The Minimum Wage, Science, and Democracy
Am I the only person who is sick of the debate over the minimum wage? Both here and at Inside Catholic the debate has recently come up.
I must say that, in the first place, I find the various attempts to cite empirical evidence amusing at best. No matter what any one economist says, there is another waiting around the corner to contradict him. Just reading the Wikipedia article on the minimum wage shows that, once again, ‘conventional wisdom’ and academic consensus has been turned upside down by new studies and new data.
My belief is that we cannot organize an economy on the basis of quantitative analysis and empirical data alone. Economists will always disagree. A new study will always prove that the old wisdom is, if not worthless, suspect. Meanwhile people’s livelihoods are at stake. Economics can be informed by scientific analysis but it must be guided and ultimately determined by social and moral considerations.
That is why attempts to flippantly dismiss the teaching of the Church on social and economic matters get under my skin. The Church’s insistence upon a ‘just wage’ is met with derision and sometimes mockery from certain Catholics. It is claimed that the Church cannot be considered a guide on economic matters, that it has flouted the ‘laws of economics’, laws which any observer of the literature knows are not immutable but subject to constant revision and conflict among economists. Pope Leo XIII took note of the same tendency in science as a whole when, remarking on the errors of rationalism, he wrote,
These detestable errors, whereby they think they destroy the truth of the divine Books, are obtruded on the world as the peremptory pronouncements of a certain newly-invented “free science;” a science, however, which is so far from final that they are perpetually modifying and supplementing it. (Providentissismus Deus, 10)
No one should mistake this for a rejection of science; Leo also devoted an entire encyclical to the explanation and defense of science in its proper role (Aeterni Patris). Our modern minds tend to cringe at the idea of science taking a backseat to anything. But even Einstein, the greatest scientific mind of the 20th century, rejected the idea that science should set policy:
[S]cience, at most, can supply the means by which to attain certain ends. But the ends themselves are conceived by personalities with lofty ethical ideals and—if these ends are not stillborn, but vital and vigorous—are adopted and carried forward by those many human beings who, half unconsciously, determine the slow evolution of society….
[W]e should be on our guard not to overestimate science and scientific methods when it is a question of human problems; and we should not assume that experts are the only ones who have a right to express themselves on questions affecting the organization of society (From the essay ‘Why Socialism’? – yes, Einstein was a pinko, if not a Red).
The bottom line is: science can only take us so far, especially since scientists often disagree, and even when they do agree, later revise their findings. The limitations of science are clear. So, given that a) scientists disagree, and b) economics can barely be considered a science, and c) economists disagree with one another about the minimum wage, it seems to me that we ought to just dispense of all the references to what the ‘laws of economics’ say. They say many things depending on how one finds, studies and interprets data, and only faith, be it religious or ideological, can guide us towards what we want to hear and do.
Moving on, the question becomes – are minimum wages moral? Is it wrong for the government to decide what employers ought to pay?
Well, as much as I might be inclined to criticize the democratic process in the US, to note its limitations and shortfalls, it must still be acknowledged that it is the vast majority of the American people themselves who want a constantly increasing minimum wage. Only twice in recent electoral history that I am personally aware of, out of dozens of votes in dozens of states, have minimum wage increases been defeated by the voters. The rest of the time they pass by large margins.
The electoral record blows to pieces the notion that it is merely leftist government bureaucrats that want to get their hands on business, the typical ‘government versus business’ dichotomy – the minimum wage has garnered so much consistent support from across the entire political spectrum of voters themselves that it is not a stretch to say that it is one of America’s democratic institutions. Thus the contest is really between the democratic will of the people and the interests of a band of ideologues and the Chamber of Commerce.
I imagine that this is typically explained or rationalized with claims that the working class voters are short-sighted and self-interested, not realizing that in the long run they are somehow hurting themselves (in other words, everything a good commercial capitalist hopes they are when they walk into his store, everything his advertisements and subliminal messaging aims to make them, everything the official philosophy of this establishment screams at them every hour of every day through every available media outlet). Is this true?
