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The Minimum Wage is Always Zero

July 25, 2008

Yesterday the federal minimum wage was raised from $5.85 an hour to $6.55 an hour. Perhaps you didn’t notice. Minimum wage laws are a strange sort of thing. They’re quite popular, yet the arguments used to support them are often of the sort that, in other contexts, hardly anyone would find persuasive.

Suppose I were to argue as follows: Homeless is an injustice and a tragedy, and no one should have to beg on the streets for food or money, or to sleep on the streets. Therefore, we should make begging and vagrancy illegal.

Presumably few people would find such an argument convincing. They would recognize that, bad as it is to have to beg for money in order to be able to eat, simply taking away your ability to beg while doing nothing about the circumstances that led you to beg in the first place isn’t going to make you any better off.

Or suppose that, instead of a ban on begging, I propose a law whereby anyone who wants to give money to a homeless person has to give at least $10. That way the amount of money a homeless person will be able to collect from begging will increase, and he or she will soon have enough money to get off the streets. Again, I doubt that many people would find such an argument convincing. They would immediately see that while some people might give more money to the homeless under the new law most people, if forced to choose between giving at least $10 and giving nothing, would choose to give nothing. Nor, I might add, would I be able to win many people over to my proposals by talking about how rotten it is to be homeless. The worse homelessness is, the worse my ideas are.

Yet when it comes to so-called minimum wage laws, i.e. laws making it illegal to hire someone for less than a set amount, many people do fall for precisely these sorts of arguments. It is assumed that if the minimum wage is set at $10 an hour, everyone who would have made less than this absent the law will now make $10 an hour. What people seem to forget, however, is that the minimum wage is always zero. There is no law that says an employer must hire anyone or continue to employ them. If a worker is worth $7 an hour to an employer, and the law says he must pay him $10 or nothing, then the worker will be paid nothing. The law has not improved his situation. It has only made it worse.

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77 Comments
  1. M.Z. Forrest permalink
    July 25, 2008 9:08 am

    There is no empirical evidence for reductions in employment when the min wage has been raised. The Santa Fe study is often cited for this. The consensus in the economics community is that modest increases in the minimum wage have no effect on employment.

  2. blackadderiv permalink
    July 25, 2008 9:24 am

    According to a 2000 survey of economists, 45.6% fully agreed with the statement, “a minimum wage increases unemployment among young and unskilled workers”, 27.9% agreed with provisos, and 26.5% disagreed. That’s hardly a consensus that it has no effect.

    There have been plenty of studies showing that increases in the minimum wage cause reductions in employment. There has been a few studies indicating that it does not. Given the disproportionate media attention given to that those few studies, it’s understandable that you might think they somehow represent the consensus view. But they do not.

  3. M.Z. Forrest permalink
    July 25, 2008 9:57 am

    Many of the studies are uncritical work from think tanks.

    David Card analyzed the 1989-1990 federal minimum wage increase (from $3.35 to $3.80) and found that raising the minimum wage had no negative effects on employment (Card 1992, p. 36).

    A later survey-based study by David Card and Alan Krueger compared the employment effects of a 1992 minimum wage increase in New Jersey with the employment effects in the neighboring state of Pennsylvania and found that the New Jersey minimum wage increase did not lead to a measurable negative impact on employment (Card and Krueger 1994, p. 792). Card and Krueger subsequently confirmed their survey results with state government data and published their findings in a 2000 American Economic Review article (Card and Krueger 2000).

    In 1995, Card and Krueger reviewed seven analyses of separate minimum wage increases from across the country and found that there was an “absence of negative employment effects” and therefore “reasonably strong evidence against the prediction that a rise in the minimum wage invariably leads to a fall in employment” (Card and Krueger 1995, p. 389). Card and Krueger found “zero or positive employment effects for different groups of low-wage workers in different time periods, and in a variety of regions of the country” (Card and Krueger 1995, p. 389).

    EPI’s analyses of the federal minimum wage increases in 1996 and 1997 came to similar conclusions, finding any employment effect was “economically small and statistically insignificant” and just “as likely to be positive as negative” (Bernstein and Schmitt 1998, pp. 4 and 33).

    The 1999 Economic Report of the President reviewed this body of research, finding “the weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment” (Council of Economic Advisers 1999, p. 112).

    In 2004, the Fiscal Policy Institute (FPI) compared total employment in states with a state minimum wage set above the $5.15 federal level to all other states. FPI found that aggregate employment in the higher minimum wage states increased by 6.1% between 1998 and 2004, whereas employment in states with only the federal minimum wage increased by only 4.1% (FPI 2004, p. 8).

    the number of establishments with fewer than 50 employees rose twice as quickly in states with a higher minimum wage (3.1% in higher minimum wage states versus 1.6% in states with the federal minimum wage);

    the number of employees in small establishments grew by 4.8% in higher minimum wage states but only by 3.3% in all other states; and

    small business annual and average payrolls grew faster in high minimum wage states (Fiscal Policy Institute 2004, pp. 11-12).5

    http://www.epi.org/content.cfm/briefingpapers_bp151

  4. M.Z. Forrest permalink
    July 25, 2008 10:05 am

    Berkeley has a page with numerous concurring studies.

    http://laborcenter.berkeley.edu/minwage/index.shtml

  5. July 25, 2008 10:06 am

    You do realize that you just quoted an uncritical work from a liberal think tank?

