Even more thoughts on the minimum wage
December 30, 2005
I’m wrong again! That’s not very surprising. I’m wrong about all sorts of things, all the time. But I’m not wrong about the need to raise the minimum wage. Fellow Madisonian Jenna over at Right Off the Shore disagrees — “Badger Blues: Wrong Again,” she writes.
It has been proven, and it is just common sense as well, that raising the minimum wage can decrease unemployment, thus harming not only the economy, but unskilled workers who are attempting to be employed at wages near the minimum level.
That’s presumably a typo, and I assume that Jenna means to assert that the minimum wage will decrease employment, not unemployment. To support her claim, she cherry-picks a couple quotes about teenage employment from a brief opinion piece that appeared in a newsletter six years ago. The article itself is not bad; it points to various studies about minimum wage increases (some of which show a negative impact on employment, some of which show a positive impact, and some of which show no impact at all), and concludes that:
While economists disagree about the effects of past increases, even critics of the traditional view think we may be near a point where further increases in the minimum wage will lead to negative effects on employment.
The “further increase” under debate at that time was an increase from $5.15 to $6.15 per hour, in 1998 dollars, and even the conclusion of the anti-increase author is tentative. Since I agree that there exists some line at which an increase in the minimum wage will hurt employment, this is uncontroversial. Indeed, my earlier post was focused on ways to make sure that there is a living wage that falls beneath that line. The relevant issue is if we are at or near the line now. Since the minimum wage is now at its lowest point since the Reagan years, and rapidly closing in on the fifty-year low reached in 1955, I’m skeptical of the idea.
Jenna’s next claim is that raising the minimum wage doesn’t matter because “very few people” make the minimum wage anyways (and plus, flippin’ burgers offers career advancement opportunities in only a few months!) The actual number of people working for $5.15 per hour (or less) is 7,300,000. Another 8,200,000 would see pay raises if the minimum wage were increased to $7 per hour. That represents over 10% of the American workforce, most of them adults. One-third of them are raising children, often as single mothers. Tell them it doesn’t matter.
It does matter. It matters for the millions of Americans who are playing by the rules, who are working their asses off, who are trying to raise a family the right way, and who can’t get ahead. They sweep our floors, and cook our food, and make our clothes, and contribute just as much to society as do many people whom the market values more highly. Not everyone had the opportunity to get a good education. Fate doesn’t smile equally on everyone, and the measure of a society is how we respond to fate. Do we respond with scorn and unconcern, or with love and charity? Everyone who works for a living deserves to live in security and middle-class comfort. This is the American covenant. Jenna criticizes my call for universal health care, good public schools, affordable college, and strong labor unions with a breezy dismissal:
Wow. What a utopia. Marx would be sooooo proud of you!
I guess differentiating between Marxism and social democracy is just too tough, but maybe it’s useful to try. In a communist society, the government owns the means of production and directs the course of the economy. History has proven that this Doesn’t Work. It’s also a Bad Thing because it drastically reduces individual freedom and sovereignty. In a social democracy, on the other hand, the government sets bounds on the free market, provides economic security through progressive taxes and a strong safety net, and then lets capitalism do its thing. The two philosophies couldn’t be more different.
I wrote about this idea in more depth a few months ago, and concluded:
Once you accept the liberty paradigm, one thing becomes immediately obvious: liberalism is diametrically opposed to socialism. I know that Republican politicians continuously insist that liberalism and socialism are the same thing, but the two philosophies have absolutely nothing in common, aside from a belief that the government can be used to achieve the desired national aims. The Republican Party has done a masterful job over the last forty years of confusing all of this under the fog of “big government�, while ignoring that fact that every government employs its power to achieve what it wants to achieve. The check on that power is constitutional democracy, not the adherence to a particular governing philosophy.
Socialists believe the government should be used to distribute the nation’s wealth equally, or psuedo-equally, or in any event in accordance with the will of the government. Liberals believe not in insuring equality, but in insuring opportunity. Providing opportunity to everyone means making sure we have good schools and good libraries and good universities. It means taking care of our environment so that our prosperity is sustainable over the long term. It means a living wage, so that we can support a large middle class in the face of globalization. It means making sure we have access to quality health care, and that we have the economic security that is a prerequisite for true freedom. The enjoyment of that freedom is what we mean by civilization.
