WillJ said:
Don't get me wrong, I certainly don't think a wide income disparity is good for society. I'm no Hamilton.
The question is entirely over whether or not the lack of a minimum wage would actually result in such a thing. You cite countries that lack minimum wages, and how poor and awful they are, but I think that's unfair. To convince me, you'd have to find a
rich (as in high total GDP or GNP) country without a minimum wage, and demonstrate that even it is an awful country. The problem is, as you say in the first sentence of your argument, that there isn't such a country. So we can't really compare across countries, as far as I know.
Ahh, but part of my argument is that in order to have a healthy economy (and thus a rich country) there must be a minimum wage, so it is rather difficult to prove or disprove, as all of the rich countries have a minimum wage.
Sorry, but as of right now I'm a bit skeptical of what you say here. I don't think the country at one point had no real middle class, then the minimum wage was enforced, and then BAM! a middle class emerged. I think underpinnings of a middle class were in place well before the 1940s. If you or someone else (maybe I myself will try to do it) could find some statistics on this issue, that'd be nice.
Well, the term 'underpinnings' is rather ambigous (perhaps intentional as argumentative insurance?
) However, the size of the middle class did explode post-WWII. Let's analyze the following information from
Encarta Online]Encarta Online
Encarta said:
Many factors converged to provide unparalleled social mobility in postwar America. Most important, income rose. Between 1945 and 1960, the median family income, adjusted for inflation, almost doubled. Rising income doubled the size of the middle class. Before the Great Depression of the 1930s only one-third of Americans qualified as middle class, but in postwar America two-thirds did.
The growth of the middle class reflected full employment, new opportunities, and federal spending, which contributed mightily to widespread prosperity. During the war, for example, the U.S. government built many new factories, which provided jobs. The federal government also directly aided ambitious Americans. In 1944 Congress passed the Servicemens Readjustment Act, known as the GI Bill of Rights. Under the law, the government paid part of tuition for veterans and gave them unemployment benefits while they sought jobs. It also provided low-interest loans to veterans buying homes or farms, or starting businesses. The GI Bill and other federal programs offered mortgages for home buyers.
As is noted in the first paragraph, the middle class (as a percentage of US population) doubled in size. Now, minimum wage is not expressly stated as a cause of the rise of the middle class, so it is our task then to deduce whether or not the minimum wage had an impact and, if so, whether this impact was positive or negative.
First of all, let us take the individual steps I argued contributed to the rise of a middle class, working from the most obvious and easy to prove back to the more debatable steps, ultimately leading back to the enforcement of a minimum wage.
1. A middle class works higher-paying, white-collar jobs
Same Encarta article said:
As productivity rose, the labor market changed. Fewer people held blue-collar jobs, and more did white-collar work. Employment grew rapidly in the service sector, which includes sales work, office work, and government jobs. More American wage earners worked for large corporations or for state or federal agencies than in small enterprise. Businesses expanded by swallowing weaker competitors, as happened in the steel, oil, chemical, and electrical machinery industries. Corporations formed huge new conglomerates (mergers of companies in unrelated industries). In addition, companies offering similar products or services in many locations, known as franchises, increased; the first McDonalds franchise opened in 1955.
2. White-collar jobs require better-educated, more skilled workers
Encarta said:
Middle-class families bought not only homes and cars, but educational opportunities. Between 1940 and 1960, the percentage of college-age Americans who attended college almost doubled. Again, the federal government played a role. In 1958 Congress passed the National Defense Education Act, which provided loans to college students and funds for teacher training and instructional materials. Cold War enthusiasm for technological advances also affected research. By 1960 one-third of scientists and engineers in universities worked on government research, mainly defense projects.
3. Following the enforcement of the minimum wage (the first was 1912 in Massachussetts, and the law became a federal law by 1938), the youth were able to go to high school and college. (Source:
Why the United States Led in Education)
In the three decades from 1910 to 1940, America underwent a spectacular educational transformation. Just 9 percent of older youths had high school diplomas in 1910, but more than 50 percent did by 1940 (see Figure 1). The transformation was even more rapid in many non-southern states and cities. Secondary-school enrollment and graduation rates, in most northern and western states, increased so rapidly that by the mid-1930s rates were as high as they would be by 1960. The high school movement set the United States far ahead of all other nations in its human capital stock.
Child labour laws would not alone have been able to spur such a growth in high school and secondary school attendance, as they only applied to those under the age of 16. I would provide you with information showing that the household income for the tenth decile increased over the course of 1910-1940, but for some reason there are no census records available online from 1900-1960 (weird, huh?)
Erm, how in the world would a minimum wage do this? Are you saying a minimum wage of, say, $5 an hour will mean everyone in the economy will make an additional $5 an hour? And that this represents a genuine increase in wealth, not inflation? Again, how in the world does that work?
Well, as history has shown, the implementation of a minimum wage has not had an equal effect on inflation, or else nations would have runaway inflation. My theory is that, in reality, companies rarely simply fire workers when a minimum wage is implemented and, instead, are left with two choices:
1. Increase productivity
2. Move elsewhere
Most companies opt for the former, wanting to avoid the backlash that results in choosing the latter. This explains the surge in productivity following WWII, as companies attempt to innovate in order to get the biggest bang for their buck, so to speak.