  6. July 25, 2008 10:10 am

    MZ, I thought the same thing SB did… if we’re going to dismiss arguments based on who makes them, why should I pay anymore attention to what EPI claims than you do to what AEI claims? (I’d also note that in a quick perusal of BA’s 2nd link, many of them come from peer-reviewed journals, which certainly oughtn’t be as quickly dismissed.)

  7. July 25, 2008 10:12 am

    I’m not sure how you go from dismissing studies as the “uncritical work of think tanks” and then go to cite a list of studies from the EPI, one of whose reasons for being is to agitate for raising the minimum wage.

    That said, you probably have a point that raising the minimum wage “moderate amounts” (if moderate is defined as very small — allowing the minimum wage to continue to fall in absolute terms) does not appreciably decrease employment. But then, raising it such “moderate amounts” won’t actually help anyone that much either.

  8. M.Z. Forrest permalink
    July 25, 2008 10:13 am

    When the world ends let me known.

  9. M.Z. Forrest permalink
    July 25, 2008 10:13 am

    Why do I bother talking to Libertarians?

  10. July 25, 2008 10:21 am

    MZ, I’m certainly not a libertarian, and I’m not sure that Darwin or SB are, either. BA made an argument, and your response was to deny that there was evidence to back it up. He pointed to studies in favor of his position, and you impugned their veracity on the basis of their authors (or, at least some of them), and pointed to your own sources which have the same prima facie standard of credibility as those cited by BA.

    The point under debate (does a raise in the minimum wage have an effect on unemployment) is a very interesting one, and one which I’m curious about (I’m inclined towards BA’s position, but not fully convinced). I, for one, would welcome arguments made for the opposite position (that it has no significant impact).

  11. blackadderiv permalink
    July 25, 2008 10:36 am

    Many of the studies are uncritical work from think tanks.

    On what do you base this statement? As I look through the bibliography in the link I provided, I see no evidence that most of the articles and studies cited originated via think tanks.

  12. July 25, 2008 10:39 am

    BA, I think MZ is referring to the papers from the Rottenberg volume, which was put out by AEI. Or, that’s my best guess.

  13. Morning's Minion permalink*
    July 25, 2008 10:41 am

    MZ beat me to it– the work of Card and Krueger is the leading evidence on this topic. The question is not whether minimum wages can ever have adverse labor supply reactions– of course they can (and in places like France I would argue they do), but what the effect is in the current circumstances.

    Fundamentally, though, we need to move away from thinking of labor as a commodity to be traded on the market, and move more toward the Catholic conception of the living wage, And given the poverty rates in the US, and the need for both parents to work (sometimes with more than one job a person), I would say it is quite obvious that the US minimum wage is too low.

  14. July 25, 2008 10:53 am

    MM, here’s my current thought on the manner (particularly in relation to a living wage), and I’m curious about your thoughts.

    A major problem I see in linking the living wage with a mandated minimum wage is the variation in the cost of living from one place to another. I’ve lived in a rural environment (central Minnesota), major metropolitan areas (Minneapolis & Rome), a dying town (Stuebenville, Ohio), and a thriving small city (Sioux Falls, South Dakota). Naturally the cost of living has varied greatly in each of these locations, and therefore — however one determines it — a living wage in each place likewise varies greatly. A living wage in Crosby, Minnesota will get you nowhere in Minneapolis.

    This alone seems to preclude linking living wage & minimum wage. But there’s the additional problem that if we really wanted to establish this linkage, we’d need a *significant* hike in the minimum wage, one far greater than anyone is currently calling for, and one which is sure to have significant negative ramifications.

    Given the great fluctuations in the cost of living alone (apart from other relevant factors), I think the best we can do with regard to a living wage is to strongly encourage (and perhaps provide some incentives) for business to seek to provide a living wage and avoid an imposed mandate.

  15. blackadderiv permalink
    July 25, 2008 10:56 am

    the work of Card and Krueger is the leading evidence on this topic.

    Why? Why should a single study, which found that an increase in the minimum wage actually increased employment, and was based on phone surveys of one industry eight months after the minimum wage increase occurred, why should we find *that* study more persuasive than all the studies that have found a contrary result? To me, that looks like wishful thinking.

    But, as the LeVar Burton, used say, you don’t have to take my word for it. Here is that notorious libertarian, Paul Krugman:

    “What is remarkable . . . is how this rather iffy result [the Card and Krueger study] has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda–for arguing that living wages “can play an important role in reversing the 25-year decline in wages experienced by most working people in America” (as this book’s back cover has it). Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects. This will to believe is obvious in this book: The authors not only take the Card-Krueger results as gospel, but advance a number of other arguments that just do not hold up under examination.”

  16. M.Z. Forrest permalink
    July 25, 2008 11:07 am

    The original refutation confirmed the data. Krueger and Card reran the study using census data and concluded their original results were correct.

  17. Katerina permalink*
    July 25, 2008 11:35 am

    Fundamentally, though, we need to move away from thinking of labor as a commodity to be traded on the market, and move more toward the Catholic conception of the living wage,

    Absolutely!!

  18. July 25, 2008 11:49 am

    Leaving everything up to the market results in wages falling to “what the market will bear.” If that level is below a living wage, should we as a society address that?

