In Defense of a Fair Living Wage: An Essay
In one hundred years’ time, from the first state minimum wage regulations of 1913, to The Fair Labor Standards Act of 1938 under Franklin D. Roosevelt, to The Fair Minimum Wage Act of 2012, the scope of the moral and economic debates surrounding minimum wage have barely evolved inside of a bubble of eroding ethics and stagnant wage growth. From the end of the Industrial Revolution to the Progressive Era to the Information Age, not only has the breadth of the economic debates by critics remained relatively unchanged, so have the cores of the ethical arguments in support of minimum wage. As in the past, modern day critics of increasing minimum wage seem to present arguments embedded in an ethical quagmire of increasingly corrupt ideals and self-interest, displaying less concern for individuals and the society as a whole. Arguments for maintaining a wage system below ethical criteria for maintenance of life, and belief that low-skilled workers are responsible for their economic stature, and therefore deserving of it, are now rooted in some flawed ideal within the boundaries of a country no longer flourishing, deplete of employment prospects, short on individual opportunities for strong economic advancement. This new landscape creates concerns about who is meant to benefit from minimum wage and what qualifies as a fair minimum wage, rising ethical considerations for increasing the minimum wage, creating query into who is affected and even whether or not there is a need for wage regulation.
These issues of contention reverberate from the past, despite widespread wage erosion amid high productivity, and continue to persist in vastly similar contexts amid developments in the globalization of employment structures and labor trade, advancements in technology, and increased corporatocracy, which have negatively impacted the United States low-wage and mid-wage labor force. As the United States comes out of one of the worst economic climates since the Great Depression, into an age of staggering income inequality due to stagnant wage growth, faced with high education costs and growing poverty levels, after decades of international outsourcing of manufacturing and service jobs, a requirement for fairer living wages is just as legitimate today as it was when the need for wage regulation ascended.
The circumstances under which the need for an establishment of state level minimum wage regulation, in 1913, arose out of an ethical need to protect women and children in the workforce. The lack of regulation on wages had led businesses towards a propensity to extort labor from women and children who, according to Chief Justice William Howard Taft, experienced less equality in their relationships with their employers, making them unable to argue for a fair wage, and causing them to become targets of “harsh and greedy employer[s]” [qtd. by Thies]. Supporting this opinion, American philanthropist, and businessman, Edward A. Filene, in his 1923 The Minimum Wage and Efficiency, expounded the ethics of paying a fair wage as a good business practice that works towards building a quality company full of productive and satisfied employees who are treated fairly. From Filene’s perspective, paying employees too low of a wage proved inefficient and wasteful, and in paying a fair wage ethical businesses can advance. Filene stated that if a company cannot continue business inside of responsible social and ethical standards, then they have no place in the business world.
According to the economists McKenna and Zannoni, in Economics and the Supreme Court, it was, and is, inefficiencies in free market models of business, such as low wages, that lead to oppressed and exploited labor forces, and the growth of monopolies. In addition, basic arguments against the laissex-faire business model of free market, which excludes or restricts government intervention in its policies, demonstrated that is was becoming unsuccessful in maintaining the health and welfare of society, and led to the growth of ineffective and unfair market situations. Eventually this belief led the public to recognize the role big business played in The Great Depression, and to hold them partially responsible, fostering the growth of anti-free-market “movements” whose desire was to dismantle big business in order to return to what they viewed as more perfect market competition and a fairer wage system [McKenna & Zannoni]. It seemed to proponents that establishing minimum wage regulation was the responsible step to take in repairing the broken structure.
On the other hand, opponents felt that an established minimum wage was an oppressive restriction to an employee’s freedom to negotiate a wage of their own, and that “[…]set[ting] legal minimum wages contradicts, and cannot coexist with, the right to liberty” [Thies]. These beliefs, that minimum wage regulation was unconstitutional, and an agent in the suppression of liberty, was also held by the Supreme Court for a period. Enforcing early minimum wage laws proved ineffectual, and in instances where a business tried to get out of paying minimum wage, led to the repeal and overturning of the laws by the Supreme Court in many of the fifteen states that had enacted wage regulations prior to 1938 [Thies].