Hmm, you talk about how the real world can be much more complicated than simple economic models, and then you start talking about widget shops.
Well, I gave you real world information as well, but I felt as if in order to make my argument complete I should attempt to argue on your terms as well. That and I like widgets :-D
At any rate, you certainly didn't refute what I said, at least in my mind. That's not to say that I think what you say is untrue or stupid. Quite the opposite, really. But you seem to be talking about something different from what I was talking about.
To sort of repeat my "model," imagine a bunch of employers, who each have a bunch of jobs that they want done, and for each job they have a reservation price as to what they're willing to pay. I'm sure you'll agree with me that that's how even the "real world" works. (Disagreeing with this would mean you think an employer is willing to pay absolutely anything for some job.)
Now imagine that the government orders a minimum wage of $5 an hour. These would have to be the effects of such a law:
- In any situation where the employer has a reservation price of $5 or more and is paying the employee $5 or more, there is no effect.
- In any situation where the employer has a reservation price of $5 or more and is paying the employee less than $5, the employer will raise the wage to $5.
- In any situation where the employer has a reservation price of less than $5, the employer will fire the employee.
...That's it. Now, you seem to think that's not true. Then either explain why what I claim is the result of one of those conditions isn't the real result, OR list some situation that I don't list, OR explain why one of those situations is unrealistic. DON'T talk about education or risk or whatnot (not just yet, that is), because those are all irrelevant to what I'm saying (but they're certainly relevant to what I'm not saying
).
Well, there is also the option of innovation as I mentioned before. If an employer is given the option of either firing a few employees (and thus generating less product) or working to enhance productivity, in the end the latter will be rewarded. As they say, "necessity is the mother of invention."
However, the whole point of my two models is to show that it is possible for a minimum wage to actually create jobs. But I suppose that we can agree on your model just to make things a bit simpler and easier to debate.
If we can agree on my little model, then we can agree that the overall goodness (possibly negative goodness, a.k.a. badness
) of the minimum wage results from:
all the goodness resulting from increases of wages in situations of the second type, minus all the badness resulting from unemployment in situations of the third type
True, more or less.
It's actually debatable whether or not increases in the wages of workers in situations of the second type is a good thing. What you did in the post of yours I quoted is explain why you think it IS a good thing---advances in education and all that good stuff. I suppose I have to mostly agree with what you said. But we still have to consider two things:
1. Just how prevalent is this good stuff, really? (That is, how common is the second situation?)
2. The bad stuff (the third situation).
Well, hopefully as my data showed, the good stuff was prevalent enough to result in an increase of the middle class in the US. I am still quite angry with myself over being unable to find household income data for 1910-1940 of the tenth decile (i.e. the group generally working miniimum wage), as I feel that would really help clarify the argument, but after hours (literally) of searching online, I haven't had any luck. I'll hit the books at the NY Public Library tomorrow, though, to see if I can attain the desired results.
As for the 'bad stuff,' I think that in the developed world it is not nearly as prevalent as the positive impacts of a minimum wage. Partly because of the economics of the situation (as I have attempted to show) but also partly because of the political and moral justification - that as a democracy, we cannot simply allow our fellow citizens languish in poverty. As I said before, "a hungry man is a radical man."
In the developing world, however, a minimum wage is far trickier of a subject. On the one hand, many in the developing world are forced to work in sweatshop-like conditions for very low wages. This, of course, should stop. However, I think that there is a certain level that a country must first meet in order to implement a minimum wage. Namely, where there is a tradition of unionization (which in many countries is not the case, either because of apathy or repression) as well as the infrastructure to bridge the gap between unskilled and skilled labour. Without those two prerequisites, the corporations will simply move to the next poor, corrupt nation in the name of its shareholders and the almighty dollar. So, I suppose that it's a mixed bag. But I firmly oppose anyone trying to abolish the minimum wage in the United States or any developed country.
In my lifetime I have seen a significant shift of manufacturing jobs from the United States to other countries. While the Left may find it easy to blame corporate greed for this, it would be foolish for a company to waste money on (higher priced) American (insert European if you prefer) workers who provide the same or even inferior quality workmanship than foreign workers. We could go around in a circle here and you could point out that the companies won't be able to Sell their products if no Americans are employed.. but I'd then have to point out that they have all those workers over in .. China .. who now have a paycheck and are looking for the good life.
The problem with blaming the loss of American jobs on minimum wage is that jobs only started moving overseas in the mid-70s. You discount the 40s, 50s, and 60s in which the United States enjoyed remarkable growth, extremely low unemployment, and a relatively high standard of living. Surely if minimum wage were the culprit, jobs would have started moving overseas much earlier, instead of having a 40-year delayed reaction. The true culprit is, as you say, "inferior quality workmanship." To be blunt, Americans (and Europeans to a slightly lesser extent) started getting lazy and stupid. Our public schooling system degraded sharply in quality, as did secondary schooling. Immigrant students, instead of staying in the US after college, returned to their respective homelands to work and innovate there. True, Americans and Europeans still dominate the Nobel awards, but that dominance is fading fast. In America especially, the class gap is defined not by what kind of car you drive or whether you go to bed hungry or not, but what quality education your kids get. The result is that fewer and fewer Americans are getting the kind of the quality education that used to be available to them. That's the real problem, not minimum wage.
(min wage is £4.50 for 22 yrs and over)
