Wages & Morality

Hey Folks,

Below you can see a major problem we face in our most "religious," compassionate, "democracy"-spreading, shining-city-on-a-hill nation.

It's an old problem, one that has existed since the discovery of agriculture allowed "civilization" to crawl into hierarchical form: the people at the upper end of the hierarchy truly believe they belong there and that those below them deserve their status too.

The culture is founded on nonsensical "truths" - more correctly myths - that support the notion that the way things are at present is good, proper, preordained, blessed by God (or gods), in accordance with "holy books," "the way they've always been, the only way things can work, not perfect but still the best ever, etc.

In a pyramid-shaped system, obviously, the few closer to the top of the hierarchy (e.g. Pharo, King, President, Industrialist) reap the greatest rewards; and the very large number near or at the bottom reap the least.

Can you guess what group of individuals revere this arrangement? Love it, like it, accept it, suspect it, resent it, resist it, or hate it? Well, those who benefit at others' expense (or believe they do) always defend the inherent and arbitrary inequality of the system, and trot out the long-established, mythical dogma as supporting proof.

Of course there are those among them who know what they are doing; i.e. cold-bloodedly exploiting other human beings - in some cases millions, maybe billions, of their fellow human beings. But, frighteningly, many of these folks (especially, but not limited to, the Upper Middle Class) actually believe their own propaganda, and actually feel hurt when the immorality of their prerogatives is pointed out to them.

Such is the case demonstrated below in a recent piece appearing in the Columbus Dispatch. I have commented throughout the piece in red and have highlighted parts of the article with blue.

(a column published along side the one discussed below and written from a working person's viewpoint, can be found at: http://www.ukuleleman.net/2006/11/working-persons-view-of-minimum-wage.html )

- Uke Man


Will increasing the minimum wage help lowest-paid workers?

Not necessarily: Supporters gloss over full costs of such laws
Monday, December 04, 2006
GLENN SHELLER

Proponents of the minimum-wage increases passed in Ohio and five other states on Nov. 7 are ecstatic over their success and claim not only a political victory, but a moral one. Paying people an "adequate" wage, they say, is a moral issue.

Presumably, then, if you voted for the minimum-wage increase you acted morally, and if you voted against it, well . . . Anyone who believes the economy is doing well, who claims to be "Christian," who claims to support the ideals of the Declaration of Independence and the Pledge of Allegience and voted against it IS immoral.

While proponents are entitled to their victory lap after successful political campaigns, their moral triumphalism is another matter, because it ignores the fact that any economic policy involves trade-offs. If proponents declare the benefits to be morally good, then the drawbacks that result must be morally bad, no? Maybe. Maybe not.

Of course, this is an issue only if the minimum wage is set at a level above what the unfettered market would pay for unskilled labor. If the market already is paying people more than the law requires, the minimum wage is an empty gesture, economically and morally null. It can be argued that raising the minimum wage has some beneficial effect on those earning higher than minimum wages, but there is a more important point to be made.

An "unfettered market" does not exist. The writer's use of this term is an example of the mythology I mentioned above. The notion is that whatever helps wage-earners is a "fetter" to the Market, but direct and blatant impositions on the Market benefitting non-wage-earners are NOT "fetters."

The Federal Reserve regularly manipulates the Market by controlling interest rates. Legislatures owned by non-wage-earners regularly manipulate the Market via taxation (increasing or decreasing), laws restricting union organizing, and adjustment of certification/licensing of occupations in ways to increase the labor pool (which holds wages down).

I've read the Dispatch for fifty years, and while it regularly complains about imposition of "fetters" by labor, I have never seen it editorialize against "fetters" imposed by the privileged.

But certainly, raising the minimum wage above what the free market would pay for unskilled labor has drawbacks. For one thing, it raises the prices that we pay for goods and services. That includes raising the prices paid by the poor, the very people the minimum wage is supposed to help. Depending on how high the minimum wage is raised, it also can mean that jobs that would have been created won’t be created. If you don't know the 80-20 rule taught in business schools, you need to. Eighty percent of what is sold is bought by the top twenty percent of the income spectrum. People earning minimum wage have barely enough to survive. The ginks who will possibly be spending a bit more will be those who can offord it.

Here’s a hypothetical example: A woman owns a small shop and employs two clerks at $5 an hour, for a total labor cost of $10 an hour. The owner feels she needs and can just afford to hire a third clerk at $5 an hour, raising her total wage overhead to $15 an hour. One needs to consider WHY she "feels" that she can afford three workers at $5.00 an hour? How much does she earn a year? How much more, if any, will she make with an extra worker? All of this is important, as I will explain.

But then voters or legislators raise the minimum wage to $7.25 an hour. Suddenly, the two clerks she already has cost her $14.50 an hour, using up all but 50 cents of the money she had hoped to pay to a third clerk. So a third clerk position is now out of the question. Whoever would have gotten that job is out of luck. The woman may, indeed, choose not to hire the third worker, but whether or not that action is "moral" or not depends on the answers to a number of questions.