    If it could reasonably be demonstrated that a minimum wage improves the lives workers, what would be a reasonable substitute (not “in principle” but in actual, concrete fact – some other means besides a legal minimum wage that will actually, you know, work?)

    Take away the minimum wage, and McDonald’s would pay its labor 2 bucks an hour. Maybe less if they could get away with it. We’d be back to “I sold my soul to the company store.” (Barbara Ehrenreich’s “Nickeled and Dimed” gives a goods look at a world where companies have all the power.)

    One role of the government, of the law, ought to be to protect the weak. This is Godly and Catholic.

    If we lived in a medieval world of craft guilds and peasant farmers, all this libertarian garbage might make some sense. In an industrialized world where large corporations wield immense power, I just can’t see the sense in it.

  19. blackadderiv permalink
    July 25, 2008 12:12 pm

    Take away the minimum wage, and McDonald’s would pay its labor 2 bucks an hour. Maybe less if they could get away with it.

    My guess is that most McDonald’s workers already make more than minimum wage (certainly when I worked in fast food I made more than minimum wage, and I was a teenager with little to no prior job experience).

    The idea that without the minimum wage we’d all be making subsistence wages is a common one, but it’s not consistent with the evidence. If minimum wage laws were what was keeping wages from falling, then we would expect the percentage of workers paid the minimum to rise over time. In fact, just the opposite tends to occur. The percentage of workers making minimum wage or less is quite small (less than 5%), and includes not only a lot of teenagers (like my former self) but also lots of food service workers who, when tips are added in, are making considerably more than the minimum. And the percentage of workers making minimum wage or less has fallen pretty consistently since the last increase.

    I agree with you that the law ought to protect the weak, but that counsels against the minimum wage (the negative effects of which are disproportionately felt by the very poor), not in favor of it.

  20. Phred permalink
    July 25, 2008 12:17 pm

    Notwithstanding the exhaustive studies on this subject, as an everyday practical matter, there is a point that even if the employee is worth the money, the entry-level position may not. Furthermore, does the increase in minimum wage add spending money to the pockets of those that it applies to, or does the product or service that depends on the effected labor force just raise their prices and neutralize its perceived positive impact.

    More than anything else, I feel that wage-percentage-based taxes are the largest beneficiary of minimum wage increases and the biggest losers are those at the fringe that are handicapped either actually in capability or by experience that are unattractive to employers because the individual candidate is simply not worth the higher wage for that position.

    Does it mean that the employee will lose their job? Maybe, but more likely it means that many entry-level positions will go unfilled and unskilled youth will have a much more difficult time getting a toehold into life.

  21. M.Z. Forrest permalink
    July 25, 2008 12:28 pm

    What do people think entry level positions are? A quick and dirty definition of an entry level position is a job that requires a lot of repitition, is tedious, but essential to completing a workflow. A fruit picker is an entry level position. Only someone unacquainted with agriculture would conclude that fewer fruit pickers would be hired if their wages increased. This is because fruit doesn’t pick itself. People keep acting like an entry level position is a superfluous job that will be eliminated if the wage is increased too high.

  22. blackadderiv permalink
    July 25, 2008 12:31 pm

    By the way, I do think that there is an alternative to the minimum wage that actually would help workers without having the same negative effects, namely the EITC or negative income tax.

  23. blackadderiv permalink
    July 25, 2008 12:37 pm

    Only someone unacquainted with agriculture would conclude that fewer fruit pickers would be hired if their wages increased. This is because fruit doesn’t pick itself.

    Unless one thinks that the amount of fruit picked is independent of the cost of picking, I don’t see why requiring employers to pay fruit pickers at a higher rate couldn’t ultimately lead to fewer jobs for fruit pickers.

    The most likely effect of increasing the minimum wage for domestic fruit pickers would, of course, be to send more fruit production overseas.

  24. July 25, 2008 12:47 pm

    Is that the mirror image of digbydolben?

  25. M.Z. Forrest permalink
    July 25, 2008 12:49 pm

    One could certainly conclude if such results in the cost of fruit picking increasing – not an unreasonable assumption – and therefore less fruit is demanded or fruit from other countries of origin is substituted that ultimately the domestic fruit industry will regress resulting in fewer fruit farm owners and workers. That conclusion involves many other assumptions that may not be justifiable.

  26. July 25, 2008 12:51 pm

    Matt,

    The minimum wage strikes me as a really bad way of enforcing a “just wage” or “living wage” because it’s simply not possible to write a minimum wage law granular enough to come anywhere close to addressing what would be just/living wages for all the different sorts of jobs being worked by different sorts of people in different parts of the country.

    The impulse not to regulate something (especially at the national level) is not necessarily an assertion that there is no right answer — in this case that there is not wage for a given job below which it would be unjust to compensate someone — but can rather be an admission that its not practical or possible for the national government to know what is the right thing in any and all circumstances. And that using the blunt instrument of a single national minimum wage is likely to do more harm that good.

    Also, as BA points out, McDonalds (and most fast food places) already pay above minimum wage in almost every region. (Even in Steubenville, OH, where I was able to live very, very comfortably on $9/hr, the McDonalds was paying $7.50/hr versus a minimum wage at the time of $5.25. The Catholic university, on the other hand, paid minimum wage.)

