The Minimum Wage Drama (2006 Dec)

by Barry A. Liebling

In the midterm elections of 2006 the balance of power shifted to the Democrats – who achieved majorities in both the Senate and the House of Representatives. Democratic officials immediately promised that raising the Federal Minimum Wage is near the top of their to-do list. This was an irresistible call for mainstream commentators to play their parts in the minimum wage dramatic ritual.

The discourse is dramatic because it is designed to excite the audience’s emotions and both troupes of players – Advocates of an increase and Opponents – like actors in a stage play know in advance what will be said and what the outcome will be. It is a ritual because the players have been repeating the same lines since the Federal Minimum Wage started in 1938.

The Advocates’ script has three main themes.

The first theme is altruism. The minium wage should be raised because it will benefit the working poor. Advocates righteously affirm that they are not trying to help themselves. They are acting in the interests of others who are the least successful wage-earners. Advocates know that their audience is teeming with people who regard altruistic appeals as unassailable. Political action labeled as “unselfish and focused on helping the needy” is automatically justified. It does not matter what methods are used or whether the methods are effective, providing they are motivated by altruism.

The second theme is the “problem of inequality.” Advocates cite surveys showing economic inequality on the rise. The gap between the most prosperous and the working poor is far too wide, and something must be done about it. Of course, regarding inequality as a problem is caused by the gut-feeling that all wealth really belongs to “society” and, therefore, everyone is entitled to an equal share. Shrewd Advocates know there will never be complete equality, and that is fine with them. What is important is that inequality of any magnitude is a call to action. As long as some people are getting a bigger share of “our society’s wealth” there is a need for redistribution, making things “more equal,” and raising the minimum wage.

The third theme is “penalize the rich.” Advocates are playing to some spectators who are not satisfied with helping the working poor. Punitive action has to be taken against business owners and investors. Those who are balefully envious of the “propertied class” – or feeling guilty that they are themselves successful – can express their irritation by proclaiming that rich people have more than their fair share of the pie. Political action that is confiscatory – such as raising the minimum wage – is attractive because it is motivated by “social justice” – cutting the rich people down a notch.

Of course, the Opponents of raising the minimum wage have standard, well-practiced responses. Their strategy is to avoid challenging the philosophical assumptions of Advocates. Instead, Opponents argue that Advocates are mistaken about the consequences of raising the minimum wage and the prospects of low-wage-earners.

Consider the altruistic theme. Opponents do not question that legislation is justified if it is altruistic – done for someone else’s benefit, especially those who are least well-off. They object to raising the minimum wage on the grounds that it will hurt some low-wage-earners. The classic economic argument is that increasing the minimum wage will make it more expensive for companies to hire employees and will result in fewer jobs. Opponents say it is better to have a man working at today’s minimum wage than to have him unemployed at tomorrow’s increased minimum wage.

What do Opponents say about the “problem of inequality”? They carefully refrain from suggesting the heresy that inequality is not a problem. Instead they argue that the magnitude of inequality is really modest. First, Opponents interpret survey data and conclude that the gap between the richest and poorest is less than Advocates say it is. Second, Opponents point out that people are extremely mobile. Those who are earning only the minimum wage tend to improve their lot and get better paying jobs. Also, many minimum wage earners are part-time workers such as students and retired persons who have other sources of income.

And how do Opponents typically respond to the “penalize the rich” argument. Some dismiss it out of hand as illegitimate “class warfare.” Exactly what “class warfare” is and why it is wrong is usually not addressed. Opponents who regard themselves as “pragmatic” point out that business owners and investors create jobs. Therefore, confiscatory punitive measures – like raising the minium wage – will kill the golden goose and hurt low-wage workers. A member of the propertied class with less money will hire fewer people – resulting in more unemployment.

The outcome of the dramatic ritual is obvious to both the players and to astute observers. Either the Federal Minimum Wage will be raised or an increase will be postponed to another time. There is no chance that the minimum wage will be rolled back or abolished. This ratchet effect occurs because while Advocates are arguing from false premises, Opponents seldom say anything that exposes minimum wage legislation as ethically wrong.

It does not have to be this way. Opponents could articulate that a legislated minimum wage is a violation of individual rights since wages should be decided by mutual consent – not government decree. They could point out that the doctrine of altruism is insidious and incompatible with the concept that each person is the legitimate owner of his or her life. They could explain that individuals have a right to the wealth they acquire ethically – and that the degree to which individuals have equal or unequal incomes is not a material issue. They could assert that the proper function of government is to protect individual rights, not to confiscate and redistribute wealth.

When Opponents understand and use principled arguments the results will be dramatic.

*** See other entries at in “Monthly Columns.” ***

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