Raising the Minimum Wage: More Complicated Than It Seems

Minimum Wage

The Rev. Dr. Neil O’Farrell looks at the ethics of raising wages for our poorest workers.

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We would think that raising the minimum wage is a simple ethical issue. Paying the working poor for their labor has to be a sound, ethical ideal. However, that is only partially right, and sometimes actually wrong if we go too far. The minimum wage is a complex issue at the intersection of business management, employment, social, and economic policy.

Raising the minimum wage ill advisedly can cause unemployment to go up and force the working poor to work harder, fearful of losing their job and not finding another. It will likely cause prices to rise, making it harder for the poor to purchase necessary goods. Deciding how and how much to raise the minimum wage requires pivoting on the head of a needle, and there is no simple answer.

Ethics requires the greatest good for the greatest number of people, and ethics implies first doing no harm. That’s a tall order when considering the minimum wage. I think absolutely it should be raised. From a justice perspective, raised a lot. But I also know better.

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It was in the early 1980s that I sat in a hearing room of the U.S. House of Representatives Small Business Committee. Presiding was the irascible Cong. John LaFalce (D-NY) as chairman. Before him at a long table was a panel of lobbyists representing a range of trade associations, testifying on some forgettable piece of legislation.

A new, young lobbyist was reading his prepared remarks for the record. I think I remember that he was from the National Association of Manufacturers, but if not NAM, then a kindred organization. Cong. LaFalce interrupted him and asked, “Does your organization support the minimum wage?” The lobbyist hemmed and hawed, and LaFalce then looked over at the lead lobbyist of the National Federation of Independent Businesses, a small business lobbying group in thrall to the Republican party. LaFalce asked him, “Does your organization support minimum wage?” The NFIB representative said quickly, “No, sir, we do not.”

The congressman looked back at the hapless young man who couldn’t answer the question, and he said, “Now, that wasn’t so hard, was it? So, let me ask you again, does your association support the minimum wage?” Finally, cornered, the young witness sitting in the hot seat said, “No, sir.” LaFalce grinned and said, “I knew that.”

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The job market has changed over recent years because of the recession and demographics. There has been a shift from younger, undereducated workers to persons who are better educated, along with family breadwinners working minimum wage jobs. They work long, hard hours for minimum wages, sweating profusely. Menial labor and its depredations abound.

The economy is not growing very fast these days because of the effects of the Great Recession, whose most profound aspects still affect those persons in the lowest economic quintile. The working poor will feel the negative impacts of an unsophisticated minimum wage hike the most, as economic policy issues have become far more complex.

Workers are scarcely protected by the law or by employment contracts. Many businesses threaten to make a mockery of health reform. Many corporations—household names—unalterably oppose the minimum wage, and most assuredly oppose raising it. Large corporations employ a legion of workers who are paid at the bottom of the scale, and no matter how hard they work, they can expect their pay to go up only pennies.

Recently, Wal-Mart announced it was abandoning plans to open a new store in the District of Columbia because the city passed living wage legislation. Wal-Mart’s action seemed to be a statement of corporate pique rather than based on economic necessity. But as you will see, perhaps not.

This is the corporate environment for the working poor. This issue will win re reprieve because of the makeup of the present Congress. Americans, as well, are heavily complicit in this injustice because we want lots of things, much of which we don’t need, and we still want this stuff cheaply. We live in a consumerist society that exists on the backs of the most poorly paid.

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As I tried to explain with my opening congressional anecdote, the minimum wage has always been a battle ground of disagreement. It still is.

A harsh irony is the fact that those who live straightened lives also shop at Wal-Mart. Wal-Mart is cheap. The poor also work there, and it may be the only place they can find a job. Raise the minimum wage, and considering Wal-Mart’s past corporate practice, there will be fewer of those jobs. Other bad things will happen to its employees, such as reduced or wildly fluctuating or uncertain hours. Moreoever, Wal-Mart is playing hardball with health care reform. If Wal-Mart raises its prices because they have to pay higher wages, the working poor who shop there may not be able to afford what they need, if they can afford it already.

Now, consider McDonalds. A franchise may net a profit of a million dollars. Raise the minimum wage and they will raise prices. It might not make any difference to most of us, but consider the urban neighborhood where I serve as pastor. People are poor. There are no grocery stores. There is significant homelessness. Raising McDonalds meal prices even a little can be a severe hardship. If your only income comprises the quarters you can raise in the middle of a highway, a more expensive meal at McDonalds becomes an burden that hurts personally.

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The federal minimum wage is $7.25 per hour, and has not been raised 2009. It is not inflation adjusted. A good number of states have raised the minimum wage in their jurisdictions. Policy makers try to set the minimum wage at an amount that will not deleteriously affect employment, but will also keep a worker from destitution. There is a preponderance of economic opinion that maintains that raising the minimum wage depresses employment because employers don’t want to pay more for workers. Remember, the greatest good for the greatest number of people leaves some people out in the cold.