    MZ,

    Those fruit picking jobs of which I’ve read about or have personal knowledge of are not minimum wage. They tend to pay by the basket of picked fruit — for the simple reason that this results in much more productive work than paying people by the hour. If I recall correctly, an experienced and strong grape picker works out to making something like $7-10/hr. Which may be pretty low compensation for such back-breaking work, but is above minimum wage. Other regions than the Central Valley grape growers may work other ways…

    Entry level positions that really are essential to a job getting done (and where you can’t get by with fewer workers) tend to be paid above minimum wage. Minimum wage fodder tends to be stuff at the level of WalMart greeters. Which yes, they could do fine without.

  27. July 25, 2008 1:01 pm

    BA – without a minimum wage, the bottom wages in the scale would decline, making workers poorer.

    Plus – Folks that want to leave everything up to the market often oppose unions (the “seller” side of the “labor market”).

    So, a world where companies have all the power (to exploit and underpay workers) is better than a world where the government (and unions) prevent that? This is consistent with Catholic social teaching, in that…?

  28. Phred permalink
    July 25, 2008 1:02 pm

    Capitalism already compensates and fills the requirements of a minimum wage, automatically and without regulation. Rather than placing the burden on the applicant to prove their value to be commensurate with the wage, the employer pays a wage that is high as necessary to attract the quality of applicant that he requires. Just like real life. Since McDonald’s was unhappy with the quality of minimum wage applicants they are willing to pay more to attract more applicants from which they can skim the cream. This effectively discriminates against low quality labor whether intentional or not. It also increases the numbers that are competing with illegal alien labor that may be of better quality but work at a discount because of legal status.

    The end game is ultimately a permanent, unemployable underclass that become wards of the state created by the incremented elevation of wages beyond their value.

  29. July 25, 2008 1:06 pm

    Incidentally — lest it sound that I’m advocating paying people minimum wage or less — back when I was running a small business on the side and had occasion to hire people, I never paid anyone less than $12/hr. I don’t like the idea of “unskilled work” and am strongly of the opinion that businesses should find a way to structure themselves such that they get all their labor from people making a decent wage.

    And it strikes me as a violation of the dignity of work and indeed human dignity when companies intentionally structure roles in order to make employees completely interchangeable and eliminate any need for skill or experience. (Thus allowing them to hire “unskilled” workers and pay them as little as the market will bear — and accepting the incredibly high turnover that such an approach results in.) I would never run a business that worked that way, and I try not to patronize businesses that work that way.

    However, I don’t think that the minimum wage is a good way to enforce “just wages” or “living wages”, and I suspect that (given that many companies do currently work in ways that I do not approve of — and many workers have been formed by that work environment) raising the minimum wage too much would cause the most harm to the very people one was seeking to help.

  30. Nate Wildermuth permalink
    July 25, 2008 1:11 pm

    The problem: Rich people would rather fire their workers than take a pay cut.

    Easy solution: Tax the rich to subsidize a living-wage for the poor.

    The hard part: The rich won’t go down without a fight, which highlights the fundamental need for the evangelization of our culture. We can start with a simple term: the universal destination of goods, i.e., the moral obligation to share what God has given you – everything.

  31. blackadderiv permalink
    July 25, 2008 1:38 pm

    without a minimum wage, the bottom wages in the scale would decline, making workers poorer.

    I know you think that, Matt, but the evidence doesn’t support your assertion.

    In 2002, .8% of workers over 16 were making the minimum wage, and another 2.2% were making less than minimum wage. If the minimum wage were all that was holding up these wages, then we would expect this percentage to creep up over time, as inflation ate away at the real value of the minimum wage level. Yet just the opposite occurred. By 2007, the percentage of workers making minimum wage had been cut in half, falling from .8% to .4%, while the percentage of workers earning less than minimum wage also fell, from 2.2% to 1.9%.

    If it weren’t periodically increased, the percentage of workers making minimum wage would keep falling until it reached zero. Which means that it’s not the law that is keeping wages from falling, but the market that’s doing so.

  32. blackadderiv permalink
    July 25, 2008 1:39 pm

    The problem: Rich people would rather fire their workers than take a pay cut.

    Easy solution: Tax the rich to subsidize a living-wage for the poor.

    You’ve just described the negative income tax, which I support. Minimum wage laws are whole nother animal.

  33. M.Z. Forrest permalink
    July 25, 2008 1:46 pm

    From 2002 to 2007 many states and localities implemented or increased minimum wages that superceded the Federal minimum.

  34. Phred permalink
    July 25, 2008 1:56 pm

    Wards of the state or negative income tax, there is a difference?

  35. Guillermo Bustamante permalink
    July 25, 2008 2:04 pm

    [This comment was removed because it was utterly off-topic. This thread is about the minimum wage, not excommunicating pro-abortion politicians. – Ed]

  36. July 25, 2008 2:20 pm

    I think that in order to not get lost about whether one argument is more valid than another in support or not of minimum wages, we need to lay the foundation first: a solid theology of work as understood by Catholic teaching. If we don’t do that beforehand, then all discussion that ignores it is everything but helpful.

  37. blackadderiv permalink
    July 25, 2008 2:27 pm

    Mr. Forrest,

    The links I provided break down data by state. A list of states without minimum wages higher than the federal level can be found here. The trend I mentioned (that minimum wage workers tend to fall as a percentage of the population over time unless the amount of the minimum wage is increased) can be seen in those states. So the theory that the overall U.S. trend is a result of states with higher minimum wage laws is not supported by the evidence.

