In my experience, political ideologies are akin to overcoats; you wear one while it fits and trade it for another when you’ve outgrown it. In this vein I’ve had dalliances with neoconservatism, I’ve summered as a Marxist, I misspent my high school years as a libertarian and my intellectual adulthood has thus far been lived within the parameters of American liberalism.
Each philosophy, of course, has its own little foibles and fallacies to nip at the heels of its advocates. Conservatives suffer from a fetishization of militarism and the more macabre elements of biblical scripture, while Marxists are hung up on their woefully incoherent doctrine of historical materialism; libertarians could fill the Encyclopedia Britannica three times over with their deductive missteps and political faux pas. In turn, my confederates can’t seem to help themselves when it comes to the minimum wage.
Let me blunt the edge of my criticism by saying that I share all of the concerns echoed by the College Democrats in their recent Michigan Daily article — wages are shockingly too low, the economic fortunes of working class families are woefully insecure and income inequality is disgustingly ubiquitous in American life. This is a disagreement among friends alone, and while my strategy for achieving a more equitable economic climate differs from my comrades the ultimate goal is nonetheless the same. Please keep this in mind when I say that supporting even the existence of a minimum wage is misguided at best and antisocial at worst.
The contemporary liberal case for the minimum wage is largely a hangover from the writings of economist and policy wonk John Kenneth Galbraith, who advocated for systemic price and wage controls to tame inflation in his 1952 work A Theory of Price Control. While a prescient and insightful macroeconomist, Galbraith’s microeconomic treatise proved to be shockingly off the mark. When former President Richard Nixon implemented Galbraith’s policies as part of his “income policy” to control inflation, the bane of rising prices was replaced with the drudgery of economy-wide production dislocations. Those industries faced with mandated prices above the market-clearing rate built up unsalable surpluses while those businesses forced to sell goods below the market equilibrium price were faced with unquenchable shortages. America’s income policy died in 1973, and liberal support for Galbraithian wage and price controls went out to pasture with it — except, it seems, for the minimum wage.
Now, the minimum wage interferes with the workings of the market in a manner akin to any ordinary price floor; quantity demanded is curtailed while quantity supplied is stimulated, and we are left with a certain output which cannot be traded at the given price. In this case the minimum wage curtails hiring by businesses while at the same time encouraging intrepid workers to enter the market at the now-higher salary, producing a body of structurally unemployed labor, which didn’t exist prior to the imposition of this policy. This is the essential explication of “Eurosclerosis,” or Western Europe’s dichotomy of high unemployment even during times of economic expansion. Well-meaning governments, assured that they are providing a helping hand to working families in their constituencies, impose a quasi-wage control that ushers in sickeningly high levels of unemployment.
Notably, and as mentioned in the article, this view on the minimum wage has been greeted with dissent by economists David Card and Alan B. Krueger, who in their article, “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” documented a supposed positive correlation between an increase in the minimum wage and employment in fast-food chains within the two aforementioned states. Not only was this claim later redacted by the authors, who revised their conclusion to say instead that there was either a mild increase or no change at all in fast-food worker unemployment, but the article flies in the face of literally thousands of other publications documenting the minimum wage’s adverse effects on employment for African-Americans, single women, teenagers and part-time workers.
The retort to this claim is obvious; even if Card and Krueger are wrong and the minimum wage produces unemployment in the short-term, this will be mediated in the long-run by an increase in demand from those workers who will see an increase in their purchasing power, spurring expansions in industrial output and, naturally, in employment. This hinges critically on the assumption that the market demand for labor is inelastic over the range of the wage increase from the minimum wage hike. In layman’s terms, we’d have to assume that higher wages for those who stay employed outweigh lost wages from those who become unemployed, and considering that the demand for labor has been documented as being highly elastic during recessions at least since Lionel Robbins’s 1934 treatise “The Great Depression,” I wouldn’t say that those are betting odds.
Now, if liberals are to accept that the minimum wage is impotent at delivering increases in either employment or higher wages for all workers then policies which do both, such as economic stimulus packages, investments in infrastructure and education, subsidies for student loans and so on may be pursued in their stead. Political capital is a scarce good, and it pains me to see my fellow Democrats wasting it on a bum policy like the minimum wage.
Ryan Dau is an LSA freshman.