I don’t see how it could be, at least not in this particular case. Only 2% of the workforce makes minimum wages. That might seem to make the whole matter irrelevant either way. It certainly makes the tone and tenor of this debate all the more ridiculous. I think the explanation for electoral victories of minimum wage propositions lie in a healthy impulse on the part of the people to want to regulate the power of businesses over workers, of employment and management over workers and their wages. All of the tongue-clucking of the economists will never convince voters that granting more power to business will improve their lives. They know from bitter experience that what employers want is more work for less pay, and they will use the means at their disposal to reverse the trend.
It also might have something to do with the fact that doom-and-gloom predictions made by economists never come true. The wiki article, for instance, notes that there has been a 50 year consensus, only disrupted in the mid 90s, that minimum wages caused unemployment and contributed to every other economic and social problem short of the plague. Yet those 50 years saw the establishment and gradual increase of minimum wages, and for much of that time, until the mid-70s at least, improving economic conditions for American workers.
At a certain point, when the sky doesn’t fall down, when the supposedly negative effects of a policy never actually materialize to any noticeable degree, when the country actually manages to grow and prosper for decades in spite of the policy, when the difficulties it encounters are more clearly and directly related to other policies (like, for instance, totally deregulating the financial sector) – I think I’m willing to trust the instincts of the people and what I observe with my own two eyes.
All of that being said, I don’t think raising the minimum wage is a solution to anything. I think the impulse to raise it is a healthy one, as I said, but I think the policy itself achieves very little. My deepest wish is that Americans would begin to move beyond the wage system and the labor market and begin organizing themselves as partners in cooperative enterprises. When all are owners, wages become irrelevant. And I think the same impulse that prompts the voters to raise the minimum wage even when it will have no effect on their own wages can translate into a drive to form cooperative enterprises. The name of the game is more control over one’s economic fate, elevation beyond a mere disposable part in a machine, beyond an isolated worker and consumer, and towards a greater sense of social being.
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Joe sez:
“Economics can be informed by scientific analysis but it must be guided and ultimately determined by social and moral considerations.
“That is why attempts to flippantly dismiss the teaching of the Church on social and economic matters get under my skin. The Church’s insistence upon a ‘just wage’ is met with derision and sometimes mockery from certain Catholics. It is claimed that the Church cannot be considered a guide on economic matters, that it has flouted the ‘laws of economics’”.
I have asked in another context whether the “laws of economics” are more like the laws of physics or crime statistics.
Insofar as economic “realities” or laws are based on the behavior of sinful people, they are subject to change if people start thinking and acting less sinfully, e.g., if those social and moral considerations Joe speaks of start to have more influence on the normal behavior of people.
No doubt there are employers out there who strive to provide their employees with a living wage as a moral matter. If this approach were widespread, and the moral norm (as the unacceptability of racism, say, is a moral norm), then probably we would not be having this discussion about a legal minimum wage.
Let me try and draw together a couple of points. You note that “what employers want is more work for less pay.” You also note that “[o]nly 2% of the workforce makes minimum wages.” Doesn’t that strike you as odd? If a minimum wage is needed to prevent employers from lowering wages, how is it that 98% of the workforce is able to maintain wages above what the law requires?
It’s true that employers want more work for less pay. Employees, on the other hand, want less work for more pay. In a free labor market, employment only happens if both parties agree. An employer might really want to pay his workers $2 an hour, but if he can’t find anyone willing to work for less than $10, then he will pay $10 or will have to make do without. By the same token, if an employee is only worth $5 an hour to an employer and the law says that he must pay him $7 or nothing, then he will choose to pay him nothing.
You note (correctly) that instituting the minimum wage hasn’t led to economic collapse. Given that the minimum wage only covers 2% of the workforce, however (most of whom are either teenagers or are not the primary breadwinners for themselves or their family) this is not so surprising. If you throw a small pebble into a river you might not see much of a ripple (and if the river is moving fast enough you won’t see any at all). That is hardly a reason to assume the normal laws of displacement don’t apply.
One other thing. You say that “the minimum wage has garnered so much consistent support from across the entire political spectrum of voters themselves that it is not a stretch to say that it is one of America’s democratic institutions.” My guess is that popular support for immigration restrictions is as strong if not stronger than support for the minimum wage. Does that mean that immigration restrictions are one of America’s democratic institutions?