Furthering the scope of the arguments by critics, prominent anti-transformative economists believed that a natural law of business, wealth, and market existed in society and promoted income equality. A neoclassical economist of the time, John Bates Clark, held the view that an employee, under wage regulation, would not receive fair pay for thier contribution, but free of regulation the employer would naturally be inclined to pay the employee fairly. The error of this view holds the assumption that employers, businesses owners, and corporations will be driven by an ethical responsibility to their employees and community. In addition, the premise ignores that minimum wage regulation was not meant to, and does not, cap potential wages, but simply establishes a base pay, a means for creating a situation where low-skilled employees can maintain the ability to pay for the basic costs of living and maintenance of health, and be a productive asset to society.
However, according to McKenna and Zannoni, opponents of wage regulation began to acknowledge that businesses were becoming too large, and increasingly unconcerned with the ethics of paying fair wages, which employees were entitled to in exchange for service, thereby contradicting the idealistic “natural law” of market philosophy set forth by Clark. The growing popular dissent was that big business did not have public interest in mind and in fact, by forcing low-wage workers to seek assistance from the community, the businesses themselves were unethically receiving entitlements on the backs of low-wage earners and the members of those communities. [McKenna and Zannoni]
Putting these historical arguments of failed business models and corrupt ethics into a modern context, we need only to look to corporations such as WalMart, notorious for low wages and opposing recent proposed increases in minimum wage. It is reported that WalMart costs tax payers nearly $1.6 billion in public assistance [Walmart: High Cost of Low Prices, 2005]. Additionally, the fast food industry, costs tax payers $7 billion a year [Allegretto] in public assistance programs serves as typical example of inefficiency. Today, just as they had one hundred years ago, big businesses fight to keep wages low and/or below a realistic living wage, all the while growing themselves on the backs of taxpayers. In keeping wages artificially low these businesses resign their employees to a life of poverty; stripping them of the freedom to be productive members of society, often stifling their liberty to collectively bargain for a fairer wage through union affiliation [Walmart: High Cost of Low Prices]. These un-ethical business practices echo the concerns that led to the growing realizations by economic leaders and lawmakers, which accounted for the shift in the Supreme Court’s opinion of wage regulation, and the understanding of the fundamental need for it. This further illustrates the need for continued wage regulation and a more ethical and fair living wage.
While the Supreme Court has found minimum wage regulation completely constitutional since The Fair Labor Act of 1938, which mandated a Federal minimum wage, modern day opponents work hard to remove and suppress state and federal minimum wages, despite support for a Federal wage increase of $1.75 by nearly three-quarters of Americans, as reported by Danielle Gewurz of The Pew Institute. Organizations such as the ALEC (American Legislative Exchange Council), a conservative group that pushes for laws benefiting corporations in attempt to advance free-market philosophies, have, according to a report by the National Employment Law Project, introduced and co-sponsored 67 wage repeal and suppression legislation bills since 2011. Organizations such as these do not appear to be concerned about the unethical practices of those corporations preying on low-skilled workers and those caught in the downturn of the labor market over the last 10 years or more.
Based on their resolutions for opposing increases in minimum wage, the American Legislative Exchange Council (ALEC), along with others, claim that “few” workers earning minimum wage indicates labor market supply and demand is working very well, therefore there is no need for an increased minimum wage, and in many cases there is actually no need for minimum wage. Not surprisingly, however, is that the five States who currently have no State minimum wage regulations, Louisiana, Mississippi, Alabama, Tennessee and South Carolina, also experience some of the highest poverty levels compared to those with a State minimum wage at, or higher than, the Federal mandated wage [Luhby]. In addition, these claims do not
taken into account the high number of people making above minimum wage but below an adequate living wage, who must turn to tax-funded social programs to subsidize basic costs of living. High poverty rates persisting among the working class (1) [Yen] actually indicate a system that is not working effectively. Once again, this demonstrates the failure of the laissex-faire model of free market, where wages are kept artificially low, as ineffective in maintaining the health and welfare of society while unethically putting the financial responsibility on the shoulders of society itself.
