Christopher Caldwell, the conservative – but sane – senior editor of the Weekly Standard, comes up with another interesting column in this week-end’s Financial Times, where he discusses the economic merits of a minimum wage, which he claims are unconvincing, but nevertheless ends up supporting an increase in such minimum wage for social and political reasons.
His arguments make a lot of sense, and show exactly what the Dems should fight for:
Christopher Caldwell: Social logic of a living wage
The economic case for a higher minimum wage looks strong at first glance. In the US, it was last raised in 1998. The minimum now pays only one-third of the average salary, at a time of rising energy and healthcare prices. As Mr Kennedy noted, a year of minimum-wage work leaves a single mother with two children thousands of dollars below the poverty line.
In fact, the economic arguments for a higher minimum wage are weaker than they look. But the political arguments are strong enough for leaders to cross them at their peril. Mr Kennedy’s dramatic statistics do not capture the social reality of the minimum wage. Among those who get it, single-income families are a distinct minority. Half of minimum wage earners are under 25, according to US Bureau of Labour statistics, and one-quarter are teenagers. Many people have to take minimum-wage jobs; it is less clear that many have to stay in them. A person who spends six months loading the dumpster at a superstore, showing up on time, being polite, acquires a record for reliability that is a marketable credential. Removing that first rung on the career ladder could certainly spur unemployment.
This is a fair summary of the main arguments on that topic: the minimum wage is so low that it is not even enough to take peoplee out of poverty (which is undoubtedly true); but if it is only a first step into the labor market, making the step higher will keep some people out (harder to say if it is true, but the argument is certainly used).
Caldwell then goes on to shoot some of the anti-minimum wage arguments, by pointing out the contradictions in them:
Not that attacks on the minimum wage are particularly impressive on economic grounds. Claims that modest hikes would cost jobs – such as were made in the US during the Clinton rise, and in the UK when the minimum was introduced in 1999 – have been overblown. There is something self-contradictory about the twin rationales of the minimum wage’s opponents. They see the minimum-wage workforce as minuscule for the purposes of measuring the gains (money for poor people) and vast for the purposes of measuring the costs (bankruptcies and job losses).
But he then goes for the big picture in a way which is pretty unusual for a conservative, in that he acknowledges that the current economy is becoming increasingly tough for the middle class, and is encouraging a growing divide between the “winners” of globalisation, and the losers
There is a larger narrative about how people are compensated in today’s economy. It is recounted in a fascinating way by Frank Levy and Richard J.?Murnane, the Massachusetts Institute of Technology economists, who have long studied the gap between the well and poorly paid. In The New Division of Labor, just out in paperback from Princeton University Press, they examine the role of computers in creating that gap. For Mr Levy and Mr Murnane, computers are best at carrying out “rules-based tasks”. Computers enhance the value of those engaged in “expert thinking” (thinking outside the box) and “complex communication” (interpreting information). But they drive down the demand for people engaged in the rules-based work that used to support much of the lower middle class. The results are a “hollowing out” of income distribution and increasing inequality. Low-paying rules-based jobs – various secretarial, computational and manufacturing posts – are candidates for either automation or outsourcing.
(…)
The authors find John F.?Kennedy’s remark that “a rising tide lifts all boats” inapplicable in today’s economy. The same processes that increase demand for skilled workers reduce demand for unskilled ones. One possibly dangerous consequence, they fear, is that the “haves” of the new economy may use the political clout that money buys to accelerate these processes. But that could set off a destructive reaction. “Our market economy,” Mr Levy and Mr Murnane write, “exists in a framework of institutions that requires the political consent of the governed. People doing well today have a strong interest in preserving this consent. If enough people come to see the US job market as stacked against them, the nation’s institutions will be at great risk.”
In short:
- globalisation and technological progress are indeed hollowing out the middle classes, by empoverishing its bottom half, whose jobs can be automated or outsourced, and who are left with only menial, low paid jobs (and, I may add, in competition wiht the traditional holders of such jobs, i.e. recent immigrants;
- this can be a politically self-sustaining, and self-reinforcing process, as the “winners” vote to defend the status quo and protect their advantage, and the losers get disinfranchised from the political world (or are distracted by cynical politicians focusing on “external enemies” like immigrants, gays or Arab terrorists);
- this will however reinforce the feeling of exclusion from society, and may ultimately lead to a wider delegitimisation of today’s politics and institutions.
There is evidence of just such a perception of a stacked job market. America now has a strong grass-roots political movement that is claiming a level of compensation that cannot be justified by the laws of supply and demand. Last November, a Florida referendum to raise the state’s minimum wage to a dollar above the federal one got 71 per cent of the vote. The Association of Community Organisations for Reform Now was instrumental in the initiative. The group, which many dismissed a decade ago as a remnant of 1970s progressivism, is once again a force after campaigns in dozens of cities and states to pass “living wage” laws. One-third of states now have minimum wages above the federal level.
This is not an economic but a political victory. It does not mean that, say, wrapping hamburgers is worth a dollar an hour more than we thought it was. But it may mean that social peace is.
This means that a smart conservative like Caldwell recognises that the political pendulum has switched so far in favor of the moneyed and/or educated and/or globalised classes and to the detriment of the working class that there is a real risk that the reaction could be very violent.
Thus lies a very simple lesson for the Democrats and the left in general:
if even conservatives can recognise that the economy is becoming increasingly unequal and unfair, why aren’t they making a bigger stink about it? Why leave this to grassroot organisations? This is a political winner that can be easily be grasped: THE ECONOMY IS INCREASINGLY UNFAIR.
The left needs to make more noise about this, so that the politicians can go and fight for incremental improvements – for social justice, to save the political compact, democracy, and to stave off the implicit threat of major social unrest.
Is this a dream? Can it be done? The minimum wage (“living wage”) is certainly a good place to start.