Many have looked at this issue and have come up with various proposals. President Obama has proposed raising the minimum wage to $9 an hour. Another popular set point is $10.10 Nobel Economist Paul Krugman supports raising it to the president’s benchmark. He believes the higher figure, particularly since it’s been so long since the federal minimum wage was raised, would not have too damaging an effect on the economy or employment. One gets the impression from Krugman that his recommendation comes from both economic and social justice concerns.

A group of prominent economists including Joseph Stiglitz, Jeffrey Sachs, Laura Tyson, and Robert Reich sent a letter to congressional leaders urging them to raise the minimum wage from its current level to $9.80 by 2014. Stiglitz is another Nobel Prize winning economist.  “At a time when persistent high unemployment is putting enormous downward pressure on wages, such a minimum wage increase would provide a much-needed boost to the earnings of low-wage workers,” the group wrote in July 2012. These economists believe that raising the minimum wage will not depress employment for those at the bottom of the scale.

Thus, in terms of the ethics of a minimum wage, many experts believe that raising the minimum wage will not have a deleterious impact on low-wage employment, as opponents would suggest. There is no guarantee of that, but the higher minimum wage laws in different states suggest that a higher national figure wouldn’t hurt. There would seem to be an ethical mandate to raise the amount, at least to the neighborhood of $9 and a little beyond.

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What do some religious groups, which provide ethical guidance, believe?

The United States Conference of Catholic Bishops has been a strong advocate of raising the minimum wage. “We can begin the process of fixing our economy by returning the worker to the center of economic life,” said Bishop Stephen E. Blaire of Stockton, California, in congressional testimony.”One of the best ways to do that is with decent jobs that pay just wages, thereby honoring human dignity and restoring hope to workers and families. Increasing the minimum wage to a level that reflects the real economic reality faced by families today would go far in building an economy worthy of the humans that operate in it.”

 

The United Council of Churches has been staunch advocate for increasing the minimum wage and for living wages. In a 2010 position paper, the NCC outlined a series of bullet points on wage issues:

• The federal minimum wage was enacted during the Great Depression to promote economic recovery

• The long-term fall in worker buying power is a key reason we are in the worst economic crisis since the Great Depression

• An America that doesn’t work for working people is not an America that works

• Raising the minimum wage boosts consumer purchasing power and economic recovery

• Raising the minimum wage does not increase unemployment in good times or bad

• Raise the floor to lift the economy

The Evangelical Lutheran Church in America has been a strong proponent for a just minimum wage. “The Rev. Mark S. Hanson, presiding bishop of the Evangelical Lutheran Church in America (ELCA), joined 10 other Christian leaders in the United States in an appeal to Congress to increase the federal minimum wage as ‘a matter of economic and racial justice.’ ”

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Ethics recognizes that in doing the right thing, some people will be hurt. That is a tragedy, but not a justification for avoiding doing the right thing.

Ethics has always put persons, their well being, and their human dignity in the center of ethical analysis. Clearly, the economists and church bodies listed above support raising the minimum wage. Even considering the messiness of the minimum wage on the economy, people I listen to and read for guidance support raising the minimum wage.

What might good men and women do? Many things, depending upon your situation. You could find out what the employment practices are at places you shop, and decide that there are some places that are not a right ethical decision for you. Generally, small businesses—the Mom and Pop stores—tend to treat their employees more like family. Independent businesses need to do right by their employees. There are also advantages for you the consumer. Considering buying and setting up a new TV. Isn’t it easier calling the store down the street than a manufacturer’s customer support line? That local call is also less expensive than hiring The Geek Squad.

Avoid buying the cheapest goods and substitute something that carries less onerous ethical freight. Ask, or even look at the employees of a store. Do they look happy? Most of the time you can tell.

There are lots of ways, not all of them perfect, to attempt to shop ethically. For example, Costco pays its employees handsomely, provides benefits, and will promote employees based on effort and time in service. Not everyone can afford to buy and store 12 rolls of papers towels, but perhaps you and your neighbor can if you go together.

If you have people who help clean your home or take care of your yard, or whom you hire for a special purpose, give them a tip.

One good rule of thumb is that big box stores with a national presence tend to shortchange employees, unless they are in management. In the summer, I buy produce from farm stands, from pick-up trucks, and farmers’ markets. And so on.

It probably is useless to lobby Congress, although I regularly use the internet to voice my opinion to my representatives in Congress, if only to keep up the good fight. In many states, you will have more luck lobbying your state representatives in passing more enlightened employment practices. This is one of the reasons that many states mandate a higher minimum wage than the federal standard. There may be something you can even do more locally.

In ethics, I typically go with my gut. On something as complex as the minimum wage, which touches millions of lives, I turn to empirical information and people and institutions far smarter than I am.

