In a recent post, RTG endorses the Republican dismissal of any hope to raise the national minimum wage:
The fact is: Americans who make $5.15 an hour are in high school and college. These are not 30 year old people who can only make minimum wage.
This is the kind of anti-factual polemic that caused me to establish this blog. Say what you will about the minimum wage, but back it up. Here's the facts I've found - and I'm open to questioning them, but at least it's somewhere to start:
• Almost half (47%) were married or had children.• Eighty-seven percent were 20 years of age or older.
• Forty-five percent of the low-wage workers living above the low-income line were married or had children, and for many of them their earnings were essential to their families' economic well-being. On average, these workers' earnings contributed 37% of their families' incomes in 2002. Thirty-five percent of these workers would have been in families with incomes below the low-income line without their earnings.
• Thirty percent of low-wage workers living above the low-income line are un-married adults without children living with their families or relatives.3 They are predominantly young adults living at home. In some cases the income of these workers was important to their families. 16% of them would have had family incomes below the low-income line if it weren't for their earnings, and, on average, they provided about one of every six dollars of their family's income in 2002. Another indicator that these workers are struggling to meet their basic needs, even though they are not living in poverty, is that about one-third did not have health insurance during the entire year of 2002. Also, a large group of these workers (42%) were enrolled in college. Thus, this appears to be a group dealing with the expense of education or unable to afford to move out of the family home because of low personal income.
• Fourteen percent of those with low wages and incomes of more than twice-poverty were adults living alone. These adults had average annual earnings in 2002 of just over $26,000. About a third of these workers did not have health insurance.4
• Eleven percent of those with low wages and incomes of more than twice-poverty were children.
So now that we have to look at the statistics and not simply make blind assumptions and draw sweeping conclusions, it looks like it's more than just high school kids who are affected by the minimum wage (not that I don't think young people are entitled to fair wages). It does make one wonder how many of these policy positions RTG writes about are actually based on any empirical evidence. If I didn't know better, I'd say this is a case of outright social darwinist class warfare, but then isn't class warfare the domain of the eeevil Left? As I intend to show, Republicans are very agreeable to manipulating markets in much more effective ways than minimum wage laws - in order to serve their class interests.
Monetary policy is a key area where government intervention favors capital over labor. The Fed has a long running policy in place to keep unemployment at a certain level - typically 5 percent - as a check on inflation (see NAIRU). When unemployment gets too high, the Fed often raising the interest rate, thereby cooling down the economy artificially and putting jobs with the least demand at risk. While I'm not suggesting that there's anything to be gained from inflation (another consequence of a centrally managed money supply), Dean Baker makes the argument in his book, Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, that the financial sector benefits from inflation control disproportionately:
...bankers may be very concerned about modest increases in the rate of inflation. They lend money at fixed interest rates. If the inflation rate rises above the rate they anticipated when they made loans, then the bankers will be repaid in money that is worth less than the money they lent. In other words, higher than expected inflation rates cut directly into bank profits.
Baker also shows how businesses are less likely to approve of high wages and benefits that accompany unemployment if they can't justify it in the bottom line. All of this is to demonstrate that the lowest paid among us are the most vulnerable to Fed policies. The Fed policy has almost always been to raise the price of money - in the form of interest rates - once worker wages get too high, thereby benefiting employers and politically powerful sectors over wage workers. If you're going to support a monetary policy that calls on state intervention at the expense of a certain class, you have a responsibility to help the people who will be most impacted by the loss of purchasing power: namely, the supposedly "least skilled".
Although in reality all this talk about minimum wage workers not have the skills for the 21st century and all that is largely disingenuous. It is certainly true that those who don't have as wide an array of skills to offer will be less able to compete. However, there's no reason to assume that certain skills should be more or less in demand than others - in other words, there's no necessary reason why a doctor should be more in demand than a dishwasher. If this were a case of the market allocating incomes based on pure supply and demand with no outside intervention, then RTG would certainly have a point.
