Monday, September 29, 2008

Arguing With Conservatives Part II: Minimum Wage

Since it's a relatively slow news day so far I thought I'd return to another episode in arguing with conservatives. And I know what you are thinking, is it fair to beat them when they are down? After all, hasn't the recent financial crisis already shown that traditional laisez-faire economics won't work? The answer is yes and yes because politicians and the public have short-term memories. For example, remember when everyone was so upset about the media coverage of Bristol Palin? Well, now it appears that McCain campaign is praying she'll get married and that the media will cover it.

We know that the failure of unregulated finance won't mean the end of Republican calls for deregulation, so it's worth taking a look at another popular conservative argument: that minimum wage hurts the economy. In fact, conservatives often go so far as to say that minimum wage actually hurts workers. The argument is very simple, and at first blush, it can almost make sense: they argue that a lower wage means that more workers will be employed. Furthermore, conservatives argue that a free market leaves workers open to choose a different job -- and thus the minimum wage actually encourages a lower wage for workers. Even further, and contradictorily, you'll hear conservatives argue that a higher wage could prove disastrous for the economy.

The argument against a minimum wage -- and a living wage -- has several simple and obvious flaws that I'll look at in turn. First, cutting or abolishing the minimum wage flies in the face of the hard evidence that is American history. We know that there was a time when Americans did not have the protection of labor laws -- and what did we have? Answer: twelve year olds working in coal mines. Thus, while conservatives can point to a hypothetical scenario in which workers suffer, we can point to a real world scenario in which workers suffer in the absence of a minimum wage. Along these lines, we also know that the minimum wage has consistently gone up in this country and that hasn't spelled doom for anyone -- not the workers, and certainly not the people holding the ultimate wealth.

And here are the problems with arguing that a lower minimum wage means more workers employed. First, people can't survive on minimum wage as it is -- so a lower minimum wage is a moot point in terms of any benefit it brings individual workers. Second, there's no guarantee that cheaper labor translates to higher production. Simple hypothetical: if a company can only sell 100 widgets, and it takes 10 workers to produce those widgets, a reduction in the cost of labor will not mean more widgets produced. In fact, all it will means is an increase in the profit of the company owner. Furthermore, an increase in a minimum wage, unlike a decrease, has the effect of increasing demand. Thus, increasing the minimum wage would conceivably lead to greater production and thus the employment of more workers -- not the other way around.

The one concern I do have with wage arguments is the very real problem of losing American jobs overseas. I'm not against the free market -- I'm against the unregulated free market. Thus, if it's more efficient for some jobs to move overeas, then the answer isn't in the form of a $25 billion loan to the auto industry. Instead, we should take that money and put it towards education, job training, and new industries (like clean energy) that have the potential for producing jobs. Unfortunately, that's not politicaly possible -- but special interests are a whole other topic that plague both parties -- and something I'll address in a later post.

And finally, the last hypocrisy: Republicans think the only factor in the economy is giving people money to spend. They say we do that by giving huge tax cuts to the wealthy. Well, why not give that money to working people would would be far more likely to spend it? The answer: once again, the minimum wage argument may not really be about the economy at all -- it's about keeping the wealthy and their money where it is.

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