I think what I’ve discovered is a second, more powerful proponent of what my gut tells me. Ethical, good men and women support the minimum wage and its increase. How could we not? It’s about those who are the neediest in our society. In a sure respect, the work conditions of the working poor affect our own work as well.

photo: sylvar / flickr

 

 

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About Neil O'Farrell

Pastor, St. John Lutheran, in Brooklyn, a post industrial neighborhood of Baltimore city, Divinity degree from Harvard and doctoral degree in pastoral health. I'm an avid gardener, lover of almost everything with four feet, start books but don't finish them, off the edge liberal, and speak my piece, often when I should be listening.

Comments

  1. Ross Steinborn says:

    “Ethics requires the greatest good for the greatest number of people” — this is the definition for Utilitarian ethic, not ethics generally. And there are many philosophical arguments against this, not least of which is what if for everyone to be happy one person had to suffer inordinately?

    • Neil O'Farrell says:

      Dear Ross,

      Thanks very much for your response, and you’re absolutely correct. Let me just respond to a complex issue with a couple of observations. With regards to the income of the working poor, there are very few issues as utilitarian as their income. So choosing the ethical formulation I did seemed to make sense in terms of the topic. One might say that paying workers less increases shareholder value. That is one of the reasons that when major corporations announce large lay-offs, share price goes up over the short term. Increasing share holder value could be seen as a good thing, unless of course you are one of those who are now unemployed. I think the concept of shareholder value has become very much overdetermined in corporate management these days, even though it has legal foundation. I think invoking shareholder value is frequently a smokescreen. Back to my article, it was already running too long, and I wanted to keep it primarily focused on the minimum wage and the working poor. And to use your observation, which you use so accurately and trenchantly, those working poor and those who can’t find work because we have recklessly over-increased the minimum wage,or who lose their jobs, in fact make your point because they are suffering inordinately. I was using ethical shorthand, as you point out, but I felt comfortable for the above reasons giving less nuance to pure ethics, and rather to the working poor, the unemployed, and the nature of the minimum wage. Thanks so often for giving depth to what I wrote. Neil

  2. Tom Janus says:

    Pastor O’Farrell,
    As a student, who does work part time at a local paint store, I feel privileged in my community that I make
    $10.30 per hour, compared to many of my college friends, many who work at larger corporate type stores, at a considerably lower rate. For many of them also, talk of being treated shabbily with little respect.
    The store I work at is locally owned and I find myself treated more like family. I can’t say that I need a big boost in the wallet (although I wouldn’t turn it down), but my friends sure could.

    Tom

  3. Australia has twice the minimum wage as the US and Big Macs cost roughly the same. – August 9, 13

    http://therealnews.com/t2/index.php?option=com_content&id=31&Itemid=74&jumival=10553

    Big companies need people to work, they pay the minimum that they can get away with. If you raise the minimum wage then you reduce corporate profits, not the number of jobs.

    Capitalism is efficient, if the work could be done by fewer people, it would already be performed by fewer people.

    Raising the minimum wage cuts profits, not jobs.

    • Last week, fast-food workers around the United States yet again walked off the job to protest their low pay and demand a wage hike to $15 an hour, about double what many of them earn today. In doing so, they added another symbolic chapter to an eight-month-old campaign of one-day strikes that, so far, has yielded lots of news coverage, but not much in terms of tangible results.

      So there’s a certain irony that in Australia, where the minimum wage for full-time adult workers already comes out to about $14.50 an hour, McDonald’s staffers were busy scoring an actual raise. On July 24, the country’s Fair Work Commission approved a new labor agreement between the company and its employees

      5Aug2013
      http://www.theatlantic.com/business/archive/2013/08/the-magical-world-where-mcdonalds-pays-15-an-hour-its-australia/278313/

      i think this was the source article, good discussion in the comments section about it

    • Neil O'Farrell says:

      Dear Tom,
      Congratulations on your enjoyable job. Your prove there are a lot of places to work, and they are not all the big box stores. You can get higher wages (I hope you get that raise), and have a more enjoyable work environment. My wishes for your continued good luck. Neil

  4. Neil O'Farrell says:

    Dear everyone, I’m having trouble getting the site to be tidy about my responses. I’m trying to respond to everyone. Bear with me as I get it sorted out. With regard to Australia, Dear Mike, I wish our economy was more like that nation’s. America has a history of tension, if not outright animosity between corporations and labor, and you are so correct about what a higher minimum wage means is lower profits. Unfortunately, our laws virtually mandate the highest shareholder value, which continues to pit management and labor against each other. The political environment doesn’t help either. It’s not likely to change, but I don’t think we can all move to Australia, particularly the working poor. So we will continue to strive on this side of the Pacific Ocean. Dear Jameseq, I discussed the lamentable state of union organizing in America, and I rejoiced at the efforts to unionize, and to follow up on your comment, I hope the result is more than symbolic. Everyone, thanks for continuing to comment. It’s great, and I very much appreciate it.

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