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The Problem of the Minimum Wage

Thursday, December 5, 2013

[Updated on 7/25/2014 - See the bottom for some more info]

Today (12/5/2013) portends protests across the country at fast food outlets.  Labor unions will be stirring things up to argue for a $15 minimum wage so that fast food workers will be able to earn a "living wage."  There are a few problems with this, but in order for us as conservatives to be heard on the matter we have to show that we are willing to come to terms with the underlying problem.

It is easy to point out that minimum wage jobs, like those fast-food outlets offer, have never been intended to be "living wage" jobs.  While my "working" life technically started as a 14 year old paperboy for the San Diego Union, my first "official" job (in the sense that I got a paycheck and a W2 at the end of the year) was cleaning the lobby of the McDonald's on Broadway and I Street in Chula Vista.  I got $3.35/hr., then the minimum wage.  This was never meant to be a wage that I could "live" on.  It was meant to be an entry level job at which I gained experience and showed I was reliable while still living at home and going to school.  And it served me well exactly in that respect.

But there is something else going on here.  Where adults are holding down these jobs, they often have more than one and often are part of a household where multiple people are contributing to the the overall cost of living.  And this was working - albeit perhaps in a difficult, "grind it out" sense.  But it isn't working out so well anymore.  Even though government statistics tell us inflation is low, ask these folks how far their minimum wage dollars go today in comparison to how far they used to go.  Utility bills are higher.  Water rates are increasing.  Food is costing more.  There is a serious disconnect between the inflation statistics reported by the government and the lives our neighbors are struggling to live.

Where labor has this wrong is in pointing to the minimum wage.  This is wrong for two reasons: the harder of these two to understand is that the problem is not wages, but the fact that those wages are paid in a currency that is worth less and less.  The easier of these two problems can be understood by asking this question: If I can magically add a zero to your bank statement, that might make you feel better today.  But if I do this in a way that will also add a zero to your grocery and utility bills, how have I helped you?  You are getting more dollars for each hour of work, but the everyday things you rely on are getting more and more expensive.  When you add this to the first problem - the value of the dollar is going down - that hike in the minimum wage has left you no better off for having it.

At this point I have to explain that I am not opposed to the minimum wage - as are many, and maybe even most, conservatives.  I believe in the inherent dignity of the human person.  And if the human person has an inherent dignity, their labor must have an inherent worth.  The minimum wage is how we as a society express our underlying conviction about the dignity of the human person.  To suggest that labor is just another commodity to be traded in the economy is to embrace what ethicists call a "utilitarian" morality.  The worth of a human being is measured by his or her utility to society.  We have seen this before: it was called eugenics.

Where the minimum wage goes wrong, as described above, is when it is used to address (or to attempt to address) income inequality.  It goes wrong for a very simple reason: It does not work.  It never has, and it never will, simply because it leaves unchanged the more fundamental problem of why our money is worth less and less.

If income inequality is the central issue for our neighbors who sympathize with the Occupy Movement, and for the labor unions organizing today's protests, it needs to be pointed out that income inequality - measured by the percentage of total income received by those in the top 1% - has been trending up from a bottom of a little less than 8% in 1973, recently peaking at a little over 18% in 2008.  (It also has to be pointed out that the trend upward in the gross public debt started right about the same time.)

The problem is not with wages, it is with the money in which those wages are paid.  The problem is allowing the banking sector to tell us what our money means.  The Treasury used to hold gold in reserves and our money was tied to it; you could exchange a dollar for a set amount of gold.  That is money that means something; it is money that represents the wealth of the nation.  In 1971 the dollar was taken off of this standard and both income inequality and the gross public debt have been rising ever since.  [UPDATE: Steve Forbes has a new book out which discusses this and many other problems which have been created since the dollar was taken off the gold standard.]

And with that debt now surpassing the ability of the Treasury to service it, the Federal Reserve had to step in to create new money in order to keep the government's borrowing costs down.  As each dollar is added to the money supply, the ones in your wallet are worth less and less.  Or to put it another way, that minimum wage - in real terms of how much it will buy you - is actually going down!  It is no wonder labor is stirring for a minimum wage increase.

