The other day, I saw one of my Facebook friends post this image:
The claim that minimum wage jobs aren’t supposed to be careers, and that consequently any adult who still has one deserves a wage that cannot be lived on, is dangerously misleading. Here’s why.
There are several levels on which this argument misleads. Let’s start with the history–it’s just not true that minimum wage laws were passed with the intention that they would not provide workers with living wages. The federal minimum wage was made law by President Franklin Delano Roosevelt in 1933. It was declared unconstitutional in 1935, reenacted in 1938, and subsequently ruled constitutional by the Supreme Court in 1941 under the commerce clause. During this period, Roosevelt said many things in support of the minimum wage law and is very clear about what he intended. In 1933, FDR says:
No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.
He’s remarkably specific:
By living wages, I mean more than a bare subsistence level—I mean the wages of a decent living.
As a historical claim, the notion that the minimum wage was not intended to be a living wage is without basis in fact. When people make this argument, what they are really doing is dressing up a normative claim as if it were a descriptive one. They don’t have any reason to believe that the minimum wage was not intended to be a living wage. What they really believe is that it shouldn’t be, that only high school and college students should work for minimum wage and that adult workers should try harder to have substantive careers.
This argument relies on the assumption that if adult workers work hard enough, they will necessarily be able to get jobs that pay more than minimum wage. The claim implies that whenever we see an adult working minimum wage, it’s indicative of lack of effort rather than any larger economic phenomena. If this assumption is true, it means we have a lot of adults who just don’t try hard enough–45% of minimum wage workers in the US are older than 24:
There are 3.3 million people working at or below the minimum (workers can earn less than the minimum if they fall under an exemption–most commonly working for tips). This means that there’s just under 1.5 million people older than 24 working at or below the minimum. What would happen if 1.5 million people started trying harder?
Let’s say that our 1.5 million adult minimum wage workers all quit their jobs, took out student loans, and pursued 4 year degrees. Wouldn’t they all get better jobs once they got degrees? Not necessarily. The trouble is that our society does not create jobs to fit the extant skills of its workers–it educates its workers so that they will be able to do the jobs our society needs to thrive. For instance, if a bunch of people decide to get journalism degrees, this does not increase the number of available jobs in the field of journalism–we only need so many journalists, no matter how many people there are who want to do the job. The increased competition for the same number of jobs only serves to allow employers to pay less for the same skills. So if our 1.5 million adult minimum wage workers attempted to enter more lucrative fields, this would not increase the number of total people employed in those fields–instead, it would depress wages and reduce the economic value of the skills the workers had gained. The same number of people would still be unable to get these jobs, and the ones who would get them would earn less. What happens to people with college degrees who are unable to get jobs that take advantage of their skill set? They end up working in low-skill jobs, which often pay minimum wage.
This is because the economy still needs 1.5 million people to fill those minimum wage jobs. McDonald’s, Wal-Mart, and other such firms hire adults because there are not enough young people to do all the jobs they need doing. These firms don’t care if the adults they hire have degrees (indeed, about 1/3rd of adult minimum wage workers already have bachelor’s or associate’s degrees). Because their skills are not relevant to the job they’re doing, adult minimum wage workers will not be paid any premium for the skills they may have. It is always in the interest of individual firms to drive down their labor costs, and so these firms will pay as little as possible. Because there are always adults who can’t find jobs that match up well with their skills, there is always a large surplus of adults available to do minimum wage jobs. The intense competition for low-skill jobs means that without minimum wage laws, these people could be paid what poor workers during the 19th century were paid–the bare minimum required to prevent them from starving to death. It doesn’t matter if every adult had a PhD–we would still need 1.5 million adults to work minimum wage jobs, and we would still have the same surplus of workers unable to get jobs in the fields for which they had relevant skills. Consequently, the state instituted the minimum wage for the explicit purpose of preventing this kind of outcome, to ensure that every person who ends up stuck with a minimum wage job can achieve a minimum standard of living beyond subsistence.
Now, some would argue back that this is perfectly acceptable, because this is the free market’s determination of what low-skill labor is worth, and that to have a minimum wage is to distort the wage market. This trouble is that there is no “natural” wage market that exists independent of the political system and the choices we make. To have a wage economy in the first place, the political system has to create a stable currency, construct and enforce a system of property laws, levy taxes to fund these operations, and so on. One of the choices states must make when constructing their wage markets is how much negotiating power to give workers relative to employers. Because the market is itself constructed by the state, there is no “natural” relationship, and it can range widely. If the state makes the position of the employer too strong (e.g. by prohibiting trade unions or eliminating the minimum wage), workers will not earn enough to maintain a sufficiently high rate of consumption, and the economy becomes demand-constrained. Conversely, if the state makes the position of the worker too strong (e.g. by making the minimum wage too high or requiring pensions that are too large), employers will be unable to afford the number of workers they require to meet demand, and the economy becomes supply-constrained. To choose not to have a minimum wage or not to raise the minimum wage is every bit as substantive a political choice as the choice to have it or raise it. Every system, even the most deregulated, remains a political choice, an artifice the state has created because it believes (rightly or wrong) it will benefit the population as a whole.
We can have substantive debates about whether the economy is demand constrained or supply constrained. We can argue about whether workers have too much or too little leverage under the current rules. But there is no fixed natural relationship that the economy will magically gravitate to on its own. The question is not whether to have rules, but what the rules should be to ensure that we maximize our society’s potential to generate good lives for its citizens.
Benjamin Studebaker 