Economic security is a prerequisite for individual liberty in the modern age, and therefore liberals believe it’s the role of the government to help provide that security. Jenna disagrees:
Here is what I think would actually help the economy: (a) control frivolous medical malpractice suits (perhaps a cap, guvunuh?) so that physicians are not forced to pay huge malpractice insurance premiums and can lower costs, (b) a fair tax system, taking all the “progressiveness” out of it, so employees are actually encouraged to increase their income, (c) fewer public schools and more access to private schools, through school choice and vouchers, where schools actually perform beyond standards, (d) college opportunity for those who deserve it, so that it actually means something, and public universities are not bogged down with financial aid costs, and (e) free market ideals and a decrease of the forced use of labor unions and unionized workers, which only serves to oppress the mechanisms of said free market and raise market prices for every consumer.
Where to begin? Point (a), at the top of the list, the most important thing to help the economy, is…. *drum roll please* …. a limit on medical malpractice penalties. Yippee! From this overhyped, unimportant, and marginally bad idea, we move on into a kind of dystopian fantasy land, in which we get rid of public schools (but still levy taxes to fund private school “vouchers”, apparently), make sure that colleges aren’t “bogged down” with financial aid costs (since financial aid money goes from the government and to the college, this is an odd assertion), and see to it that labor unions are legislated out of existence (how using the coercive power of the government to ban collective bargaining is a “free market” solution is beyond me).
Most bizarre is the idea that I’m somehow discouraged from increasing my salary because I pay a supposedly punitive 28% tax on a marginal dollar of income. Would a revenue-neutral flat tax make me more excited about my work? It actually wouldn’t make the slightest difference, but under a flat tax I’d probably lose my mortgage deduction and education credits and lots of other tax supports for the middle class, and I’d end up paying a higher effective tax rate than I do now. But if I was as rich as Steve Forbes, I’d make out like a robber baron. The idea that a revenue-neutral flat tax will be good for the non-rich is one of the six impossible things you need to believe before breakfast to be a Republican, but that’s a debate for another time.
The Red Queen is probably a Republican.
What ties this dystopia together is a philosophy in which people are consumers, but not citizens. It’s Ayn Rand’s dream, with a few favored policies of corporate Republicanism (malpractice limits, union busting) smuggled in to make the whole thing an ungainly amalgam of badness. People are economic agents, but not members of society. In the comments, “Casper” gets to the heart of the matter:
Granted, it may not be the most ideal situation to earn minimum wage and have to have to feed four mouths, but that there is what encourages the wage earner to better his or her self. If governement insures you’ll always get a raise, then what’s the point in getting an education, additional training or striving for that management position?
Yep, it’s good old-fashioned Social Darwinism, resurrected from its shallow and unquiet grave. Sure, it sucks for those hungry kids, but they’ll soon die off. The important thing is that Mom and Dad be “encouraged” to “strive” for a better job.
That’s not the America I want to live in, and I think we can do better than that.
December 30th, 2005 at 9:55 pm
Excellent; I can just picture the Queen of Hearts yelling, “Off with her head! And capital gains tax cuts are good for the poor! And cutting taxes increases government revenue!”
December 30th, 2005 at 10:16 pm
I think the America you’re looking for is a little further north. It’s called Canada.
December 30th, 2005 at 10:28 pm
Whoa, whoa, whoa. What Marx have you been reading? First, if you’re anti-socialism, you’re anti-democracy. Socialism is simply extending liberal democracy to the economic field. The so called communism of the USSR was state capitalism, nothing more nothing less. It was one big Walmartopia.
If you have read a Marx, it would be difficult to situate him anywhere else than the socialist-libertarian camp. Socialism, from Marx’s perspective, could only emerge from a society with a tradition of “social democracy�. It is quite simply an extension of that tradition to the economic realm.
I would very much be interested in why such a development would be opposed to liberalism. Only in the sense that “liberalism� and conservatism� are two wings of the same ecopolitical system. For example, you may want to have a minimum wage, but not to extend “worker’s democracy� into the economic sphere. The Right Wing Idiot is of course right, universal health care, good public schools, affordable college, and strong labor unions have always been the bedrock of a strong socialist platform. This certainly is not something to shy away from but hold up as a badge of courage.