But again, to increase the minimum wage in dollars that represent the wealth of bank shareholders is to ensure that we - that is all of us - will never catch up as we watch our standard of living slip away.  Our neighbors working minimum wage jobs will just be the first to feel the effects.

8 comments

  1. From John Carter
    Legal immigrants that came to this country over 100 years ago and others with limited marketable skills faced similar problems with low skills = low wages = low standard of living. Their solution - multiple families lived in small residences with no luxuries; the primary wage earners worked multiple jobs, the mothers often brought work into the home and every penny was pinched. Children born into these households either worked hard to earn an education or a trade that would enable them to lift themselves (and often other members of their family) out of poverty. Children that didn't their skills compared to their parents became the next generation of their family living in poverty. More often than not, these families did in fact improve their lot in life over 2 or more generations and attained a reasonable 'living wage' which enabled them to purchase homes, cars, and other symbols of middle class status.
    ***Today's adult minimum wage earners expect that society should provide them with middle class amenities. How many are living with a severely reduced standard of living similar to those with the same low skill sets of earlier generations? How many of these minimum wage households are without cell phones, or flat screens, or dependable vehicles? How many stress the value of education to their children so that they will live a better life?
    ***I agree that our money is worth less because of horrible government policies and waste; but the person that spends their whole life pushing a broom at Mickey D's without promotion to higher paid positions has not earned the right to have a standard of living equal to those that have invested themselves in their future.

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    1. John...You make an assertion and ask some questions, and both are very helpful. Thanks for the reply.

      ||***Today's adult minimum wage earners expect that society should provide them with middle class amenities.||

      I think we have seen enough examples of this to know that there are those out there like this. But to paint with this broad a brush ("Today's adult minimum wage earners") is certainly unfair to those who are not like this.

      ||How many are living with a severely reduced standard of living similar to those with the same low skill sets of earlier generations? How many of these minimum wage households are without cell phones, or flat screens, or dependable vehicles? How many stress the value of education to their children so that they will live a better life?||

      This is exactly the question. And if we do not know the answer, it is not because they are not out there. It is because we are more preoccupied with our talking points than with actually looking for them so that we might hear their story. And if we do that, we will hear a story of things like 5% raises against 15% increases in things like food and energy - and that is under good circumstances.

      We have a pocket of poverty here in Mira Mesa where there are kids who go to one of our elementary schools who sleep with their parents in their car (and they are not few in number). These are folks who take whatever job they can find when they can find it. They are proud people, too. They are loathe to go on public assistance. The principal of the elementary school is an absolute hero and works tirelessly, many times at her own expense, to provide help to these folks in a way that upholds their dignity. (I would have known nothing about this were it not for volunteering in the community.)

      Believe me, they are out there. And while bank shareholders guzzle at the trough of zero interest rate policies (ZIRP) and Quantitative Easing, what few dollars these folks earn buys them less and less. I cannot see how a social conservative who has taken notice of God's attention to the poor can be anything other than outraged at this theft.

      Let us not miss these people because we are so busy polishing our talking points.

      JHH

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  6. From John Carter - Having volunteered myself, I am aware that there are many in the condition that you describe. However, we can't base our opinions on just the extreme examples on either side of the situation - instead we need to look at the majority of cases. Just as I stated about abortion that the majority choose abortion as a convenient method of birth control, the majority of minimum wage earners are living as I described in my paragraph above. We can't base social policy on the positive or negative exceptions to any social problem - we need to address the majority of the occurances.

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    1. John, thank you again. This really helps because it provides context for what I am advocating for. Let's use a 99/1 ratio like the Parable of the Lost Sheep. Right now our politics is about organizing this group against that group, on the basis "of the majority of cases." That is "politics as usual."

      So if 99 are indolent, on the dole and in need of hectoring and scolding, but 1 is pounding the pavement, making an honest effort, but truly struggling, I am calling for us to make our politics primarily about what we can do to help that one, rather than making our politics primarily about hectoring the 99. I do not doubt that some - maybe even a large majority - are in need of a good scolding. I'd still rather our politics make that our secondary concern.

      As we have discussed elsewhere, I see a disconnect between how we as social conservatives see ourselves to be and how we are seen outside of our circles. We are seen as political scolds. I want to do whatever I can to remedy that.

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