Does she get a good return on her investment at the $5.00 an hour rate? Would she still make a good but slightly lower return at the higher rate using two workers? Would she make a good but, again, slightly lower return with three workers at the higher rate? Under all three scenarios is she making significantly more than her workers?

If the answer to any or all of these is "Yes," then the increase in the minimum wage is not the problem. The selfishness of the "owner" is the problem. She can pay the higher rate and hire the third worker AND still be OK herself - the only drawback is that SHE would be a little less well-off while her workers' situation would be a little improved.

This argument may sound strange to some because the myth holds that the equation moves in only one direction: wages are cut or layoffs made to increase profits; profits are NOT cut to increase wages. In fact, there are businesses making 6% profit who are cutting workers because Wall Street demands HIGHER profits. It is not always a matter of avoiding bankruptcy; it more often is a matter of "inadequate" profits.

Minimum-wage proponents will point to the two clerks who just got a big raise and pat themselves on the back. They might even claim that since neither of them lost their jobs, this proves that minimum-wage laws do no harm. Well, Folks, the "big raise" takes those $5.00 an hour, full-time workers (if they are allowed that many hours) from pre-tax earnings of $10,400 to a whopping $15,080 (assuming they never miss a day for their own or their family's illnesses or emergencies). And I'd bet my house that the columnist takes home a bit more than both those figures added together - and probably would like a raise besides. Of course, according to the mythology all of that is as it should/must be.

But they can do this only because nobody thinks about the person who won’t be hired. That person is invisible, but was deprived of a $5-anhour job so that somebody who already has a $5-an-hour job could have a $7.25-an-hour job. How’s that for social justice? Here, the mythology frames the debate falsely. Supposedly it is a zero-sum situation. The only way more workers can be hired is if present workers take a pay cut. I've already shown how that is not necessarily the case. Profits could be reduced to "adequate" levels so as to raise wages to "adequate" levels.

That never gets mentioned, however; the mythology asserts that such action is impossible; the pain is supposed to flow in only ONE direction.

In this example, the minimum wage law sets two minimum wages: $7.25 an hour for those lucky enough to have a job already, and $0 for those shut out.

We can argue all day about how much damage any given minimum wage level will do, but even minimum-wage proponents implicitly acknowledge that such laws are harmful. Otherwise, why not set the minimum much higher? Instead of Ohio’s new $6.85 an hour, why not set the minimum at $10 an hour or $25 an hour or more? This doesn’t happen because even minimum-wage proponents know that raising wages artificially does damage. And minimum-wage opponents think that living and raising children on ten or even fifteen thousand dollars a year doesn't causes damage?

Moreover, if the morality of this whole question is to be decided by how many more people can get jobs, rather than on the quality of life of workers and their families; then, clearly, the minimum wage should be REDUCED - as far as it needs to be to allow everyone a job. Whether or not the people can survive without turning to crime is apparently irrelevant.

But there is another moral factor to be considered. In passing minimumwage laws, society is saying, "Every working member of our society should have at least this much income."

But if society decides to impose a policy it considers a social good, shouldn’t all members of society bear the cost of it? Yet with minimum wage laws, the cost of this mandate is imposed on just one sector of society: employers, many of them small businesses. Minimum-wage proponents are claiming the moral credit for a good deed that they forced somebody else to pay for. This is nonsense.

First of all, everyone doesn't pay the cost of government programs any more than government programs serve everyone. Wealthy Libertarians who hate government in almost every way, nevertheless, love it that government provides police and military force to protect their property from impoverished criminals. And, as the writer suggests, EVERYONE is required to help pay (including the poor) for the "justice" system that protects the wealthy from the poor (an overstatement? look who is incarcerated).

Another example of the double standard is tax abatements for businesses. For the "social good" of being allowed to have a job, businesses are allowed to escape paying taxes for some part of their services, many of which serve the Public as well. The Public, however is required to take up the slack. This, of course, is , unlike the minimum wage, "as it should be."

Here the mythology essentially justifies blackmail. State and national governments could outlaw the practice so that business decisions would be made on factors other than how low a community's workers can be beaten down. But that would be against the laws of God, Nature, and the Market. No one ever even suggests such a wild idea.

Rep. Nancy Pelosi, D-Calif., who will be speaker of the U.S. House when a Democratic majority opens Congress in January, has pledged that a top item on her agenda will be raising the federal minimum wage to $7.25.

No doubt she or some of the proposal’s supporters will claim that raising the wage is a moral issue. I would hope so, because it is.

They’ll be right. But they’re going to talk only about the half of the moral equation that makes them look good. Maybe, but the sad thing is that so many good people who take umbrage at the concept of an "adequate" wage, or its characterization as a "moral" issue are so indoctrinated by the self-serving, mythological propaganda that while they persevere in debasing their fellowman, ignoring the ideals of Christianity, and abandoning the official values of United States of America, they pat themselves on the back for being such moral defenders of everything sacred.

- Uke Man

Glenn Sheller is editorial page editor of The Dispatch.
gsheller@dispatch.com