How to Best Advocate for the Minimum Wage

minimum-wage-2It’s campaign season again (when is it never campaign season?), and Republican douche-bags are out in force running for president, casting aspersions on the minimum wage. Master creep Scott Walker just called the minimum wage “lame”.

Given the laziness of the national media, we are invariably going to get into a he-said / she-said about the minimum wage, with conservatives dissing it as some kind of communist take over of industry where we will all be wearing drab, olive-green uniforms singing hymns do Dear Leader if we raise it, and liberals calling anybody who doesn’t want to raise it a corporate fascist. CNN will put two talking heads from opposing ideologies on the tee-vee machine, let them yell at each other, and then say they gave equal opportunity to both sides.

But I’d like to detail and argument for the minimum wage that I think liberals should use, and while it won’t convince any conservative about anything, it will at least use language conservatives can understand.

Conservatives (and the libertarians in conservative clothing) make a point about the minimum wage that should be true. In their worldview, you have capital (those that are owning or running the business) and labor (those that are working for the business), and that these two groups will come to a naturally agreed upon wage that is an equilibrium between supply (labor) and demand (capital). Any intervention of government into the process just distorts this equilibrium.

When they make this argument to people in my income bracket (those making over $100k per year), it makes sense. People in my pay grade aren’t depending upon a minimum wage, and for the most part, we can pretty easily switch jobs if we want. We may choose not to because we have kids in school or we like the neighborhood, but that’s a personal choice not something forced upon us for lack of opportunity. My company has to pay me a “competitive” wage compared to other people in my field, and if I’m good, I can look around and probably demand even more than I’m making today from some other company.

However, this is not what happens as you get to lower wages. As work becomes less skilled, people are more easily replaceable (supply goes up). And these people are less mobile or less likely to be able to be mobile, which further exacerbates the supply. Capital, however, is always pretty mobile. We all know of companies like WalMart that set up shop in a city, and if they cannot squeeze the city into getting the tax breaks or other incentives, they move their store 5, 10, 15 miles away to the next town. The demand, therefore, hasn’t changed. WalMart doesn’t really give a flying fig that you have to travel 15 extra miles to shop there.

Which means through basic economics that wages will just go down. There are too many people competing for too few job positions. A natural equilibrium will still be reached, but it will be quite low. And this shouldn’t be a surprise. There is a reason that BMW opened its first US factory in the American south east as opposed to putting it north of San Francisco. Certainly, cost of land has a lot do with it, but BMW can be pretty sure their cost of labor will stay low – they moved into a depressed area with a lot of workers willing to work for less. It’s the same reason businesses abandon the US and open factories in China and India. We could eliminate minimum wage laws so the factories will stay here instead of moving, but is the point to really be paid one dollar an hour, or one dollar a day?

Labor and capital do not have equal negotiating power. Capital has much more negotiating power, and it always will. In order to equalize the negotiating power, you need a countervailing force. That force can be a union or it can be a government. It cannot be an individual worker applying for the job. That’s why we need a minimum wage. It sets a floor.

Naturally, this is going to have consequences. Anecdotes abound any time the minimum wage is raised as some business that was struggling to stay afloat now goes under, claiming the reason they are shutting their doors is because their cost of labor has gone up. But can you really say that this was the only reason? No. Plenty of businesses do quite well when the minimum wage goes up, and they do well across all sectors of the economy, so it isn’t like a minimum wage has damaged a specific sector. Perhaps that business that shuts its doors needed to shut its doors. Perhaps it just wasn’t well run.

Will this convince your crazy uncle who watches Fox News all day that the minimum wage is good? No. But it should at least be using language they can understand.

 

 

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