Thursday, May 8, 2014

Debating the Minimum Wage

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.

Cosmo explains:

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%.




11 comments:

Dennis said...
This comment has been removed by the author.
Sam L. said...

One cannot convince the unknowing that they are ignorant when told lies.

n.n said...

The issue is cost-of-living. Minimum wage is a red herring. As is "equal pay for women", which features selective discrimination.

That said, redistribute one million. No, one billion, to each man, woman, and child, then set them loose in the arena.

Do the proponents of raising minimum wage even understand the laws of supply and demand? Perhaps Democrats want to address the cost of placating their base, including finance and welfare policies, and the consequences of a devaluing capital and labor.

The Left's 1% need to stop hiding behind "good intentions" and abortion/murder (i.e. reducing the problem set). They have been a leading sponsor of corruption and dysfunction in America and globally.

n.n said...

While money does grow on trees, which is an inherently renewable resource, or in electrical signals powered by nuclear and coal plants; wealth does not, and only exists as a product of capital and labor converting limited, finitely available resources to a usable and useful form.

Incidentally, this is why we have health care "reform", because money, and its representative binary signals, do indeed grow on trees and stored in seemingly limitless petabyte drives. Perhaps it's time to invest in exabyte drives to fill the demand for money... and extend Planned Parenthood to accelerate reduction of the problem set.

Ares Olympus said...

I don't know about the minimum wage, but the fancinating data is "Labor force participation rate" rather than unemployment, and the gender divide, with women near an all time high just below 60%, and men at an all time low of 70%.
http://correctionspageone.blogspot.com/2011_12_01_archive.html

I'm not sure who Romney's 47% are who are just looking out for government handouts, but compared to 1948 with 88% of men are employed, and only 32% of women we're in a totally different world from then.

Meanwhile perhaps minimum wage would "help" the women working in rural nursing homes or other "low value" work that merely helps people, versus computer work that converts everyone into a number and scams a way to extract a new monthly charge on an unneeded virtual service?

Any manufacturing is also totally different, with low skill work being now largely exported, men who used to be able to graduate from high school, get a good job at a lifetime employer to raise an income upon are much harder to find. And its women who are being scammed into the college degrees in exchange for debt, which may or may not pay off, but what are the young men doing who aren't going to school, and aren't going to higher education?

I see that the idea of "living wage" is hopelessly naïve, that is to say, once you factor in "debt" and access to credit, people can spend far beyond their means, and hope for the best, and in a bull market and high employment, perhaps the debt is eaten quickly, and in a bear market and poor job pickings, debt is a deadweight that pulls even the most newly conscientious debtors back under water without some sort of "bailout" to start fresh, like the banks always have access to.

So my thought is raising the minimum wage is a "mostly harmless" way to help people on the bottom, but unless you can help them out of debt, its spitting in the ocean and rewarding their credit card companies who can extract interest for another year or two that otherwise would have lead to bankruptsy.

I'm a pessimist on the whole picture, but I think the best thing we could do in my mind is loosen bankruptcy laws, and that would "punish" banks with lose and exploitive marketing for easy credit, and help people who will never otherwise escape.

My dad declared bankruptcy when he was 70, in 2005 before they changed the laws, and most of the credit card debt came from a few years in the 1990's when he lost his job. My dad was proud, but a friend convinced him that he had already long overpaid the original money he used, and the balance he owed was all from crazy interest rates and transfer fees and all the tricks they use to extract more money for "easing" repayments into infinity and beyond.

Ares Olympus said...

I don't know about the minimum wage, but the fancinating data is "Labor force participation rate" rather than unemployment, and the gender divide, with women near an all time high just below 60%, and men at an all time low of 70%.
http://correctionspageone.blogspot.com/2011_12_01_archive.html

I'm not sure who Romney's 47% are who are just looking out for government handouts, but compared to 1948 with 88% of men are employed, and only 32% of women we're in a totally different world from then.

Meanwhile perhaps minimum wage would "help" the women working in rural nursing homes or other "low value" work that merely helps people, versus computer work that converts everyone into a number and scams a way to extract a new monthly charge on an unneeded virtual service?

Any manufacturing is also totally different, with low skill work being now largely exported, men who used to be able to graduate from high school, get a good job at a lifetime employer to raise an income upon are much harder to find. And its women who are being scammed into the college degrees in exchange for debt, which may or may not pay off, but what are the young men doing who aren't going to school, and aren't going to higher education?

I see that the idea of "living wage" is hopelessly naïve, that is to say, once you factor in "debt" and access to credit, people can spend far beyond their means, and hope for the best, and in a bull market and high employment, perhaps the debt is eaten quickly, and in a bear market and poor job pickings, debt is a deadweight that pulls even the most newly conscientious debtors back under water without some sort of "bailout" to start fresh, like the banks always have access to.

So my thought is raising the minimum wage is a "mostly harmless" way to help people on the bottom, but unless you can help them out of debt, its spitting in the ocean and rewarding their credit card companies who can extract interest for another year or two that otherwise would have lead to bankruptsy.

I'm a pessimist on the whole picture, but I think the best thing we could do in my mind is loosen bankruptcy laws, and that would "punish" banks with lose and exploitive marketing for easy credit, and help people who will never otherwise escape.

