Even before the State of the Union put the issue squarely on the table, economists have been arguing for and against an increased minimum wage. On January 4, Gregory Mankiw counseled against such an increase, arguing that if we think poor people don’t make enough money the entire society should pay for an increase, in the form of welfare rather than wages. Why, he asked, should companies have to bear the burden all by themselves? The answer to this seemed obvious to the Nonprofiteer: companies should bear the burden because companies receive the profits from their employees’ work. Unless we’re proposing to share all corporate profits with all of society (that is, restore a reasonable corporate income tax), there’s no reason for all of society to pay corporations’ expenses.
Just a few days before Adam Davidson made the counter-intuitive case that paying retail workers better and increasing their number would result in greater profits for retailers, citing studies from other countries. The thrust was clear: if you pay peanuts, you get monkeys; if you pay reasonably, you get reasonable and enthusiastic workers. The minimum wage is not a charity activity, not even an act of social justice, but an act of economic self-preservation. Certainly if that’s true it’s a cost that should be borne by the companies and not by the entire country. As Davidson says, workers are value added to your product.
And just a week or so later, at the University of Chicago’s Institute of Politics (and through his film “Inequality for All”), Robert Reich pointed out that it’s not businesses or wealthy people who are “job creators,” everyone’s favorite excuse for refusing to tax people who have plenty. It’s workers and mainstream consumers who are job creators—we’re the ones who spend the money for the goods which then need to be created by other workers whose pay then goes to buy the goods we create. It seems to the Nonprofiteer that some guy named Marx long ago showed that labor creates value; but in case his name makes the hair stand up on the back of your neck, Reich reminded his audience that Henry Ford understood this, too: he raised his workers’ wages so they’d be able to afford to buy the Model Ts they were building.
Ford in many ways was an appalling human being but he was right about wages. History, though, has shown us that we can’t depend on clear-thinking entrepreneurs to support the wage structure: we need unions and, failing them, we need the minimum wage. Reich also pointed out that if the minimum wage had merely kept up with inflation since the 1970s, it would be more than $10. So there’s no reason to delay raising it to that level.
The more sophisticated members of the Nonprofiteer’s audience doubtless are thinking, Can you say Econ 101? But things aren’t often laid out this clearly to those of us who aren’t economists, and the Nonprofiteer experienced Reich and Davidson’s insights as bolts from the blue. Thus her desire to share them: To Whom It May Assist.