  38. M.Z. Forrest permalink
    July 25, 2008 2:35 pm

    Your reference was to BLS data that I assume would only consider the federal minimum wage. I’ll have to take your word that where the min wage was static, there was a decrease in the number of people making it.

  39. G Alkon permalink
    July 25, 2008 2:41 pm

    The study cited by BA may or may not be correct — but his general point is clear enough and has to be true, to an extent. Companies just won’t hire people if it hurts their profits to do so.

    In the global economy, the point made by BA is illustrated by the general migration of the manufacturing sector out of the US. It is much cheaper for companies to get poor people to make stuff for virtually nothing; then the products can be sold back to US consumers.

    The problem of low wages can’t be approached outside of the problem of global capitalism, which I take it is the implication of Katerina and MM”s points — Catholic theology can discuss the labor issue better than libertarian economists, because Catholic theology does not take for granted national borders.

    The way to deal with low wages, a problem in the US but an _infinitely_ worse problem outside the US, is for the US and other major markets to use their power to enforce labor regulations _outside_ of the US. Then companies will no longer be able to run away from minimum wage legislation, in or out of the US.

    The minimum wage issue is being discussed in this thread in the abstract — it has been abstracted from context. BA’s point is, more or less, correct, but also not very relevant to the issue of poverty. International corporations have no incentive to pay the minimum wage in the U.S. when captive work-forces can be enslaved elsewhere for pennies on the dollar. That’s the real problem.

  40. Policraticus permalink
    July 25, 2008 2:42 pm

    Given the great fluctuations in the cost of living alone (apart from other relevant factors), I think the best we can do with regard to a living wage is to strongly encourage (and perhaps provide some incentives) for business to seek to provide a living wage and avoid an imposed mandate.

    This highlights, I think, the importance of evaluating living wage according to local living standards and costs. Accordingly, I think this underscores the importance of local Catholics listening to their local bishops on such economic matters.

    However, I foresee two objections to this view: On the one hand, urban centers tend to have a wide spectrum of economic standards and living trends, which compounds the difficulty of determining “living wage” accordingly; on the other hand, while I agree that living wage is best determined on the local level, it seems to me that a federal mandate is, in fact, a necessary correlate to a nationalized and globalized economy. Incidentally, this latter point complicates relying on the general principle of subsidiarity in practice, exposing the gap between theoretical affirmation of the primacy of local societies and the practice of a nationalized and globalized economy.

  41. Policraticus permalink
    July 25, 2008 2:44 pm

    Also, I recommend reading more authoritative studies (e.g., academic works from external publishers, peer-reviewed work in consensually reputed journals). AEI and the Acton Institute, for example, would not count in this regard. One can find a think-tank study to verify virtually any political or economic position.

  42. blackadderiv permalink
    July 25, 2008 2:51 pm

    I recommend reading more authoritative studies (e.g., academic works from external publishers, peer-reviewed work in consensually reputed journals). AEI and the Acton Institute, for example, would not count in this regard.

    Agreed. I would note, though, that the EPI is precisely such a think tank, and that most of the studies cited in the material I linked to would meet your criteria for academic rigor.

  43. July 25, 2008 2:54 pm

    I see your point, Poli, but what, exactly, would a national mandate that allows for local determination look like, beyond “Employees must be paid a living wage”? I suppose it go on, “as determined by [x entity]”, but that sounds hairy as well. I’m not trying to skirt the issue… it just seems too complex to be able to handle at the national level.

    To G Alkon’s point, I think another problem is the US consumer’s absolute desire for the lowest possible prices, no matter the cost. Speaking as a life-long middle-classer, I think I’d be able to pay a *bit* more for most goods if it meant that the laborers involved in the production were paid a higher wage. Tangentially, I recall a story a few years back about how a manufacturing plant in Ohio was going to be closed because the manufacturer (I think it was Rubbermaid) tried (apparently too hard) to bargain with Wal-Mart, and lost the contract, leading to the closing of this plant.

    Based on the $$$ we shelled out just to see The Dark Knight, I think most Americans could afford to pay an extra buck or two for a garbage can in order to keep a factory open. So too with any number of products… if we’re a consumer-driven economy, lowest prices rule.

  44. Policraticus permalink
    July 25, 2008 2:54 pm

    Blackadder,

    I agree. My point was neither for nor against your post, but a plea for all of us to appeal to specialized and rigorous studies. Otherwise, the typical blog/combox impasse obtains, sadly and predictably.

  45. July 25, 2008 2:55 pm

    BA is right: most of the studies in his link were from peer-reviewed journals, i.e. sources that meet the academic bar.

  46. Jeremy permalink
    July 25, 2008 3:18 pm

    Katrina Ivanovna writes
    I think that in order to not get lost about whether one argument is more valid than another in support or not of minimum wages, we need to lay the foundation first: a solid theology of work as understood by Catholic teaching. If we don’t do that beforehand, then all discussion that ignores it is everything but helpful.

    Bravo!!! I second the motion.

  47. July 25, 2008 3:26 pm

    The Economist on the minimum wage:

    http://www.nvcc.edu/home/jmin/ReadingStuff/The%20minimum%20wage%20by%20Economist.doc

    Being the Economist, you know where they ultimately fall but they present a very balanced case. They conclude that even seen in the best light, raising the minimum wage does very little to cure poverty.