Returning once again to the historical debates, we look to some moral and social arguments under which the first state minimum wage act for women and children became needed. According to The First Minimum Wage Laws, written in 1991 by Thies, some clergy along with other members of society, opposed minimum wages on grounds of morality. Moral critics believed that a woman with funds to live a comfortable life free of “cooperative economics” (shared housing), and with money to spend on simple pleasures, would be moved to derive those pleasures from locations outside of her home, and find her moral compass askew. This concept held that through low wages, a system of social control could be established. Conversely, proponents of the act theorized that this lack of fair wages that was forcing many women to remain living with their parents, or seek out dependency through “cooperative economics” while taking part in “economizing” efforts such as making their own clothes, created situations where women had no time to enjoy life [Thies]. Further, a person making such a pittance has no real chance to improve their social standing and is limited in contributing to the economic system.
Through the philosophies of the advocates, and certainly paralleled with the idea that maintaining low wages was a good control system, wage regulation then became a means to privacy, freedom, and personal independence that leads to further satisfaction with life. This supported theories that former “sustenance wages” could be more “decent” through regulation so that a person could uphold a healthy prosperous life [Thies]. These assertions called for a person’s right to earn a living wage at a level permitting them to provide themselves basic necessities; a safe and clean place to live, basic privacy, adequate sustenance – opportunity to sustain and maintain health and happiness; illuminating the essential role of wage regulation in a democratic society that included American philosophies of freedom and independence for all.
However, identifying the “beneficiaries” of minimum wage regulation proved, to some, a good method to separate “parasites from the mass of workers” [qtd by Thies], indicating a poor opinion of low-wage workers that continues to persist. Today, the reasoning that minimum wage separates the “wheat from the chaff” holds in opinions that only teenagers, the under-educated and low-skilled workers are truly effected by a wage regulation set below living standards, and are undeserving of an increase. This somewhat erroneous belief is refuted by the statistical analysis of minimum wage and employment structures by Heidi Shierholz, as well as study and analyses by economists Cooper and Hall. In Shierholz analysis for the Economic Policy Institute, she suggests that 28% of those who would be positively affected by an increase in minimum wage will be women over the age of 20, focused in industries such as education and health services, hospitality, leisure, and retail trade. In an analysis by Cooper and Hall, it is further revealed that 88% of minimum wage earners affected by an increase will be over 20 years old.
Adding to modern debates regarding raising minimum wage, many argue that minimum wage is entry-level, never meant for the long-term maintenance of life. This contradicts the historical implications surrounding its creation, as “minimum wage was specifically intended to play a crucial role in a strategy to reward work and reduce poverty in America and to ensure that growth in the economy is broadly shared across the workforce” [Shierholz]. In addition to being felonious, the argument by critics assumes that every citizen has the means and ability to advance their skill level beyond an entry or low-level status. It further maintains the suggestion that those employed in low-wage industries should simply get a degree, as if all it takes is a college education to “escape” low paying jobs, reiterating commonly held views that lack of education is a large factor in becoming a low wage earner.
Challenging this is Shierholz’s analysis in Fix It and Forget It: Index the Minimum Wage to Growth in Average Wage finding that 43.8% of minimum wage earners actually have a college education of some level. This discovery should not be overly shocking in reflection of recession job loss and the impact of outsourcing employment on labor forces, which has led to job losses in low-skill mid-wage earning positions (such as manufacturing), forcing workers to take jobs in low-skilled low-wage industries. Following the loss of low-skill manufacturing jobs over the decades, even high-skilled mid-wage jobs have been prone to outsourcing.
Overall, mid-wage employment opportunities on U.S. soil have been on the decline as jobs in data entry/payroll, auditors/tax preparers, computer programming/software engineering, medical transcriptionists/paralegals, and technical writers within the IT, finance, insurance, and professional and business service sectors [U.S. Congressional Research Service]. Coupled with recession job losses from 2001 onward, this accounts for the 7.3% decrease of growth in mid-wage occupation employment, which experienced a 60% job loss, while low-wage occupations have seen an 8.7% growth in employment, as reported by National Employment Law Project. This supports my theories that there are those in the low-wage industry that has been forced there, not out of some lack of skill, but because of economic conditions beyond their control.
