Social Immobility

When politicians lament the persistence of inequality they are really saying that they want to use the power of the government to give people more. In this case, they want to give people  higher wages by increasing the minimum wage. Naturally, the politicians insist that it will cost nothing. 

True enough, it will cost them nothing, but since a wage increase at one level of a company will impact the wages of other workers, it will surely cost companies something.

Those who buy votes by promising to increase the minimum wage reject the idea that the new rule will cost jobs. They do not see that a wage is ultimately a function of the value a worker adds to a product. They assume that plutocrats are exploiting workers, and that increasing the minimum wage will right the balance.

When pundits complain that workers at Costco earn more, on the average, than workers at Walmart, they fail to mention that, thanks to differing business models, a worker at Costco adds more than twice as much value as a worker at Walmart.

In New York City a few years ago a group of developers wanted to turn the Kingsbridge Armory, in the Bronx, into a shopping mall. They wanted to invest $300 million and hire 1,000 workers to build the mall. Then, the businesses that would operate out of the mall would hire 1,200 staff.

That would have spelled real jobs for real people. It didn’t work out. The New York City Council demanded that the prospective employers pay an above minimum wage. They were told that they would have to pay more than $10 an hour.

Th developers folded the project. There is no mall. There are no jobs, but the City Council has stood up for the vested interest groups that own it.

As is well known, the tragedy of the Obama economic recovery is that fewer and fewer people now hold jobs. As David Brooks pointed out, the problem with poverty in America is not the minimum wage rate, but the lack of employment.

In his words:

The primary problem for the poor is not that they are getting paid too little for the hours they work. It is that they are not working full time or at all. Raising the minimum wage is popular politics; it is not effective policy.

One should add that the problem is not how much the government can force private employers to pay their employees but how much value these employees can add to a product.

Is America producing workers who can do their  jobs effectively and competently? Is America producing workers who can add something measurable to an enterprise?

If not, the debate over the minimum wage is political posturing.

Moreover, it is counterproductive. If you tell workers that they deserve to be paid more for doing the same thing, you are removing part of their incentive to improve themselves and part of their responsibility for their current wage. If you tell them that government will vote them a pay raise, you are telling them that their own efforts are being systematically undervalued by wicked and predatory employers. How well do you believe that that will motivate them to work harder and better?

The problem, as Brooks sees it, lies in the culture. American culture has been producing people who do not much want to work or do not know how. If they do not know how, they do not want to learn.

Instead of harping on inequality, we should, Brooks says, see the problem in terms of social mobility. Today’s America has increasingly been divided into permanent castes, constantly at war with each other.

Brooks writes:

Some on the left have always tried to introduce a more class-conscious style of politics. These efforts never pan out. America has always done better, liberals have always done better, when we are all focused on opportunity and mobility, not inequality, on individual and family aspiration, not class-consciousness.

Social mobility, one of the great products of the Enlightenment and the Industrial Revolution, accepts the existence of status hierarchies. It accepts the existence of different skill sets and different levels of achievement.

It rejects a caste system that fixes people in one social stratum, the one they were born into.

Increasingly, Americans in the lower social classes are becoming a permanent underclass, out of work and out of luck, permanent wards of the state. Those who belong to the upper classes can provide their children with so many privileges and advantages that those who are in the lower classes cannot and will never be able to compete.

Brooks lists some of the cultural factors contributing to the decline in social mobility:

There is a very strong correlation between single motherhood and low social mobility. There is a very strong correlation between high school dropout rates and low mobility. There is a strong correlation between the fraying of social fabric and low economic mobility. There is a strong correlation between de-industrialization and low social mobility. It is also true that many men, especially young men, are engaging in behaviors that damage their long-term earning prospects; much more than comparable women.

Many people agree that these cultural problems trump stopgap solutions like increased minimum wages. And yet, no one really seems to have a very good idea of how we are going to do it. Surely, it would involve undoing the countercultural revolution that overtook the nation during the 1960s.

And it would also require us to overcome the national obsession with multicultural diversity. If people are going to add value to an enterprise they will need to learn how to work as a team, to function as part of a group. They will need to define their identity as loyal employees of their company. They need to follow one set of rules that pertains to everyone equally. they will need to get over the idea that they should be following their bliss or doing as they please. A company where different people are following different rules can never prosper. If it does not prosper it will not be able to pay its workers a higher wage.

Brooks is a bit too optimistic, but surely there is nothing wrong with his agenda:

If we’re going to mobilize a policy revolution, we should focus on the real concrete issues: bad schools, no jobs for young men, broken families, neighborhoods without mediating institutions. We should not be focusing on a secondary issue and a statistical byproduct.