The minimum wage debate is a strong example of the left’s vigour and academic prowess. There has been an extensive and effective appeal to the various economic data that blast gaping holes in the argument that a higher minimum wage will somehow increase unemployment or drive prices through the roof.
Economists leaning left have aptly noted that productivity has increased dramatically over the past 30 years, with no similar increase in wages (Schmitt). Others (Card and Krueger, but more recently Dube et al.) have noted that apocalyptic predictions of mass unemployment have proved wrong in the past. Economists of the middle-out persuasion have shown how a higher minimum wage would stimulate demand.
But, in a sense, we don’t really have to prove this. When debating the Kyoto protocol — the international treaty obligating countries to reduce emissions of greenhouse gases (GHG) — we don’t ask whether unemployment will drop by 1% or 2%, but whether it’s morally appropriate for two dozen or so developed nations to benefit from GHGs that will primarily affect the world’s poorest people. When Ford executives released the Pinto, it would have been preferable if they'd asked not whether the car would be profitable, but whether it was moral to knowingly sell a deadly product.
Similarly, even if were some businesses to fail, unemployment rose and prices increased, a higher minimum wage could still be an acceptable policy. We must ask ourselves whether we want to live in a society when the poorest working people cannot afford to purchase basic necessities. Or, put differently, should a business that cannot afford to pay its workers enough to survive be allowed to exist, grow, and prosper?
This question is not entirely absurd, and we have had to ask and answer similar questions before. We once had to ask ourselves whether a company that could only remain profitable by releasing toxic chemicals into the air should be allowed to exist. We answered no. We once had to ask ourselves whether a company that could only remain profitable by employing child labour should be allowed to exist. We answered no. We once had to ask ourselves whether a company that could only remain profitable by paying women too little, pushing workers too hard, or maintaining a dangerous workforce should be allowed to exist. We answered no.
It would seem rather boorish to suggest today that if McDonald’s were to stop hiring 10 year olds to cook burgers, its prices would have to rise 68 cents and therefore we shouldn’t ban child labor. And yet, because of a similar price rise, workers at McDonald’s must work two jobs or go without health insurance. That means that what many Americans take for granted — time to read, enjoy coffee in the morning, and play with their children — are all luxuries for the employees from whom we purchase burgers. Is that the type of society we want to live in? One in which workers at WalMart must also accept food stamps to keep your “everyday low prices” around?
Walmart and McDonald's brutally crush any attempt for workers to get a decent value for their time and labor. This same brutality occurred frequently during the industrial revolution, a time of environmental degradation, worker abuse, and widespread inequality.
This is the left’s strongest argument. Markets are not divine incarnations of revealed wisdom; we must modify them to suit our demands as a society. When markets produce negative consequences, we don’t accept them and move on, we demand public action.
So it is now.
Some on the left have suggested some sort of negative income tax as a solution (and I would heartily accept a guaranteed minimum income, it would complement a higher minimum wage.)
But this fails to get at the problem. There should be a dignity in labor. Those who work should have enough money to eat, live comfortably, and enjoy time off. I’m rather tired of wealthy writers, economists, politicians, and businessmen who believe that they should enjoy these benefits, but other members of society should not. I’ve always held the relatively simple belief that profits should always be in service to people, not the other way around.
On the Economist blog, however, Will Wilkinson writes that, “Subsidising the worker, to bring her up to a certain baseline minimum, counts as a subsidy to the employer only if we think that was the duty of business all along — to pay workers not only a wage commensurate with the market value of their labor, but also sufficient to finance a life of a certain dignity and security.” His argument against the living wage is based on two dubious propositions. The first is that businesses will pay employees commensurate with the value of their labor (belied by the empirical data); the second is that businesses have no obligations further than that. The market is once again “the institutionalization of irresponsibility.” If a corporation can make a profit, it should, human considerations be damned!
The great economist, E.F. Schumacher once noted that we should study economics “as if people mattered.” Economics can tell use how to stimulate aggregate demand, estimate inflation and predict GDP. But it can’t tell us what we as a society should value. Economics can tell you that one billionaire buying a yacht for a $10 million dollars will stimulate the economy to the same extent as ten thousand working-class families purchasing $100 worth of diapers. But they can’t tell you whether one purchase is morally superior. That is for us to decide.
Those who argue against raising the minimum wage are not seeking some moderate middle ground; they are arguing to abolish it. The value of the minimum wage has slowly eroded to the point that today it is worthless. Liberals and progressives still clinging to Victorian notions of progress are under the illusion that we have become a more compassionate, more fair society. Rather, the fact that we must still advocate for the minimum wage, progressive taxation, unions and Social Security — programs taken for granted decades ago — indicates how barbaric our society has become.
That is why raising the minimum wage is the only moral option available to us today.