Obviously, the Democratic Party is in panic mode about the upcoming Congressional elections. Its supporters have been filling the airwaves with accusations of racism, the better to motivate minority voters. And they have been using all means necessary to get women, another important constituency, to the polls.
Things are so dire, that even Cosmo—the magazine that mostly tells women how to have more, better orgasms—has weighed in on the minimum wage. You see, failing to raise the minimum wage is discriminatory against women.
In case Republicans hadn’t made their view of women clear in their crusades against contraception and their closure of abortion clinics, they’ve moved from your uterus to your pocketbook. First came their unanimous rejection of a bill that would have guaranteed equal pay for women. And yesterday, Senate Republicans blocked a measure that would raise the minimum wage to $10.10 an hour, up from the current rate of $7.25. That legislation would have allowed women across the United States to earn a livable wage, narrow the pay gap, and keep their families above water.
Gosh, if you didn’t know any better, and perhaps Cosmo’s readers don’t, you would think that increasing the minimum wage is the royal road to economic prosperity. Even Joe Biden has been touting its virtues, noting that when FDR introduced it in 1938 unemployment did not rise.
If you don’t believe Joe Biden, Cosmo assures us that all studies of the effect of the minimum wage prove that it does not increase unemployment. The magazine shows no awareness of the fact that an employee must be able to contribute enough value to an enterprise to justify an increase in wages. If the employee cannot do so, the company can either lay off workers or lost its viability.
To respond to Joe Biden, we turn to Amity Shlaes, author of The Forgotten Man, a notable study of the Great Depression, for a reality check.
Soon after the stock market crash in 1929, President Herbert Hoover increased the minimum wage. Shlaes explains how well that worked:
President Herbert Hoover liked the idea [of a minimum wage] enough that within months of the 1929 crash he hauled business leaders to Washington to browbeat them into sustaining higher wages. Ford actually committed to raising pay, to $7 a day from $6. Within two years Hoover also signed the Davis-Bacon Act, which mandated that government offices fulfilling construction contracts in various regions pay the “prevailing wage” for the workmen’s trade and for the region. The act put additional upward pressure on wages at a time when the economy could ill afford that. Unemployment abided and rose, rather than disappearing, as it had in a depression of the early 1920s.
From the beginning of the New Deal, Franklin Roosevelt did everything in his power to increase wages, regardless of whether employers could afford it:
Franklin Roosevelt codified the pressure further with the National Industrial Recovery Act, whose codes contained minimum wages for various trades. Now even private companies that were not government contractors had to pay more than they could afford. There was an interruption when in 1935 the Supreme Court held Roosevelt’s NRA unconstitutional, mostly for reasons unrelated to wage rates. But within months Roosevelt signed the Wagner Act, which gave labor the power to terrify closed-shop business and even carry out occupations of business premises (this latter action bearing the euphemism “sit-down strike”). Employers offered higher wages or paid for their refusal with violent strikes. John L. Lewis, the militant labor leader, terrified even Ford into accepting unionization. As if the Wagner Act were not enough, a new law, the Fair Labor Standards Act of 1938, re-codified the minimum wage across trades.
Reducing wages, the old lesser evil chosen by employers in troubled times, would not be sanctioned by the powerful New Dealers in Washington. So employers often laid people off — hence the mostly double-digit unemployment of the 1930s.
As for 1938, Shlaes offers this explanation:
In the very late 1930s, unemployment did drop, though not down to anywhere near acceptable levels. If you want, you can tell yourself this drop was caused by the 1938 Fair Labor Standards Act. But this drop came in good part because the New Deal was running out of steam.
After the Fair Labor Standards Act, Roosevelt shrugged and turned to studying Europe’s conflicts. The 1938 midterms saw the Republicans making some gains, and the general sense was that the New Deal had run its course. If you really want to evaluate high-wage policy from the Depression, you have to look at all the laws and policies, not merely the Fair Labor Standards Act in isolation.
It is worth keeping in mind that after eight years of New Deal policies, the prewar unemployment level was around 14%.