I have found your posts on the minimum wage interesting, but I am afraid it won’t amount to much without balancing the other side. The only way to have a livable wage is to institute a maximum wage on the other end. This is what seperates the liberal from the socialism. The liberal likes changing things on the periphery whereas the socialist want to change the system. This is why I’ll support a living wage and sick time eventhough in the end they are merely band aids. But, don’t fool yourself into thinking what seperates us is “liberty�. Liberty for what, for whom, that is the question.
I would suggest in the future not to let right wing wackos define “socialism� or other concepts and instead read the wonderful homegrown examples such as the early Milwaukee socialists, Mother Jones, and Eugene Debs. As Karl Marx’s said from time to time the American get so upset when you talk about socialism for the working class, yet tend to not have any problem with it when the rich are involved.
December 30th, 2005 at 10:29 pm
[...] Â Badger Blues liberalism is diametrically opposed to socialism. [...]
December 30th, 2005 at 11:33 pm
Nate: some thought-provoking comments. I’ll try to do them justice. “Socialism” is one of the words that, like “fascism” or “democracy” or “politically correct”, has so many meanings that it’s tough to come up with a precise definition that’s univeraslly acknowledged. That problem is amplified by the fact that I am not up to date on my socialist jargon: anarcho-socialists, or Trotskyites, or Marxists, or communists, etc.
To the extent that socialism is defined as not part of our “ecopolitical system”, I’m not a socialist. I happen to like our ecopolitical system. It is more in need of tweaks on the periphery than wholesale change. To the extent that socialism is an extension of the New Deal, or the belief in a social safety net, I am a socialist.
I don’t believe in a maximum wage. I do believe in progressive taxation. I don’t believe in a statist economy. I do believe that some industries should be public: utilities, electric co-ops, etc. But liberty requires the ability to exercise economic freedom, too. It means the freedom to start a business. It means the freedom to turn a new idea into a new invention. That freedom isn’t absolute, and should be regulated in order to prevent one person’s economic freedom from impoverishing and essentially enslaving someone else. “The freedom to swing your fist ends where my nose begins”, or something.
I’m not sure how you would define the difference between socialism and social democracy, but it seems to me that either the difference is simply one of degree (in which case it’s not a useful distinction), or the difference is one of a state-directed economy vs. a capitalist one. In that case, I am firmly on the side of the capitalists.
December 30th, 2005 at 11:43 pm
Sarah: that’s not a bad idea for a end-of-the-year list. What are the six impossible things Republicans believe? Voodoo economics is certainly at the top of the list.
December 30th, 2005 at 11:46 pm
Whoa! This “Right Off The Shore” is from the People’s Republic of Madison? The most wingnutty wingnuts in Madtown? What’s the world coming to? Nate, if you’re from Madison, well done — represent!
December 31st, 2005 at 7:59 am
“I guess differentiating between Marxism and social democracy is just too tough…The two philosophies couldn’t be more different.�
Do you know how many planks Marx’ “Communist Manifesto� shares with not only your post but “social democrats� in general? They are actually not that different, but quite similar, other than who owns the means of production. See how many of these you agree with, and then we will see how different the two political philosophies are:
1. Abolition of property in land and application of all rents of land to
public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all right of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralisation of credit in the hands of the State, by means of a
national bank with State capital and an exclusive monopoly.
6. Centralisation of the means of communication and transport in the
hands of the State.
7. Extension of factories and instruments of production owned by the
State; the bringing into cultivation of waste-lands, and the
improvement of the soil generally in accordance with a common
plan.
8. Equal liability of all to labour. Establishment of industrial armies,
especially for agriculture.
9. Combination of agriculture with manufacturing industries; gradual
abolition of the distinction between town and country, by a more
equable distribution of the population over the country.
10. Free education for all children in public schools. Abolition of
children’s factory labour in its present form. Combination of
education with industrial production.
Even though you might not want to call yourself a Marxist, because of his failings worldwide, you/social democrats just might be.
“From this overhyped, unimportant, and marginally bad idea…�
Is it, really? If physicians weren’t paying huge amounts of medical malpractice insurance premiums, wouldn’t health care costs be lower?