    I independently arrived at the same policy recommendation as the Economist when I took a look at the issue a while back. Raising the min wage doesn’t do very much. I worked for min wage when I was 14 and exceed it in high school. Today, my father hired an illegal immigrant for $10/hour plus lunch. We should really be looking to expand the EITC.

  48. Nate Wildermuth permalink
    July 25, 2008 3:47 pm

    You know, some jobs probably just shouldn’t exist. For example – the person taking tickets at a movie theater. Is that job really worth a living wage? Does someone really need to be there to take our tickets?

  49. July 25, 2008 4:03 pm

    Nate,

    I’ve always wondered about the same thing… and then I come to the conclusion: “well, what would they do if they didn’t sell tickets?” And that’s not the answer… the easy answer, perhaps, but not the right answer. No wonder John Paul II praises in Laborem Excersens farming or work that has to do with the land as the highest form of labor, because it makes us more human. Thus, I do believe there are certain kinds of labor that serve the right purpose: they remind us of our purpose and make us more human whereas other kinds of work make us less human.

    Dorothy Day thought that perhaps the job that the woman who works 12-hour days making solely a plastic box for Swatch watches had was not the kind of job that should exist. I agree. That is not work that puts the person at its center. The person becomes an instrument then. But then you’ve got to wonder, who is going to make packaging for products and so forth? Somebody or something has to make them. Of course… maybe have a more varied kind of work… I don’t know. But I wondered the same exact thing when I saw a man wearing advertisement in the middle of the road pointing to a specific restaurant… :(

  50. July 25, 2008 4:04 pm

    I’m sympathetic to the concerns that are behind the minimum wage, although I’m also convinced of the simple logic in Milton Friedman’s explanation: If you want to help poor people, the minimum wage amounts to 1) a subsidy to their wages, plus 2) a tax on the businesses who employ them. #1 is fine, but it’s kind of a mystery why anyone thinks that #2 is the best policy solution. Hence, it makes more sense to support increases in the EITC, which is much more closely targeted at helping actual poor people. See http://gregmankiw.blogspot.com/2007/01/minimum-wage-vs-eitc.html

  51. July 25, 2008 4:09 pm

    In re Policratus and Katrina’s comments:

    It seems to me that there’s an implicit difference of opinion between the more conservative leaning commenters here and those with more social democrat sympathies in regards to how effectively one may enforce something like a “just wage” or “living wage”.

    I suspect that everyone here agrees that there is such thing as a “just wage” and that it is not necessarily the case that a “just wage” is whatever the market will bear. (Extreme example: even if I could find some fellow willing to paint my house for a dollar — it would be wrong of me to pay him only a dollar because of that.) And we all would also seem to agree that it is wrong to pay someone less than a just wage.

    However, there seems to be a good deal of difference as to whether it is likely that any one institution, whether it be congress, the state legislature, or (as Polis suggests) the local bishop, is likely to be able to set a clear “minimum wage” that on the one hand is not well below the “just wage”, and yet on the other runs no risk of driving some people out of employment. The social democraticly inclined seem fairly confident that someone should easily be able to set a minimum wage that would benefit society far more than hurt it. Those of us who are more conservative seem to regard it as more appropriate for employers and employees to deal with these questions.

    To me, at least, it seems likely that what the “just wage” is varies a great deal depending on the job, the time, the place, the people involved, etc. Thus, while it seems to me important that our Church and political leaders lay out what they consider to constitute justice in wage-paying, and the importance of paying a just wage, it seems to me a difficult area in which to successfully legislate.

  52. July 25, 2008 4:59 pm

    Well, but wouldn’t the economy “correct itself” when minimum wages are raised? I mean, not all companies can’t fire all their employees, because they still need the manpower to earn their profits, right?

    Minimum wages need to be set by the government and they need to be high enough for an individual to live with dignity. Why do I believe they need to be set by the government? Because companies, nowadays, are looking after their bottom line and that’s all they care about. That’s the plain truth and anybody who works a job on this blog should know that. That being said, a company is not going to raise wages from the goodness of their heart.

    This country is not governed by a government but by corporations and simply put, corporations will not look after the common good by making sure that their employees earn enough to live with dignity, because that would include their competitors and that’s not what they’re in business for. That’s the role of the government. The truth of the matter is that government regulations are what got us to where we are today in regard to just wages, fair work conditions, bathroom breaks during work hours, etc. Companies don’t “naturally” take the initiative to do any of those things, because that’s not what they’re in business for. It affects their bottom line! No wonder the Church is such a strong supporter of worker’s unions.

  53. Policraticus permalink
    July 25, 2008 5:05 pm

    It seems to me that there’s an implicit difference of opinion between the more conservative leaning commenters here and those with more social democrat sympathies in regards to how effectively one may enforce something like a “just wage” or “living wage”.

    You are half correct. The root of the disagreement was pointed out by Katerina: the foundations of Catholic teaching on labor. The so-called “conservative/social democrat” difference is stating things too superficially.

  54. July 25, 2008 5:19 pm

    Poli,

    Are you honestly claiming that there is absolutely no question as to whether there should be legal minimum wages according to Catholic Social Teaching?

