Raising the Minimum Wage Is Not the End Goal—We Need to Challenge Capital Itself

Richard D. Wolff August 8, 2017

Protestors march in a rally on Capitol Hill in Washington to push for a raise to the federal minimum wage to $15 an hour, on July 22, 2015. (Photo By Al Drago/CQ Roll Call via Getty Images)

This arti­cle first appeared on Truthout.

Once more with feel­ing, the old debate ris­es into the head­lines and the talk show cir­cuit: Should gov­ern­ments — state, fed­er­al or local — raise the min­i­mum wage or not? Employ­ers of min­i­mum-wage work­ers weigh in to say no.” But that rais­es a PR prob­lem: It looks bad to advo­cate keep­ing work­ers’ wages so low. So, they make a bet­ter-look­ing claim: that rais­ing min­i­mum wages caus­es some employ­ers to fire low-paid work­ers rather than pay them more. Their oppo­si­tion to rais­ing min­i­mum wages then morphs into an advo­ca­cy for low-paid work­ers to keep their jobs.

Work­ers and their allies most­ly take the bait. They weigh in with coun­ter­ar­gu­ments. These most­ly respond direct­ly, claim­ing that rais­ing min­i­mum wages does not lead to sig­nif­i­cant job losses.

Over the decades, pro­fes­sion­al econ­o­mists and sta­tis­ti­cians (increas­ing­ly over­lap­ping sets) have entered the debate. Their entry resolved noth­ing. Every few years, the debate has flared up again. The econ­o­mists write arti­cles and books that enrich their resumes. Some score research grants from foun­da­tions, busi­ness lob­bies and labor groups to pre­pare shiny new ver­sions of the old arguments.

On the lev­el of the­o­ry, it boils down to a sim­ple idea: If the cost of hir­ing work­ers ris­es, oth­er things unchanged, the hir­ers will employ few­er. To this sim­ple idea, the oth­er side coun­ters with anoth­er: oth­er things unchanged nev­er hap­pens. For exam­ple, they point out that rais­ing the min­i­mum wage increas­es employed work­ers’ incomes and there­by their pur­chas­es. And that means more jobs. This income effect,” they say, will off­set what­ev­er job loss high­er min­i­mum wages might entail.

Of course, lots of oth­er things also change while (and after) min­i­mum wages are raised. Those changes, too, will have all sorts of effects on employ­ment. There are way too many influ­ences on jobs to know — let alone mea­sure — them all. But none of the play­ers in these debat­ing games want to hear that. There are always econ­o­mists and sta­tis­ti­cians offer­ing, at rea­son­able cost, yet anoth­er study that will, they often promise, final­ly prove deci­sive.”

Empir­i­cal­ly mind­ed econ­o­mists, adept at sta­tis­tics and their manip­u­la­tion, have also seen an oppor­tu­ni­ty. While the­o­ry may not resolve the issue, turn­ing to the facts sure­ly will, they say. They promise that look­ing at actu­al, real-world out­comes — what hap­pened to jobs when min­i­mum wages have been raised in the past — will set­tle the issue. Both sides in the debate have deployed empir­i­cal as well as the­o­ret­i­cal argu­ments for many decades.

Sad­ly, empir­i­cal stud­ies proved as inde­ter­mi­nate as the­o­ret­i­cal ones. To pick any his­tor­i­cal exam­ple of a raised min­i­mum wage and then exam­ine how employ­ment changed sub­se­quent­ly runs into the prob­lem of whether oth­er things are unchangedagain. To cal­cu­late the effect of a raised min­i­mum wage on jobs, you must iden­ti­fy and exclude the influ­ence on jobs of every­thing else going on when (and since) the min­i­mum wage went up. And every­thing else” is an infin­i­ty. No one can iden­ti­fy and mea­sure all of the oth­er influ­ences exert­ed on a soci­ety dur­ing the time of a min­i­mum wage change. Thus, we can nev­er be sure that, in any giv­en sce­nario, what­ev­er hap­pened to jobs after wages went up was an effect only of the wage increase rather than an effect also of every­thing else” going on when and since wages rose.

Con­ser­v­a­tives and employ­ers finance, pub­lish and cir­cu­late eco­nom­ic analy­ses” (the­o­ret­i­cal and empir­i­cal) to claim that rais­ing the min­i­mum wage will cause poor work­ers to lose jobs. Lib­er­als do the same with labor unions, sym­pa­thet­ic reli­gious orga­ni­za­tions and civic groups to sup­port eco­nom­ic analy­ses that claim no job effect from rais­ing min­i­mum wages.

The con­ser­v­a­tives usu­al­ly have far more mon­ey to buy and pro­mote their analy­ses. Because they pro­vide more financ­ing to polit­i­cal par­ties, can­di­dates and lob­by­ing efforts, they make their argu­ments” bet­ter known and are more effec­tive in gen­er­at­ing laws and regulations.

What actu­al­ly hap­pens to min­i­mum wages depends lit­tle on these end­less­ly recy­cled argu­ments. It depends much more on the strengths of the two sides, cap­i­tal and labor — what resources each devotes to shape politi­cians’ and pub­lic opin­ion. For exam­ple, the U.S. fed­er­al min­i­mum wage today is $7.25 per hour, down from $8.68 per hour, its his­tor­i­cal high in 1968 (mea­sured in 2016 dol­lars). Across the last half-cen­tu­ry, as the wealth pro­duced in the U.S. grew dra­mat­i­cal­ly, cut­ting the real min­i­mum wage 16 per­cent con­tributed sig­nif­i­cant­ly to the nation’s grow­ing inequal­i­ty of wealth and income.

What we need is not anoth­er recy­cling of inher­ent­ly unprov­able claims. They have not worked to serve the inter­ests of U.S. work­ers in hav­ing decent jobs and incomes. Quite the opposite.

The end­less min­i­mum wage debate has been a dis­trac­tion. Our real polit­i­cal and eco­nom­ic choice is not whether to raise the min­i­mum wage and risk some unem­ploy­ment or to secure jobs by fore­go­ing wage increas­es. Con­sid­er a par­al­lel sce­nario: A mug­ger in an alley offers you the choice between suf­fer­ing a stab­bing or a beat­ing so he can secure your wal­let. Will you then ago­nize and debate over which offered option to choose? Ratio­nal­i­ty sug­gests oth­er­wise. Why not refuse both and pur­sue a total alter­na­tive — an escape from the alley, an attempt to dis­arm the mug­ger, an appeal to the mug­ger’s con­science — that is far more in your inter­est than either option offered.

So, it is with the min­i­mum wage debate. It rep­re­sents a kind of irra­tional­i­ty. Econ­o­mists and oth­ers in sol­i­dar­i­ty with the labor­ing major­i­ty should be refus­ing fur­ther rounds of that debate. Instead, they should demand and pur­sue an eco­nom­ic sys­tem that pro­vides both full employ­ment and decent incomes, and sup­port for those who can­not work. That is the only sys­tem that deserves our backing.

Richard D. Wolff is pro­fes­sor of Eco­nom­ics Emer­i­tus, Uni­ver­si­ty of Mass­a­chu­setts, Amherst where he taught eco­nom­ics from 1973 to 2008. He is cur­rent­ly a Vis­it­ing Pro­fes­sor in the Grad­u­ate Pro­gram in Inter­na­tion­al Affairs of the New School Uni­ver­si­ty, New York City. He also teach­es class­es reg­u­lar­ly at the Brecht Forum in Manhattan.
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