My dad declared bankruptcy when he was 70, in 2005 before they changed the laws, and most of the credit card debt came from a few years in the 1990's when he lost his job. My dad was proud, but a friend convinced him that he had already long overpaid the original money he used, and the balance he owed was all from crazy interest rates and transfer fees and all the tricks they use to extract more money for "easing" repayments into infinity and beyond.

Anonymous said...

Aside from pegging one's view of women's economic security as being about access to contraception and proximity to an abortion clinic, I am just heartened to see that Cosmopolitan now seems to be interested in the plight of less-well-off women, with or without orgasms.

Maybe we'll see an airbrushed 53-year-old female trailer park resident named Bev on the cover of the next issue, with her frosted hair done up from two Tuesdays ago, outfitted with the latest saggy jeans, a designer Champion sweatshirt, and flip-flops. You know, the real America Cosmo has always believed in, bringing the truth down to the people! Maybe they'll have a feature on regulars at Applebee's. Or how smoking is still "in" in different parts of the country. Do women in middle America have orgasms? Find out on page 36, next to the Revlon ad. Then there won't be big media telling people like Bev how to feel about their bodies no more. Not with the power of Cosmo on girlfriend's side! Snap. Dang, with Cosmo's permission, girls like Peggy will be back on the town! Good times are a'comin'!

Yeah, but let's be serious. That kind of coverage ain't never gonna happen. Cosmo's not that kind of magazine. Let's see... contraception, abortion and (how to have multiple) orgasms. There's a winning platform for women's progress and liberation! If they're not having kids, whether by contracepting or aborting to prevent them, (which is the postmodern pinnacle of women's "reproductive health" -- now known as the "Fluke Method"), they'll have more time for orgasms. And if they're earning $10.10 an hour, they'll have even more orgasms. It's not just public policy, it's a lifestyle: the Obama Orgasma in Organza Bonanza. And then the Republicans won't be able to hold them down, or tie them up. After all, Republicans can't bring women to orgasm. It's all Bush's fault. And Joe Biden is a genius.

And that's what being a liberated woman is all about? How silly. When was the last time a Cosmo editor made 10 bucks an hour? The last time they even thought about $10 bucks in an hour was their coffee break at Starbucks sipping a soy latte that requires 10 words to describe how they want it done. Spare me.

Tip

Dennis said...

n.n.
I believe there was an experiment done a few years ago that took a variety of people in different economic conditions and started them off with exactly the same amount of money to work with during the experiment. As I remember the experiment was stopped because the people who had money before had all the money afterwards and those who did not did not.
Not surprisingly, most of the Enlightenment thinkers were very poor at handling money matters and constantly hitting up their sponsors for more money. The same is true of a significant number of those touting a minimum wage. Most of them waste the taxpayers money at such levels that it is mind boggling and demonstrate little knowledge of economics or the proper stewardship of it.
I just wish that for once in their lives they actually worked through how money works its way through an economy, it might actually help to ask the question as to the whys and wherefores of money and the necessity of it, the "multiplicative factors" involved, and knowing what it takes to operate a business.
Yesterday I had thought to create an example of a small business, its fixed and variable cost, it city, state and federal requirements and taxes, et al so as to get people to think about how much is entailed. I would be happy if there was thought to the idea of a "medium of exchange."

n.n said...

Dennis:

Your observation of disparate input is what makes social insurance an unquestionable aspect of our society. It's not really a fundamental flaw, but a pragmatic response to imperfections of human nature. The challenge is to limit redistribution or rehabilitation schemes, so that they do not sponsor progressive corruption, and do not offer an incentive to corruption. This is where religion (i.e. moral philosophy) becomes an integral aspect of a free, civilized society.

Remember, money does grow on trees, and in binary signals populating our networks and computer systems. The focus needs to be on wealth production in the form of products and services financed by capital and derived from labor. The focus also needs to be on local and perhaps regional development, where real economic activity actually occurs, and not just intermediate processes which create an illusion of wealth.

It's also worth noting that there does exist structural inequality. For example, the difficulty of realizing full employment, with compensation to match cost-of-living, is directly proportional to the density of a population center. This is why Democrats in particular, whose power derives from high-density population centers, are such adamant advocates for social insurance. It's certainly not out of goodwill. Since their strategy to accrete power has been to denigrate individual dignity and devalue human life.

I think both perspectives need to be addressed. The classical economic perspective which reflects the laws of supply and demand; and the social economic perspective which reflects the imperfections of human nature and civil structures. In a democracy, both perspectives must be addressed in order to earn consent of the governed.

Dennis said...

n.n

Is that a governmental function of local churches, people of goodwill and/or other groups? As long as government is a player one is guaranteed that there will be no solution and creating a dysfunctional economy surely isn't going to ameliorate it. Government involvement in a lot of areas in which they have no standing, despite the "promoting the general welfare, is why many people no longer pay attention to their neighbors and act accordingly.

n.n said...

Government involvement ... is why many people no longer pay attention to their neighbors and act accordingly

I agree. Proximity engenders accountability. Not only does the real economy function at a local level, but so does a social economy. The centralization of these functions is a cause of progressive dysfunction as it increasingly causes a dissociation from reality.

Also, as you have noted, the corruption of individuals, the destruction of families, etc., has a correlation, and perhaps a dependence, on the progress of social programs uprooting the natural or "traditional" order. It feels good to shift the burden of responsibility, but the consequences are negative progress in a real sense.

Oh, well. Perhaps we will discover a new stable state, previously unknown to mankind and Nature. The experiment must continue!