Saturday, July 19, 2014

Right-Wing Lies vs. New Deal Truth (part 7 of 10): "Raising the minimum wage will destroy the economy!"

(The Wage and Hour Division of the U.S. Department of Labor helps enforce minimum wage law. Image courtesy of Wikipedia.)

The political right hates the minimum wage. They believe that wages should be as high or as low as "the market" demands. So, if a job pays $3 per hour, you should either accept that or look for another job. The allure of this philosophy is its simplicity--it just sounds so right, so pure. But then the complexities of life begin to materialize. For example, if there are far more workers than jobs (as there are now), then wages will be suppressed (as they are now) because employers realize that if you're not interested in working for peanuts, there are thousands of other desperate workers who will (as there are now). Further, looking for another job is not so easy when, again, there are far more workers than jobs. Suddenly, the "free market" of work & wages becomes a game tilted heavily towards the wealthy class. Throw in other problems, like job-outsourcing to third-world labor markets, and the game becomes even more rigged in favor of those with deep pockets and political connections.

The minimum wage is part of an array of policies & laws that protect us from people who would have us working in chains if they could. This might seem like a harsh statement, but it must be remembered that legalized slavery was the rule, not the exception, for most of human history. Whether it was the Romans enslaving the defeated, or the Vikings enslaving the Gaelic peoples, or Americans enslaving Africans, slavery has been with us far longer than not.

 (A diagram of a slave ship, showing its human cargo. Image courtesy of Wikipedia and the Library of Congress Prints and Photographs Division.)

But let's look at the economics. Does an increase in the minimum wage destroy jobs, and thus the economy? Well, according to a recent study, "The 13 U.S. states that increased their minimum wages on January 1 (2014) saw higher employment growth, on average, than the states where the minimum wage didn't change."

Also, there are countries where the minimum wage is higher than ours, yet the unemployment rate is the same or lower. For example, when adjusted for the cost of living, Australia's minimum wage is about $9.77. It's unemployment rate is 5.9%. Luxembourg is $10.37 and 6.1% and New Zealand is $8.17 and 6.0%. (In the U.S. it's $7.10 and 6.1%)

Interestingly, according to Forbes journalist Parmy Olson, "The Scandinavian countries of Sweden, Norway, Finland and Denmark don’t have a minimum wage at all because they are so highly unionized. 'The unions there felt that a national minimum wage would interfere with collective bargaining, and it might even bring the price of labor down,' says Chater" (referring to Robin Chater, secretary general of the Federation for European Employers). And these countries are doing quite well. For example, Norway has an unemployment rate of 3.5% and a much higher per capita GDP than the U.S.

Are you seeing a pattern here? Many countries are doing as well, if not better, than the U.S., despite the fact that they have higher minimum wages and/or unions, things that the political right in America scolds as job & economy-destroyers.

The fact is, in America we have the worst possible situation: Low union participation and a low minimum wage. Is it any surprise that poverty is rising and the middle-class is shrinking?

("One Third of a Nation" was a WPA theatre play about poverty in America. WPA poster, courtesy of the Library of Congress Prints and Photographs Division.)  

I have asked some conservative-minded folks the following question: "What do you think was a good time period in American history, with respect to the economy?" The answer I most frequently get is "the 1950s," which is a good choice. But when I point out that the national minimum wage law was in existence then, and that union participation was very strong, they have little, if anything, to say. I'm not sure if they fully see the dilemma of scolding unions & the minimum wage, yet picking a time period where those two things were firmly established.

New Deal policymakers created the national minimum wage because they knew that power, in the supposed "free market," is concentrated in the hands of wealthy business owners, wealthy executives, and wealthy shareholders. And history shows us that those with power will abuse those without power. All the political jargon about "skills," "the free market" and "personal responsibility" won't change that fundamental aspect of human nature.

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