“we get rid of public schools…�
I never called for the elimination of public schools. As a student who has attended both public and private schools, I can see how superior private schools are. I would like others to end their blind reliance on the public school system which is increasingly overcrowded and failing to do what most parents expect it to do, and have access to the school of their choice. I would simply like to see a decreased use of public schools, but not the elimination.
“The idea that a revenue-neutral flat tax will be good for the non-rich is one of the six impossible things you need to believe before breakfast to be a Republican, but that’s a debate for another time.�
First, let me clear the air. I’m not a Republican. I feel very strongly that I am a conservative, not a Republican. Today, the two are quite distinctive.
Second, how would a revenue-neutral flat tax be bad for anyone? Or are you one of those people who like paying taxes? You claim you would lose “tax supports,� but if you weren’t paying grossly huge amounts of your income in taxes, you would not even need those supports.
Finally, from the tone of your post, you seem to have taken it personally that I said you were wrong. Don’t. One thing you should know by now is that politics is anything but personal.
And thanks for pointing out my typo
December 31st, 2005 at 10:24 am
[...] Badger Blues Ben Writes: “Socialism� is one of the words that, like “fascism� or “democracy� or “politically correct�, has so many meanings that it’s tough to come up with a precise definition that’s universally acknowledged. [...]
December 31st, 2005 at 10:25 am
Wow, an interesting post with comments on a Madison blog. Way to go! Anyway, Princeton economists Kreuger and Card did the definitive study on the negative effects of raising the minimum wage and, they found that there are/were none. The peer reviewed literature totally debunks the standard anti-minimum wage raising talking points. That the people who are opposed to raising the minimum wage are so quick to go from “raising the minimum wage increases unemployment” to “but, but, no one (important) makes the minimum wage anyway” makes their arguments seem all the more disingenuous. Lastly, Mr Capitalism himself, Adam Smith was strongly in support of a progressive income tax, because he recognized that the rich receive the most benefits from the government and a stable society.
December 31st, 2005 at 10:43 am
Jenna: your ten points of Marxism continue to suggest to me that social democracy and Marxism are completely different things. I agree with 1.5 out of the 10 — (2) progressive taxation and (10) free public schools. I don’t know what “combination of education with industrial production” means, hence the half-point. And depending on what it really means, I agree with the part of (7) that might be referring to environmental protection. The rest of the points, I completely reject.
I’ll leave the discussion of medical malpractice to another post, and just point out that its actual effect on the health care industry is very small part of the health care crisis in this country.
December 31st, 2005 at 10:54 am
To follow up on Shane’s post, here are the references to Messrs. Krueger and Card:
Card, David. 1992. “Using regional variation in wages to measure the effects of the federal minimum wage.” Industrial and Labor Relations Review. Vol. 46, No. 1, pp. 22-37.
Card, David. 1992. “Do minimum wages reduce employment? A case study of California, 1987-1989.” Industrial and Labor Relations Review. Vol. 46, No. 1, pp. 38-54.
Card, David and Alan Krueger. 1994. “Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania.” American Economics Review. Vol. 84, No. 4, pp. 487-96.
Card, David and Alan Krueger. 1995. Myth and measurement: The new economics of the minimum wage. Princeton, N.J.: Princeton University Press.
Card, David and Alan Krueger. 1998. “A re-analysis of the effect of the New Jersey minimum wage increase on the fast-food Industry with representative payroll data.” Cambridge, Mass.: NBER.
December 31st, 2005 at 11:22 am
[...] Socialism and Liberalism 1 Filed under: Proletarian News — Administrator @ 11:23 am Badger Blues liberalism is diametrically opposed to socialism. [...]
December 31st, 2005 at 11:24 am
[...] Socialism and Liberalism 2 Filed under: Proletarian News — Administrator @ 11:26 am Badger Blues Ben Writes: “Socialismâ€? is one of the words that, like “fascismâ€? or “democracyâ€? or “politically correctâ€?, has so many meanings that it’s tough to come up with a precise definition that’s universally acknowledged. [...]
January 3rd, 2006 at 8:17 pm
Readers here may enjoy my critique of what Jenna at Right Off Shore thinks would help the economy.