As part of the $1.9 trillion COVID relief bill, the minimum wage is expected to be raised to $15.00 an hour. Whether this should be part of the relief package is, of course, an open question. Sadly the likelihood of the minimum wage being raised on its own is highly unlikely. It isn’t only that opponents have prevailed in the past, but that supporters have also failed to truly grasp the issues here. The minimum wage is not about paying workers more than their worth. Nor is it merely a matter of social justice because a sizeable segment of the minimum wage labor market are single mothers of color.
On the contrary, the minimum wage is but one tool in what should be a move towards a more encompassing wage policy in the name of broader economic justice. All administrations talk of an economy producing good paying jobs. The new Biden administration said as much during the campaign. And yet, it doesn’t support jobs paying good wages when it signs executive orders instantly killing jobs in fossil fuels. Meanwhile, it claims that displaced workers can be trained to install solar panels at a fraction of what they were earning in oil and gas. Ironically, these lost jobs are union jobs, and the unions were among Biden’s strongest supporters. Does the Biden administration now think that raising the minimum wage will push up the wages of those solar panel installation jobs?
Possibly, but a little transparency would be helpful here. Critics will assert, as they all too often do, that only a small fraction of the labor market earns the statutory minimum wage. Although this is technically true, it misses the point. The statutory minimum wage is merely a reference point for the larger low-wage labor market, which would include those earning between the statutory minimum wage and say $12.00 an hour, and maybe even up to $15.00 an hour, especially in high cost-of-living states like New York.
Our larger low-wage labor market now includes adults with children; not just teenagers seeking funny money. Still, supporters of the minimum wage really don’t do their cause of higher wages any good when their only arguments are about the poor. The minimum wage is important because it affects the wages in a much larger swath of the wage distribution than simply the 2 percent of the labor market that earns the statutory minimum. Otherwise, how else do we explain the fierce opposition to it? After all, if only a small segment of the labor market earns the minimum wage, it should be a non-issue.
A boost in the minimum wage, and certainly an increase up to $15.00 an hour, will force up the wages of those in wage ranges above the new statutory minimum. Increases in those wage ranges will force up the wages of those in wage ranges above them, and so on. These are what we can refer to as wage contour effects. Therefore, it isn’t out of the realm of possibility that those $21.00 an hour solar panel installation jobs could be forced up as well.
The minimum wage should be promoted as a middle class policy intended to boost wages for a wider swath of the distribution. Only when couched as a middle class policy can it truly gain the political support it needs for passage. It was on this basis that Social Security Act was passed during the 1930s. By presenting it as a middle class entitlement rather than another poor person’s program, the architects of the program were able to build broad base support for the program.
At the same time, one cannot help but feel that a $15.00 an hour minimum as part of a COVID relief bill is nothing more than a cover for the globalist policies that elites have been pursuing for years which did much to suppress wages. These policies have essentially facilitated the exportation of good paying, and often union, jobs to places where wage rates are low and there is little by way of regulation. In the interest of protecting consumer welfare, antitrust laws have not been enforced and any number of small businesses have been eaten up by larger corporations.
These effective monopolies have also resulted in labor monopsonies, which have effectively driven down wages, especially at the bottom of the distribution. As an example, if the Walmarts of the world and other box stores buy up mom-and pop operations — what used to be referred to as small businesses — these bigger firms become the largest employers of low-wage workers. In fact, they are effectively setting wage rates for the low-wage market. And because they are the principal employers of low wage workers, an increase to $15.00 an hour is not going to have the predicted negative textbook effect.
Of course, if proponents of increases explained labor monopsonies, instead of the standard justice and fairness arguments, they could actually make a credible argument against those who only focus on disemployment effects, specifically among teenagers. The real issue, and which has been dramatized by the visible inequities in the wake of government shutdowns of the economy due to COVID, is that the nation needs a serious wage policy.
Many of the globalization policies have involved assaults on the nation’s labor market institutions. Unions have been under assault through state right-to-work laws and the stacking of the National Labor Relations Board (NLRB) with people who are hostile to labor. The minimum wage has been allowed to deteriorate. It would not be an exaggeration to say that the nation has had, and continues to have, a putative policy of low wages where workers are told that our challenge of competing in the global economy is wage rigidity.
If we had a serious wage policy whereby the goal would be good wages, including those in the low-wage labor market, then maybe there wouldn’t be quite the need for stimulus checks, which are poorly targeted. Moreover, there would not be quite the same need for the government sponsored social supports which cost the nation more that $152 billion a year.
An increase in the minimum wage is an important start, but what the nation really needs is a serious wage policy. The nation needs a set of policies that will drive up wages. A floor that keeps up with inflation helps, but laws protecting workers’ rights are also important. This would include serious stimulus money that would compensate workers fully for the jobs they lost due to pandemic related government shutdowns. It would involve thinking about workers’ current jobs and wage rates before issuing executive orders that will effectively push them into lower paying jobs. It would involve perhaps creating wage boards and/or councils to establish industry-wide, and maybe even occupation-wide ,wages that ensure that at a minimum a middle class living would be free of the need for social support. Because in the absence of a serious wage policy, the only reality we have is that public officials really don’t really care about workers at all.