What I find “amusing at best” is the attempt to “flippantly dismiss” the concern of well-meaning people that doing something will not work. People like DarwinCatholic and Blackadder don’t say, “raising the minimum wage to a just level won’t work, let the poor starve.” They say, “raising the minimum wage to a just level won’t work, let’s have the government top-up wages through a wage subsidy program like an expanded version of the Earned Income Tax Credit.” Whether they are right or not (and I am sceptical of a number of aspects of the wage subsidy idea), they are not allowing economics to set their ends; their ends are based in Catholic Social Thought. They are trying to determine the best means of meeting the just wage requirement, and in spite of your dismissal of all economic research, which strikes me as a more than slight overreaction, since the alternative is merely to try whatever alternative is best sold to the populace, and hope the consequences of being wrong aren’t too great.
How do you get young rich men to give up their possession and follow Jesus?
For what it’s worth, the concept of a “living wage” has recently been treated as obtainable through some kind of negative income tax credit: Here’s MacIntyre writing in 2006:
The basic economic injustice of our society is that the costs of economic growth are generally borne by those least able to afford them and that the majority of the benefits of economic growth go to those who need them least. Compare the rise in wages of ordinary working people over the last thirty years to the rise in the incomes and wealth of the top twenty percent. Compare the value of minimum wage now to its value then and next compare the value of the remuneration of CEOs to its value then. What is needed to secure family life is a sufficient minimum income for every family and that can perhaps best be secured by some version of the negative income tax, proposed long ago by Milton Friedman, a tax that could be used to secure a large and just redistribution of income and so of property.
Now I think it is fairly surprising that MacIntyre’s goal–”a large and just redistribution of income” for the betterment of family life–is to be actualized through an idea of Milton Friedman of all people (no fan of a just redistribution of income). I take it this is a good example of how Catholic Social Thought articulates principles and ends rather than prescriptions and means: if Marxist-leaning MacIntyre sees an idea from Chicago-School Friedman as contributing to these ends, he has no problem getting behind it.
For me the surprising thing is that folks on the economic left have been so cool to the negative income tax idea. One gets the impression that for some people labor market regulations are the end, and that their purported beneficial effects are just the means of justifying them (MacIntyre, it would seem, does not fall into that category).
BA,
1) “If a minimum wage is needed to prevent employers from lowering wages, how is it that 98% of the workforce is able to maintain wages above what the law requires?”
I never claimed it was needed – in the USA. In other countries where doesn’t even exist, it probably is. Wages have to be determined objectively by the cost of living. In the final analysis that is what people are ‘willing to work’ for, the bare minimum of goods and services needed to keep them going and cover expenses. In America that is higher than the minimum wage rate.
“You note (correctly) that instituting the minimum wage hasn’t led to economic collapse. Given that the minimum wage only covers 2% of the workforce, however (most of whom are either teenagers or are not the primary breadwinners for themselves or their family) this is not so surprising.”
No, but what IS surprising is that people so passionately debate the issue given that it effects relatively so few people. Which is why I said, I think it has more to do with the masses wanting to discipline business, and I’m all for that.
3) “My guess is that popular support for immigration restrictions is as strong if not stronger than support for the minimum wage. Does that mean that immigration restrictions are one of America’s democratic institutions?”
It may be so. I support immigration restrictions too. I just don’t support draconian police sweeps and the demonization of an entire people. And I think even the immigrants would agree on the minimum wage – if American workers could look past language barriers they’d see that they have an ally and not an enemy in Mexican labor.
Anyone concerned with the wage destruction we have seen in the past few decades has to incorporate, as a part of that concern, the mass influx of low skill labor. Cesar Chavez was more militant on that point than any immigration restrictionist (including myself) I can think of.
I never claimed it was needed – in the USA. In other countries where doesn’t even exist, it probably is.
According to this listing, countries without a minimum wage include: Austria, Denmark, Finland, Germany, Iceland, Italy, Liechtenstein, Norway, Singapore, Sweden, and Switzerland.
I believe that’s a clear majority of the countries without a minimum wage. Most poor countries have a minimum wage. There are a couple that don’t, but if the idea is that Namibia would be doing a lot better if only it adopted the minimum wage found in Zambia, I don’t think that’s plausible.
what IS surprising is that people so passionately debate the issue given that it effects relatively so few people.
