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Class Warfare & the Minimum Wage:


It was hard not to applaud Senator Edward Kennedy last week when he lampooned Senate Republicans for attempting to amend and delay a Senate resolution aimed at modest increases in the federal minimum wage.  The corresponding House resolution, which was passed by an overwhelming 315-116, aimed to increase the federal minimum wage from the current $5.15 an hour to $7.25 over the next two years.  Senate Republicans, however, realizing the weakness of their minority status in Congress, seized upon an opportunity to try and block any vote on the initiative, citing traditional pro-business, anti-worker dogmas.  In general, contempt for American workers seems to be at a high as political and corporate leaders vehemently oppose attempts to peg the minimum wage to keep pace with inflation, as was seen recently in Illinois. 

 

It has become standard mantra in the Economics discipline, amongst others, to claim that the minimum wage does more harm than good, not only to the American economy, but to American workers as well.  This Orwellian framework portrays minimum wage increases as detrimental to American workers, due to allegations that they increase unemployment.  According to common Economist models such as the “law” of “supply and demand,” by “artificially” raising the minimum wage higher than its “real” value, lawmakers are only ensuring that companies must layoff larger numbers of their workers (or refuse to hire more workers as workers quit) in order to offset the cost of the minimum wage raise. 

 

Big-business proponents who justify opposing the minimum wage predictably pervade corporate media as well.  Steve Chapman of the Chicago Tribune editorializes, “chances are good that economists have been right all along in expecting” that each 10% “add on” to the minimum wage “would destroy 1 to 2 percent of young people’s jobs,” so that “a $7.25 minimum wage could mean the loss of up to 1.6 million positions.”  Such an assumption, however, has been based upon the use of highly selective, if not dubious, evidence that negates Economics studies with conflicting findings.

 

Kennedy’s backlash against the attempted Senate filibuster is long overdue, especially when corporate executives are posting record profits, while at the same time citing downsizing and mass layoffs as necessary in order to remain “competitive” in the international market.  As Congress and the President have increasingly advocated tax cuts for big business and dramatic increases in corporate welfare, Americans have been left to wonder, what about the American worker?  As Kennedy asked of Senate Republicans:

 

“What is the price you want from working men and women? How much more do we have to give to the private sector and to business? How many billion dollars more are you asking, are you requiring? When does the greed stop?”  Not any time soon, we might answer. 

 

Senate Republicans remained vehement in their attempts to flood the Senate with over 70 amendments in order to prohibit a decisive vote on the minimum wage.  Kennedy’s anger at the attempted filibuster was a welcome departure from the traditional apathy displayed by the Democratic Party when it comes to defending their base: “Do you have such disdain for hard-working Americans that you want to pile all your amendments on this?  Why don’t you just hold your amendments for other pieces of legislation? Why this volume of amendments on just the issue to try to raise the minimum wage? What is it about working men and women that you find so offensive that you won’t permit even a vote denying the Senate the opportunity to express ourselves?”

 

Of course, Kennedy isn’t the only public official that has stepped forward to challenge the political and economic status quo.  Illinois AFL-CIO President Margaret Blackshere has endorsed an increase in the Illinois minimum wage, claiming that this “is indeed a moral issue.  How can we truly expect anyone in the state of Illinois can survive and live a decent life on $13,520.”  Such incisive questions may as well have fallen on deaf ears, though, as political leaders and business elite have long preferred to cite the primacy of profitability over the right of working Americans not to suffer in poverty.

 

Such defenses of America’s corporate elite deserve to be subjected to serious scrutiny, as they often fail to stand up to empirical testing.  The standard assumption that higher wages cause higher unemployment has been effectively challenged as simplistic, and even grossly inaccurate, in recent years.  As Alan Krueger and David Card’s influential study, Myth and Measurement: The New Economics of the Minimum Wage found, unemployment has not increased in states like New Jersey, California, and Texas, where minimum wage laws were passed.  A general plotting of changes in the minimum wage and unemployment from the 1960s through 1990s also shows that there is no direct correlation between the purchasing power of the minimum wage and levels of national unemployment.  For example, in the late 1960s, when the value of the minimum wage was at its highest in inflation-adjusted purchasing power, unemployment levels were actually lower than in later periods when the wage’s value fell.