However, the bottom line is that the market she's talking about is by no means free. Doctors are protected by regulations and licensing that don't allow the same kind of worldwide market in their field with which textile or automobile workers have to deal, or even dishwashers, given the tepid policy towards illegal immigration (which RTG does support getting tougher on, but for terribly wrong reasons). The same goes for lawyers, those in the financial sector, and other licensed and regulated professions. The effect of these government requirements is to artificially restrict the supply of labor in those fields - the very same thing Republicans hate labor unions doing for their people! Dean Baker explains:
If U.S. trade negotiators approached the highly paid professions in the same way they approached the auto industry, then they would actively be trying to uncover all the factors that prevent direct competition between U.S. professionals and their counterparts in the developing world, and then construct trade agreements that eliminated these barriers. They would be asking hospitals, law firms, and universities what is preventing them from doubling, tripling, or quadrupling the number of doctors, lawyers, and economists from developing countries working in their institutions. They would also be asking the trade negotiators from Mexico, India, or China what obstacles prevent them from sending hundreds of thousands of highly skilled professionals to the United States.
Instead of acknowledging the state intervention that makes certain professions artificially higher priced by restricting their supply, she launches into an absurd display of question-begging: what if we set minimum wages for all professions?
And by the way, if that's all their skills are worth to employers, then that's all they are worth. Perhaps if we want to make the minimum wage fair, we should have minimum wages for each profession. Doctors: minimum wage: $300,000 per year. Lawyers: $300,000 per year. Structural engineers: $750,000 per year. Grocery bag clerk at the Wal-Mart: $2 an hour.
Indeed, if we set wage standards via the state, we would get some ridiculously unfair outcomes. Yet the same affect is achieved by creating barriers for entry for certain industries and not others, thus putting certain classes at a comparitive disadvantage to others. Nothing pisses me off more than people who claim to want to "let the market work" yet consistently support certain advantages for some classes over other classes. The irony is delicious!
Finally, RTG cements her incredible flight of elitist fantasy with some ridiculous notions:
It pushes out the higher paid workers because employers simply can't afford to keep them. Put it like this: I have a maid (she's legal) who I pay about $22,000 per year. I also have a pilot who I pay about $120,000 per year. If I am forced to raise the maid's wages, I can no longer afford the pilot and will have to fire him. That's why hikes of minimum wage increase unemployment.
The lack of economic knowledge here is getting to be pathetic. It's well established that low-paid workers are the most likely to be hurt by minimum wage laws, not highly paid workers. I tried to explain this to RTG but she probably ignored it in favor of ranting on another hot button party issue:
If an employer has to choose between two applicants for given low-skill task, but he doesn't have flexibility on what to pay them, he will choose the more skilled applicant instead of the less skilled applicant, because it's a better value for the wage he's forced to pay.
If he could have paid the lower skilled worker less, he would have taken him over the higher skilled worker, since the latter was overqualified anyway. But since he has no flexibility on wages, his money is better spent on the more experienced applicant.
I sum my position up with a supposedly conservative issue: the solution is a free market, not just for some but for all:
The solution is absolute flexibility on wages, so that low skilled workers are more likely to be hired and more likely to get the skills they need through experience, vs. competing in a market where the bar is artifically raised.
This applies to doctors and lawyers and accountants and defense contractors, too, by the way. Imagine that: white collar people using the state to boost their wages! It's almost like a *gasp* labor union - only instead of targeting the poor, defenseless capitalists, these lawyers, doctors, and other protected professions are boosting prices to you and me by effectively cartelizing. Or, as RTG puts it:
It's not as if a cabal of men are sitting around thinking, "Well if we only set the minimum wage at $5.15, that will ensure that ‘many' of them are women! And we like our women poor and dirty!"
Perhaps that cartoonish portrayal is not entirely accurate, but it's too close for comfort.
Let me make clear: I do not support government intervention into the market on behalf of any class. In the long run minimum wage distort the market. But remember that such market manipulation is occuring within a market that is already heavily favoring the upper classes - and not based on their productivity, but rather on their artificially diminished need to compete. Unlike RTG and the rest of the Right, when I speak of a free market, I actually mean it. And if we're going to have a market where the rich are favored by the state, I do support them having to pay for their privilege and not talking out of both sides of their mouth. But why should they do it, when RTG will do it for them?
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