I’ve wondered about this myself (of all the subjects I’ve blogged on at Vox Nova over the years, legislating wages for low skilled workers is the one that has produced the most vitriol in response). I think the reason for the passion is that while the impact of the particular policy may be small, the principle involved is a big one. If someone is forced to accept that low wage workers receive low pay because of supply and demand and not because of the wickedness of businessmen or some such that can be gotten rid of through legislative decree, then a whole slew of one’s cherished political and economic beliefs could be endangered.
Anyone concerned with the wage destruction we have seen in the past few decades has to incorporate, as a part of that concern, the mass influx of low skill labor.
What wage destruction?
blackadder,
Increasing the supply of low skilled labor means driving down the wages of those not swimming in the currents of the cognitive elite. In your work as a lawyer, for example, how many of your fellow lawyers – that is, competition – are U.S. born? Government workers are protected by federal laws. And on and on. Not so for those who work in day labor, carpenters, roofers, and so on. I see this firsthand, having grown up in Jim Wells county TX. Mass unskilled immigration has been terrible for the very people our business/government/union/cultural elites so often claim to be “for” – even as they enjoy their cheap landscaping and maintainance.
Increasing the supply of low skilled labor means driving down the wages of those not swimming in the currents of the cognitive elite.
The most pessimistic estimate (from George Borjas) is that the wages of native born high school dropouts is 8% lower in the short run, and about 5% lower in the long run due to immigration.Other estimates have found that the wage effect is zero or positive even for high school dropouts. The main people who suffer economically from increased immigration are other recent immigrants. This has led Borjas, somewhat disingenuously, to argue that we ought to limit further immigration out of concern for the immigrants already here.
Soooo many examples, especially in recent years at processing plants. Mass immigration, while great for the bosses that “need” cheap labor, can also be a jumpstart to all sorts of abuse.
http://www.nytimes.com/2008/12/13/us/13smithfield.html
http://www.nytimes.com/2008/07/27/us/27immig.html?ei=5087&em=&en=8af05895cad29362&ex=1217304000&pagewanted=all#
how many of your fellow lawyers – that is, competition – are U.S. born?
Less than you probably think. Immigrants and even more children of immigrants (e.g., Scalia, Ginsberg, Alito, and Sotomayor), are disproportionately represented in top law schools.
And let’s not forget doctors, engineers, and computer programmers. Those professions are in dire need of a restrictive immigration policy.
At least among economics, I do think there is much of a disagreement. Modest increases in the min wage, especially from an already low level, have very little impact on unemployment. Large increases do.
JJ,
Has it occurred to you that the problems listed in the articles you cited might have more to do with the immigrants’ illegal status than with the fact they are here at all?
Nate: You certainly don’t force them! :)
Joe: I think plenty of people still like to debate the minimum wage. As I see it, support of the minimum wage is indicative of whether a person can get over the sheer goodness of their own intentions and look at the actual consequences of their policy preferences.
It’s not that the minimum wage idea will not work, it’s that it has not worked, and this has been shown repeatedly.
blackadderiv Says:
May 28, 2009 at 9:01 am
“One other thing. You say that “the minimum wage has garnered so much consistent support from across the entire political spectrum of voters themselves that it is not a stretch to say that it is one of America’s democratic institutions.” My guess is that popular support for immigration restrictions is as strong if not stronger than support for the minimum wage. Does that mean that immigration restrictions are one of America’s democratic institutions?”
Chesterton pointed out, that although he was a supporter of democracy, democracy itself can be violently wrong. Restriction of immigration has been consistent throughout the history of the U.S. I include in this such things as the reservations of Indians, the poor and minority ghettos in our cities, the barred communities of the wealthy, and such like phenomena.
Zach,
There are economists who do not accept the argument that the minimum wage either a) causes unemployment or b) causes enough unemployment or other problems that outweigh the benefits of a minimum wage. So a person can take a position in favor of a minimum wage on the basis of what at least some economists have argued on the basis of their own studies without it being about sentimentalism.
Furthermore, I’m not impressed with hard-nosed utilitarianism. As I said in the post, I don’t think the minimum wage will really solve the problem people want it to solve, but I think the impulse behind it is a healthy one.