 

Card and Krueger’s questioning of the anti-worker, big business paradigm has been reinforced by a number of Economists, hundreds of which have stepped forward to support an increase in the federal minimum wage as a means of reducing social inequality and aiding in economic growth.  In growing numbers, Economists and other academics are wondering whether big business dogmas are worth defending – particularly the conservative theory that the minimum wage is irrelevant when the private economy already pays Americans workers for the “true” value of the work.  William Spriggs and John Schmitt argue in Reclaiming Prosperity: A Blueprint for Progressive Economic Reform that “it is not surprising that the long erosion since 1980 in the after-inflation value of the minimum wage has made a substantial contribution to the steep increase in inequality during the last 15 years.”

The value of the minimum wage was worth far more in 1968 (at $7.49 an hour in inflation adjusted purchasing power), than it was in 1997, when the $5.15 minimum wage was passed.  This incremental but steady decline in the value of the minimum wage is in large part a result of the failure of government to raise wage levels to keep pace with inflation.  Such a trend has led many Economists to question the claim that businesses cannot afford to pay higher wages due to competitive pressures.  As Robert Pollin and Stephanie Luce argue, “what has changed so drastically over the past thirty years that – despite the economy’s far greater productive capacity – the idea of a national living wage now strikes many as pie-in-the sky?” 

 

If anything, the dramatic growth in corporate profits in recent decades is the major indicator that a higher minimum wage, if not a living wage, is certainly possible, and morally defensible.  As author Kevin Phillips shows in his work, Wealth and Democracy: A Political History of the American Rich, corporate profits generally skyrocketed throughout the 1980s and 1990s, followed by modest growth in overall economic productivity.  Economic growth, however, was accompanied by stagnating hourly wages for private sector employees.  Michael Parenti has noted this trend in his work, Democracy for the Few, explaining that, “Between 1973 and 1997, worker productivity increased by 20 percent, while real wages declined by 22.6 percent.”  In reality, then, it has not been big business’s problems with profitability and growth that have prevented a raise in the minimum wage, but rather corporate opposition to rewarding workers for increased productivity.  Corporate greed has played the major role in the dramatic increase in American inequality.

 

We may return to the last refuge for those who argue against raising the minimum wage: the claim that such regulations prevent corporations from effectively competing in the international economy.  However, as scholar Susan Hansen explains in her work, Globalization and the Politics of Pay, this claim is largely a fabrication, as she demonstrates that “[U.S.] states with high labor costs are in fact doing better with respect to economic growth, exports, and foreign direct investment.  The strong link between high labor costs and productivity growth provides a competitive advantage in the increasingly specialized global economy.  Reducing labor costs has had adverse social consequences in the states [characterized by low pay]: slower rates of job creation, slower declines in poverty rates, stagnant growth in personal income, rising inequality, lower voter turnout, higher crime and suicide rates, and instability in family life.”

 

While business leaders and political elites will continue to howl about “market distortions” like the minimum wage, Americans need to reexamine the priorities of the political leaders of a state with unparalleled wealth, accompanied by the highest rates of inequality in the industrialized world.  If “the market” is defined by its failure to provide workers the fruits of their labor, depriving families of basic necessities by paying below subsistence wages, then let us have more distortion of a system placing corporate greed over basic economic rights and needs.  Fortunately, most Americans seem to support an increase in the minimum wage, as over 80% of Americans support a raise in line with that proposed by Senate and House Democrats.  Only time, and more importantly, increased activism and pressure on American political leaders, will tell if the public’s opinion will play a deciding factor in the ongoing debate over the minimum wage.

 

 

Anthony DiMaggio has taught American Government and Middle East Politics at Illinois State University.  He is currently a PhD candidate in the fields of American Government and Mass Media Studies.

 

 

 

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