities.  Not surprisingly, labor advocates identify the costs of a higher minimum wage far less comprehensively and measure them differently so that their conclusions find that the costs of a higher minimum wage are decisively outweighed by its benefits.

Business advocates basically reverse the argument.  The costs and benefits they identify and how they count them “proves” that the costs of raising the minimum wage outweigh its benefits . They argue, for example, that employers will fire workers rather than pay higher minimum wages, and that the resulting unemployment will proliferate social costs.  They also suggest that raising the minimum wage will contribute to inflation and thus to its many negative social costs.

The cost-benefit calculations of the two sides clash, but do their opposing proofs matter?  Are the resources used to make and disseminate such calculations effective in the political battle over the minimum wage?  Was that the best possible strategy for labor, or was it mistaken?  Because US labor lost that battle repeatedly for a decade, these questions deserve answers.

The first problem with the labor strategy concerns the very idea of identifying and measuring the consequences (positive and negative, “benefits” and “costs”) of raising the minimum wage.  The difficulty lies in the fact that such consequences are infinite in number, variety, and duration.  No one can know, let alone count, all of them to prove that the benefits outweigh the costs.  All any cost-benefit study ever did was select and count some of them.  And different calculators with different agendas usually identify and count costs and benefits differently.

Secondly, anything shown to be a consequence of raising the minimum wage is easily shown to be a consequence as well of other factors.  For example, when better mental health follows a rise in the minimum wage, the latter cannot be assumed to be the sole cause.  Many other factors — known and unknown, present and past — also play their roles.  It is no more feasible to identify and measure all the consequences of a changed minimum wage than it is feasible to identify and measure all the factors that combine to produce any of those consequences.  Claims to have made such comprehensive identifications and measurements do not deserve to be taken seriously no matter how confidently they are advertised as “scientific.”

And they are taken less seriously now than ever in the political battle over the minimum wage.  True, the labor and business sides each perform their (partisan) calculations of differently selected costs and benefits to reach their opposite conclusions.  Each side appeals to public opinion and to Congress which sets the minimum wage.  But what decides the success of opposing appeals is not either side’s calculations and proofs.  Those are, after all, complex and not comparable; they also vary depending on the many assumptions of each calculator.  Each side finds and exposes flaws in the other’s argument; each side repairs such flaws.  The endless changes compound the intricacies to quickly spin beyond the public’s or the politicians’ interest or attention.

The cost-benefit calculations, to be sure, acquire some limited importance — ironically — only after the battle is won by business.  Then the business side provides its calculations to its political friends gratis as a convenient cover to disguise their siding with business (minority) against labor (majority).  To avoid responsibility for favoring business, those politicians publicize the business calculations as “scientific proof” that the benefits of a frozen minimum wage exceed its costs “for everyone, for the whole economy and society.”  Those politicians then can and do insist that all they did was vote “for what is best for everyone, our democratic duty.”

What matters in US politics is which side commits the greater resources to persuade, promote, and dazzle their audiences, demonize its opponent, and/or bribe its way to success.  It’s not either side’s calculations or “proofs” but rather the preponderance of public relations that wins the political battle.  Because business committed more resources for the last ten years, it froze the minimum wage.  To avoid losing, labor would have had either to match or outspend business . . . or else mobilize its membership to substitute politically effective agitation for such spending.

Rick Wolff Rick Wolff is Professor of Economics at University of Massachusetts at Amherst. He is the author of many books and articles, including (with Stephen Resnick) Class Theory and History: Capitalism and Communism in the U.S.S.R. (Routledge, 2002) and (with Stephen Resnick) New Departures in Marxian Theory (Routledge, 2006).

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