On February 23, 2014, Joe Conason writes in Nation of Change:
In the midst of a crucial political debate that plainly favored proponents of a higher minimum wage, the Congressional Budget Office dropped a bombshell headline this week. Increasing the minimum to $10.10 an hour — as demanded by President Barack Obama and Democrats on Capitol Hill — would “cost 500,000 jobs.” At a moment when employment still lags badly, this assertion was potentially devastating.
Almost lost in much of the predictable media coverage was the CBO report’s estimate that a minimum-wage increase would lift at least 900,000 workers and their families out of poverty — and boost incomes for at least 15 million more.
But as top economists have repeatedly pointed out, such damning employment numbers are fuzzy and unreliable, while the CBO poverty numbers probably underestimated the positive impact of a higher minimum.
Moreover, those 500,000-jobs-lost headlines were highly misleading, with the strong implication that more than half a million actual people would be laid off — which is wrong. In fact, the CBO number is meant to estimate the number of jobs employers might not fill when workers leave, or the number of jobs employers might not create as quickly if they must pay a higher wage. It doesn’t mean that people will lose their current jobs, but that those people seeking low-wage jobs may have to look slightly longer to find them.
What about that nice round number of 500,000? Naturally it is rounded to the nearest hundred thousand, but more to the point is that the headlined number is simply the midpoint of an estimated range from “slight impact” or zero lost jobs on the low end to one million on the high end.
Such a million-job spread represents substantial uncertainty. Skeptics may consider the uncertainty even greater because the CBO report relied heavily on disputed assumptions by conservative economists — and diverged from the consensus of top U.S. economists, who expect that moderate increases have a vanishingly small impact on employment.
But even if 500,000 fewer jobs are created in the short run, that somewhat notional cost must be weighed against the indisputable benefit to low-wage workers. As economist Dean Baker explains:
With 25 million people projected to be in the pool of beneficiaries from a higher minimum wage, this means that we can expect affected workers to put in on average about 2 percent fewer hours a year.
However when they do work, those at the bottom will see a 39.3 percent increase in pay.
While overstating the negative effect of raising the minimum wage on jobs, the CBO study understated the positive effect on families living in poverty. Its estimate of 900,000 families lifted above the poverty line is based solely on computer simulations. But historical research into the effect of previous minimum-wage increases suggest a much more robust benefit to the working poor.
According to University of Massachusetts economist Arindrajit Dube, who has studied the effects of minimum-wage increases in recent decades, the impact on poverty is much more powerful than the CBO suggests. He quotes a study by The Hamilton Project, a centrist economic think tank based at the Brookings Institution, which suggests that as many as 35 million families will benefit from an increase to $10.10 an hour due to “spillover effects” raising income among workers who already make slightly more than the minimum.
Dube’s studies of the historical effect of past minimum-wage increases indicate that raising the federal minimum to $10.10 would lift somewhere between 4.6 and 6 million households above the poverty line.
Raising the minimum wage will also reduce profiteering by large, highly profitable employers, like Wal-Mart and McDonalds, whose workers rely on government benefits — such as the Earned Income Tax Credit and food stamps — to supplement inadequate paychecks. Survey after survey reflects the strong public appetite for higher wages at the low end. But popular approval is not the only way companies can actually benefit from improving workers’ earnings and livelihoods.
The Gap clothing chain just announced that its workers will soon receive better pay to bring them above the current federal minimum. Announcing that his company will voluntarily raise its lowest-paid workers to $9 this year and $10 next year, Gap CEO Glenn Murphy said he regards the expense as a “strategic investment” that would pay for itself many times over in better productivity and morale (as well as lower job turnover and training costs).
When the clear social benefits of raising wages are contrasted with the dubious warnings of lost jobs, there is no real argument. If we intend to address poverty and reduce inequality, higher wages across the workforce are imperative — but especially at the bottom.
Raising the minimum wage will not effectively address poverty and reduce inequality.
While I am not opposed to the concept of a “minimum wage,” economic productivity is a bigger part of the story. Those arguing its support basically argue that labor is producing more value today, but working people aren’t seeing any of the gains. Who has walked away with the proceeds from all that productivity? But contrary to general belief, when looked at through the lens of two factors of production––human and non-human––labor is not becoming more productive; the non-human means of production is driving the productivity gains.
Whether or not raising the minimum wage is harmful and will cause less employment should be discussed within the larger scope of economic inequality. The proposed measures are at best a sedative to ease the pain of deteriorating livelihoods, but not the solution that is necessary to significantly address income disparities between the wealthy ownership class and the propertyless, non- and under-capitalized American majority.
Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
People invented tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention. Most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our physical capital assets, and a relatively diminishing proportion to human labor. Physical productive capital does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, binary economist Louis Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”
The role of physical productive capital is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.
Furthermore, according to Kelso, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Kelso postulated that if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive.
In reality, raising the minimum wage is the equivalent of taxing employers for the work done by their employees and giving the proceeds to the workers. And that works against employment, not in favor of it, and penalizes the ownership class for their “tools” of productivity. Advocates for a minimum wage should instead be advocating for ensuring that EVERY citizen benefits from income derived by the ownership of productive capital assets, and eliminate the need for government measures that redistribute income in one form or another––through coerced trickle-down. In other words, accomplished through redistribution achieved by the rigging of labor prices, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed.
For REAL solutions to economic inequality, support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, Monetary Justice at http://capitalhomestead.org/page/monetary-justice, and the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm.
http://www.nationofchange.org/hollow-argument-against-higher-wages-1393171769