    Again, be clear: We all agree that there is such a thing as a just wage, and that an employer sins seriously in refusing to pay his employee a living wage.

    But is every sin something which the state is in a position of sufficient knowledge to legislate? Seriously?

  55. July 25, 2008 5:31 pm

    Are you honestly claiming that there is absolutely no question as to whether there should be legal minimum wages according to Catholic Social Teaching?

    I made no such claim. However, I would suggest that without a formal, timeless wage figure, that CST would advocate a law on minimum wage both if the economic structures were not providing a dignified wage in some vital sectors and if a welfare structure were not in place to take care of basic necessities (perhaps Nathan’s ticket person would be an exception).

    We all agree that there is such a thing as a just wage, and that an employer sins seriously in refusing to pay his employee a living wage.

    Yes.

    But is every sin something which the state is in a position of sufficient knowledge to legislate? Seriously?

    We have to be careful here. While John Paul II and the U.S. bishops taught us about structures of sin, which could include structures of state, the sin does not belong to the state itself, but to those who knowingly participate in their machinery even without explicit knowledge of the sin. The culpability would, of course, be varying. The state is neither the subject of knowledge nor the agent of sin.

    You adduce the example of the state, but the state is not the sole means for alleviating structures of sin. So, no, legislation is not the only solution to “every sin.” When it comes to the specific question of wage (we need to remain specific here, not general and vague), if the economic structures are not comporting to the dignity of the worker, than the state is a means–indeed, a needed means–for correcting the injustice.

  56. phred permalink
    July 25, 2008 7:20 pm

    A just wage is subjective. In a world economy a just wage can be $6.55 a day. When everyone is through deciding how others should run their companies and pay their employees, remember employees do not own their jobs, employers do. If labor decides that the price they are willing to take for an hour of their life is too high in one country then the employer will look elsewhere, and this discussion is moot.

  57. July 25, 2008 8:04 pm

    Poli,

    I am unquestioningly sure that there are cases where a company could be identified as treating its workers so badly (either in terms of conditions or in terms of pay) that the state or some other authority would be forced to step in and do something about it. However, it seems to me that the question of a “just wage” is so dependent upon the living standard of the area, the nature of the work, the condition of the person doing the work, etc. that it seems to me impossible to have a law which enforces anything very much resembling a “just wage”.

    This is why adjusting the minimum wage seems to me a very poor way of trying to address the overall justice of wages paid to workers throughout the nation. If we’re talking about some teenager who helps out in a shop somewhere for spending money, $5/hr may well be all the work is worth. And to mandate that it be more is no increase in justice. Other people may be paid an unjust amount even at $20/hr, based on who they are and what work they do, for whom and where.

    So while I’m not strongly against raising the minimum wage, it strikes me that in many cases it does as much damage as good, and it does not seem to actually assure to any greater degree that we are paying people a “just wage”.

    But then, I seem to be rather less sanguine than you about the ability of outside parties at a high level to ascertain what is an across the board “just wage” and require it. Frankly, I can think of few who would be in a position to be clear about that beyond perhaps the employer and employee.

  58. July 25, 2008 8:05 pm

    A just wage is subjective. In a world economy a just wage can be $6.55 a day. When everyone is through deciding how others should run their companies and pay their employees, remember employees do not own their jobs, employers do. If labor decides that the price they are willing to take for an hour of their life is too high in one country then the employer will look elsewhere, and this discussion is moot.

    Workers of the world, unite!

  59. phred permalink
    July 25, 2008 8:12 pm

    I knew you were in there somewhere Matt. Thanks for making my point.

  60. blackadderiv permalink
    July 26, 2008 9:36 am

    The root of the disagreement was pointed out by Katerina: the foundations of Catholic teaching on labor.

    Opponents of minimum wage laws generally claim that such laws hurt the poor. Whether or not this is so is a factual question. Perhaps opponents of the minimum wage are wrong about the actual effects of such laws. But if they are right, then I would think minimum wage laws would be a self-evidently bad idea, and I find it hard to imagine how having a better understanding of the Catholic teaching on labor would make one think otherwise. It’s not as if, according to the Catholic teaching on labor, laws that hurt the poor are a good thing.

  61. blackadderiv permalink
    July 26, 2008 9:54 am

    Well, but wouldn’t the economy “correct itself” when minimum wages are raised? I mean, not all companies can’t fire all their employees, because they still need the manpower to earn their profits, right?

    Yes the market will “correct itself” when minimum wages are raised. This correction comes in the form of decreased employment, or other unpleasantness for the poor and low wage workers.

    It’s true that not all companies can fire all of their employees. On the other hand, many companies can and will fire some of their employees (or decide not to hire new employees as they otherwise would) if the cost of paying them exceeds the value of their work to the company (and other companies will lay off all of their employees if higher labor costs drive them out of business). If you think that businesses are only interested in making profits, then you should conclude that this is exactly how they will react to a minimum wage increase.

    People who work at low wage jobs typically don’t have a lot of options. I can sympathize with their plight. But I fail to see how taking away their least worst option makes them any better off.

  62. Zak permalink
    July 26, 2008 10:45 am

    It seems to me that a just wage is compensation high enough that the worker, can through a reasonable amount of labor, support his (or her) family so that they are not in poverty. Now, in the United States we have a general consensus of a reasonable amount of labor (40 hours a week), and there is somewhat of a consensus of what the poverty line is (although there is a growing number of calls for changing the calculations involved).