Finally, arguing that increasing minimum wage is damaging to economic systems such as employment, have been part of the platform for opponents of minimum wage increases consistently over the years. Economic research on the negative impact on productivity and employment levels due to increases in minimum wage have shown an inability to strongly tie them together due to flawed methodology. However, modern research using better data shows negligible negative influence on teen employment, while other studies find positive impacts, such as increased employment and employee morale [Shierholz]. While the potential impact on small business cannot be ignored, there is little evidence to suggest that a raise in minimum wage negatively impacts small business [Fiscal Policy Institute]. To further reiterate the minimal affected by a raise in minimum wage (2), it should also be noted that over 78.5% (3) of small business owners are non-employers. Overall, research shows small and irregular negative impacts on job growth and employment which does not justify continuing to maintain minimum wage at its low level.
Analysis finds that a meaningful minimum wage increase would not only positively impact those in low-wage industries, but would produce increases in low-skilled employment, boost consumer spending and “substantially raise pay scales across the entire lower end of the economy” [Shierholz]. Similarly, analysis done by Cooper & Hall indicates similar finding that increases in minimum wage does not negatively impact job growth, but may significantly increases job growth while boosting the economy vis-a-vis increased consumer demand and spending, lending to healthy economic stimulation.
The requirement to raise minimum wage owes to the roles of minimum wage in reducing poverty levels and income equality. According to Shierholz, the relationship between minimum wage and disproportionate wage distribution has led to increased income inequality and decreased living standards across the United States over the past 35 years. The dire need to raise minimum wage comes from the erosion of wages and the real value of wages over the years, which is due to long periods of minimum wage neglect by Congress, and rapidly increasing inflation, as illustrated by Figure 1, as well as the influx of workers into low-wage employment. Keeping minimum wage at levels that have led to overall decline in the economy and decreased wage growth negatively impacts citizens, small business, and corporations by continuing to increase income inequality and decreased spending, and encouraging poor labor conditions by oppressing and exploiting labor forces, creating high turnover while sustaining poverty levels [McKenna and Zannoni].
Figure 1 (see below)
A potential solution then, is to perhaps adjusting minimum wage with the CPI, which tracks inflation, while bringing minimum wage closer to the estimated average wage of workers (those estimates not including high-level positions), thereby promoting real wage gain that would generally not be seen by simply adjusting minimum wage with inflation figures [Shierholz]. Narrowing the gap between the low-wage and mid-wage tiers would afford low-income families the opportunity to have a real stake in economic growth. Raising minimum wage and moving it towards a true living wage, would decrease poverty levels and positively benefit society as whole.
Important in the consideration of argument for, or against, a fair living wage, is that socially responsible communities benefit from supporting fairness in economic matters aimed towards their fellow citizens. As Filene eloquently argued in his 1923 The Minimum Wage and Efficiency, fair wage is an important cornerstone to a free society and is essential in the cultivation of happy productive populations. What held true then holds just as true, if not more so, today. There is a need for a wage regulation and an increased minimum wage in the work force structure. Wildly disproportionate and unfair wage distribution, which led to initial wage regulations, is dangerous to the ideals that the United States was founded upon. Economic structures of society are not independent, rather a symbiotic relationship of ethics and responsibility between employees, employers, and consumers that, when executed efficiently and effectively, benefits all. Therefore, the production of a fair living wage to reflect economic inflation and the evolution of labor forces in a globalized society, that prevent businesses from advancing at the expense of their employees and communities, plays an essential role in maintaining a healthy democratic society where productive members have the ability to flourish and fairly contribute to the economic structures.
1 In 2011, 12.6% of adults ages 25-60 lived in poverty
2 Except in cases where suppliers may increase the cost of raw materials to reflect their wage increases
3 According to the U.S. Small Business Authority, 2012
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