An interesting thing took place recently. Workers from across the country united against what they felt were unfair work practices and began to protest. This in and of itself is remarkable since the labor movement has been all but spayed and neutered over the last 30 years. What I didn’t expect though was the amount of people who would express such disdain for workers fighting for a better life. Let me correct that, the disdain wasn’t unexpected, What was unexpected was the rationale for the disdain. People were angry because if fast food workers achieved their goals they’d be paid higher wages than some firefighters and emergency services workers receive. The argument seems to be because some vital workers are severely underpaid we should not raise anyone else’s wages.
What irritates me about this discussion though is the total disgust people have with the working poor. The argument is that they should just get a better job and if they can’t get a better job then clearly they don’t deserve to live a life of subsistence. Because that’s what this fight is for. The people protesting aren’t looking to become rich off of their jobs at the McDonald’s, they are just looking for a job that pays them enough that they don’t have to also live off of food stamps. So before we get too deep into economics, the social contract, and government handouts, lets define who we are talking about. We are talking about the working poor. People working 40+ hours a week and making minimum wage. We are talking about families working full-time and still qualifying for governmental assistance. We are taking about roughly 42% of the population who earns below 15 dollars an hour. What we are not talking about 16-year-olds with their first summer job. They would neither have the necessity nor the resources to organize a national campaign for fair wages.
But I used to work a minimum wage job it’s not that hard to…
Most of the scorn people have seems to stem from the fact that at some point most of us had a minimum wage job. When we were teenagers, or young adults just starting out we all worked jobs that started us on the road to our careers, we mostly did these jobs part-time along with the other stuff we did to start to achieve whatever success we have had in our lives. Often we grew up an out of these jobs through a variety of means and so we look back at these experiences as just the first step and anyone who’s at that stage should just do what we did and they’ll be fine. So what’s the problem with this analysis? Well first it assumes a lot, it assume that the people working these jobs are all young and just starting in their work life, an extremely irrational assumption since we are just starting to come out of the biggest recessions in a generation where hundreds of thousands of people lost good jobs and had to scramble to get whatever they could.This of course followed 20 years of globalization where millions of jobs vanished from our shores. More importantly though it fails to consider time. Personally I remember working a job that paid below $10 dollars an hour, it was my first job, I did it after school in high school and college. Eventually I left it for another job because it wasn’t enough and I was able to get better job with the help from the mother of a friend. This is a typical scenario for most people I imagine. What is also typical and important to remember is that this happened over 15 years ago! Think about that. Personally 15 years ago, I didn’t have a car, an apartment, or any other family commitments to pay for. It also didn’t cost me 116 dollars a month to ride the subway! This argument also misunderstands time in another way. It fails to consider the time of the worker whom is assumed to have a non-finite amount of time outside of work to develop the skills to “grow out” of their minimum wage job, regardless of family needs, physical limitations, and development costs. Go back to school? how? with what money? and with what time?
This is just basic economics… Part 1
The next big part of this discussion people often bring up is the “basic economics” of wages. The they will often argue that if employers are forced to pay their workers more than they will either a) go completely out of business b) have to hire fewer people and therefore be less “job creators” c) raise the cost of the goods and services they sell. There are studies that refute some of these arguments but in all honesty who cares. My feeling is good on all three. If your business model only works by what amounts to slave wages then your business is unsustainable and should go out of business. You were never a “job creator” and your profits were a market distortion. The only reason your business exists is because it is receiving a substantial government handout. Handout? You might be wondering. Yes, people are constantly accusing the government of causing market distortions by its actions that “harm” the economy. I’ve argued the point several times that government doesn’t arrive at these decisions in a vacuum. The government does things based on the needs of its citizens or at least the ones with enough political influence. Governmental assistance be it food stamps or welfare are a result of the nation as a whole deciding that there is a bare minimum people need to survive and that the government should give aid for those people who can’t sustain this bare minimum. The money to provide this aid comes from the taxes that we all pay. By allowing some businesses to have wages so low that their full-time workers still qualify for governmental assistance we as taxpayers are subsidizing the costs of operating those businesses.
This is just basic economics… Part 2: But if prices increase people will buy less and that will hurt the economy.
In economics 101 you learn about supply and demand curves. If this is as far as you go in your understanding of economics then a lot of what happens in the economy is a mystery to you. Which is why I always find it laughable when people make the argument that things are just basic economics. What you learn in basic economic theory is a simplified version of the actual economy. If you try to apply the lessons of basic economics to the economy as a whole you will have a hard time explaining how the price of oil crashed this year. That’s because basic economics leaves out a ton of variables. The price of a product is determined by the cost of the materials, the labor to make the product, the overhead needed to run the business (electricity, rent. accounting, R&D, human resources, etc) and whatever additional price the market will bare (i.e. profit). While the cost of labor has a major effect on the overall price of a product the price the market can bare can have just as much influence.Starbucks sells the same product as your corner diner, coffee, but one place can charge 4 dollars a cup, the other can only charge a dollar. This cost disparity is a result of a multitude of economic factors yet both can be profitable companies. The simple supply demand curve leaves all this out. Don’t believe me? Go into a cell phone store and ask how much the flagship Apple, Samsung, and Microsoft phones cost without a contract. I don’t know when you’ll read this, but chances are it will be roughly $649 for the base model and $700-749 if you get all the bells and whistles. This despite the fact that these phones have different designs, different manufacturers, and different operating systems. The business models for these three companies couldn’t be more different yet they all came to the same price. In other words the market is determined by more than labor rates.
This is just basic economics… Part 3: Inflation
But let us say that prices do rise because of labor rate increases. So what? If you have a good job you will get a cost of living adjustment to make up for the rising price of goods and services. If you don’t have such a great job you’ll have to start fighting for a raise. Either way wages should start increasing across the board. But wait, you might say won’t that just cause inflation. The answer is yes, and I’ve said it before and I’ll say it again, for most Americans a little inflation is good. Inflation is not the boogeyman that everyone makes it out to be it is a necessary part of any stable economy. Consider this, the Fed and most central banks set an inflation goal of around 2%. If inflation was such a horrible phenomenon wouldn’t it make sense to set the goal at 0%? Central banks don’t set goals like that because they would stagnate the economy, no sense in taking the risk of investing if you have nothing to lose by sitting on your stack of money until someone comes to you with an easy profit business. Inflation forces capital to move, it is the lubricant of economies. It can also have a social good. With wealth inequality at levels not seen since the gilded age some good old fashion inflation will do wonders to close the gap, especially if it is due to wage increases.
Why do we demand piety from the working poor
Ultimately though what I want to understand is why do we feel the need to condemn the working poor? It can’t just be because they receive benefits from the government. Most Americans do, farms receive huge subsidies, corporations receive big tax breaks, and you and I receive subsidies for our homes. All of these things are governmental handouts just like food stamps. Yet with the working poor we judge and scrutinize the decision they make, and when anything doesn’t work in their favor we blame them despite the increasingly higher bar we set for the model deserving working poor. We’ve done nothing to make housing more affordable, little to increase access to job training programs, and half the nation has rejected the single most effective way to decrease the risk of financial catastrophe in this country by not expanding medicare under the affordable care act. Yet heaven forbid the person in front of you in the supermarket after working 12 hours a day to try to make ends meet “wastes” and extra dollar or two to buy some quick easy to make food instead of buying food that will take another 2 hours to make, because clearly they just don’t know how to manage their money and that’s why they stay poor.