    Now, if that definition of just wage is accepted, the debate should be about the best way to ensure workers make a just wage. A government mandated minimum wage would be one way. Government wage subsidies (like the EITC and the negative income tax) are another. The advantage of the former is that it is easy to administer. Its disadvantages are that there is a good chance it could decrease employment or employment growth (companies could open factories, IT support centers, etc. overseas rather than pay US living wages) and that it places all the burden for the wage on employers. If it serves the common good that a just wage is paid, then one could argue that all society is responsible for paying it. The advantage of the latter is that it spreads the costs of ensuring a just wage. The disadvantages are that it is difficult to administer (many people don’t get the EITC they deserve because they aren’t filling out their tax forms correctly) and it creates a gap between the work done and the reward for it. When someone gets their EITC after filing taxes, the money they get back may appear to be a handout from the government rather than the just fruits of their labor.

    So as I see it, there are two main areas to focus on – what is the just wage (and I would argue that my approach above presents a good, although imperfect way to think about it) and how ought it to be paid. People who disagree about the latter issue shouldn’t act as if their opponents are uncaring capitalist stooges – there are reasonable grounds for differences.

  63. Policraticus permalink
    July 26, 2008 11:20 am

    Opponents of minimum wage laws generally claim that such laws hurt the poor. Whether or not this is so is a factual question.

    Yes, it is a factual question whose truth or falsity is not self-evident nor has been effectively argued for on either side.

    But if they are right, then I would think minimum wage laws would be a self-evidently bad idea, and I find it hard to imagine how having a better understanding of the Catholic teaching on labor would make one think otherwise.

    If they are right, it need not be the case that the laws are “self-evidently” bad. The very fact that such debates as these occur means that there is little that is self-evident or transparent. I find it hard to imagine that a legislated minimum wage would hurt the poor directly. Rather, I see choices made in response on the part of corporations to maintain or expand profit margins resulting in harming to the poor (e.g., increasing costs of goods, job cut-backs, reduction in employee hours). On the other hand, I see smaller businesses possibly hurting the most.

  64. July 26, 2008 3:04 pm

    If they are right, it need not be the case that the laws are “self-evidently” bad. The very fact that such debates as these occur means that there is little that is self-evident or transparent

    That’s rather missing the point. What BA obviously said is that IF the opponents of the minimum wage are right as to its empirical effects — that is, if they are correct that it hurts its intended beneficiaries, the poor — then it is self-evidently NOT a Catholic requirement to adopt or raise the minimum wage (because it is not a Catholic teaching to harm the poor). Surely you can agree with that? Or do you think that there is some sort of a priori Catholic commitment to the minimum wage even if it were proven beyond a shadow of a doubt to harm the poor overall?

  65. July 26, 2008 4:27 pm

    BA – Can you show us how your thinking in this post is IN ANY WAY rooted in Catholic social thought?

  66. July 26, 2008 6:05 pm

    I’ll take a shot, Michael… if a policy proposal (e.g. the minimum wage) is actually *harmful* to those it is intended to help (i.e. the poor), then it’s against CST, whatever one’s intentions. I’m sure that you’d agree that the poor are best served by policies that *actually* help them, rather than by those *intended* to do so but *actually* do the opposite.

  67. July 26, 2008 6:47 pm

    Don’t count on Michael I. agreeing with anything so self-evidently true. He’s a big-government anarchist, after all. :)

  68. Shmoo permalink
    July 26, 2008 6:56 pm

    I don’t worry about the minimum wage. I’ll just hire some illegals – not like i pay them the current MW anyway…

  69. July 26, 2008 7:06 pm

    Here’s my thoughts. Admittedly I’m not an economist but…
    My dad was a semi-skilled laborer for a major cooperation. He made $25 an hour, way above min. wage. Now a secretary at the same company looks at the wage my dad is making who has no education or skills and says to herself, I am worth much more than that and since I have skills, I should be paid more. The company agrees and her wages are higher. Having a minimum wage or bottom wage supports higher wages.

    Honestly, I don’t know if we should have minimum wages. I wonder if instead we should have mandatory COLA increases. I’ve been working the same job for 3 years and my salary has gone up 50 cents.

    Hey! My sister gets a raise! She was making $6.50!

  70. July 26, 2008 9:15 pm

    I think it is important to recognize that a free market is predictable because of the bestial nature of the agents within it. Its predictability reviles behavior of lion prides or birds. That is because it is predicated on humans behaving as herd beasts.

    Subjecting labor to “market forces” subjects humans, their families, and their work to these demonic forces.

  71. July 26, 2008 9:15 pm

    reviles=rivals

  72. July 27, 2008 2:39 am

    “I don’t worry about the minimum wage. I’ll just hire some illegals – not like i pay them the current MW anyway”

    Right, you have to pay them more. Yes, I have hired illegals before. They won’t work for min wage. If you want to find someone willing to work for min wage, you’re better off looking at your local high school.

Trackbacks

  1. Southern Appeal » “The Minimum Wage is Always Zero”
  2. Is Labor a Commodity? « Blackadder’s Lair
  3. Is Labor a Commodity? « Vox Nova
  4. Who Protects the Worker? « Blackadder’s Lair
  5. Who Protects the Worker? « Vox Nova

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