on wages and social justice

“The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”

-John Kenneth Galbraith

Raising wages will price low-skilled workers out of the labor market. This is an argument made by opponents of Santa Barbara’s proposed Living Wage Ordinance, including ostensibly liberal City Council candidate Loretta Redd. It is echoed in the recently published survey of living wage laws developed by the Public Policy Institute of California, and gets lots of traction from local libertarians. This is the same argument that gets trotted out against minimum wage laws, collective bargaining, health and safety regulations, you name it: pretty much anything that helps workers protect themselves from the power and self-interest of their employers.

Their argument is based on a simple and unavoidable fact: higher wages mean that it is more expensive to employ people. True enough. However, to move from that basic fact to an argument for keeping wages low is big step, one fraught with misconceptions and conservative ideology. The case for low wages is built on the existence of a permanent underclass of workers, a two-tiered society in which some sectors of the population are caught in a trap of poverty and dependence.

Consider Santa Barbara as a case-in-point. There is tremendous demand here for so-called low-skilled labor- cleaning hotels and offices, sweeping streets, painting houses, minding children and hauling garbage. This work is necessary both socially and economically- it is the foundational labor of our service and tourism-based economy. Given the large pool of poor immigrants and migrants in our region, an employer can hire people for well below what it takes to live in our community. This is why you find people working several jobs and living in cramped apartments filled with multiple families and friends. The low-wagers argue that it is just fine to resign this portion of our community to these conditions. For them, hiring more people at lower wages is better than hiring one or two fewer at levels that allow them to live decent lives.

But it is not. It is not better to hire a few more people and stick them in an underclass. It is better social policy to raise people out of poverty permanently by allowing them to work one job, allowing them to spend time on educating themselves and their children and move into the middle class. It is better social policy to have one community, not two.

Setting aside the attendant social problems with sustaining an underclass- crime, homelessness, drug abuse, congestion, increased demand for underfunded public assistance, etc- there is a fundamental economic miscalculation at play. Workers are also consumers. Earning a living wage allows workers to spend money in local shops, go to movies, buy clothes and rent single-family apartments. On a national scale, lifting people out of poverty creates more consumer demand, a boon for businesses of all sizes. In essence, the situation in Santa Barbara is a microcosm of the global economy as it is currently arranged. Poor countries provide cheap labor to rich ones which enjoy cheaper goods and shield themselves from the hardship and calamity that underpins their razor-thin prosperity.

There is also a problem with the delination of "skilled" vs. "unskilled" workers. Many people working low-wage jobs are, in fact, quite skilled. Barriers of language, discrimination, as well as rules disregarding foriegn educational qualifications keep many immigrant workers from plying their trade after moving here. How many of you have met a Cab Driver or Janitor with a degree in engineering? Perhaps more relevantly, people are doing skilled work for low pay- just ask anyone in the construction trades. The drive to push wages down is a function of the power of employers, not a free-market of skills and experience. So long as people are desperate enough to work for poverty wages, employers will pay poverty wages. Unless something- a union, a law, a pricked conscience- intervenes. Furthermore, we shouldn't think of the "unskilled" as a permanent class of worker- everyone can become "skilled". This is a lot harder when you are working two jobs.

Looking more broadly, one must ask where, exactly, argument for low wages ends. Sure, Nike’s subcontractors can hire a lot more workers if they are able to pay fifty cents a day and chain workers to sewing machines. Cleaning up sweatshops in 1900’s New York made the cost of doing business higher. This is why the textile industry responded by moving first to the American South and then to South East Asia in search of lower labor costs. At a national, and now international level, sane and reasonable policies must be set to limit the depth to which employers can push their bottom line. I used to serve on a United Nations advisory group on youth employment. The constant tension between corporate and labor/public interest organizations in the groups was between more jobs and quality jobs. This is a false dichotomy. You can have both.

High wages and regulated labor markets to not necessarily lead to high unemployment. So long as full employment remains a real political goal, and macroeconomic tools are used to achieve it, a nation can have both high wages and keep its citizens working. This was the hallmark of post-war Swedish economic policy, and it was executed with great success. Despite distortions by conservatives who love to whip Sweden for its unemployment rates, unemployment in Sweden has been consistently on par with its neighbors in Europe, generally lower. Through the 1980’s, when unemployment rose to 6% in the U.S., Sweden’s rate was close to 2%. This is on top of the fact that Sweden’s methods for its rates are far more accurate and honest than ours are. Consider that two million prisoners, as well as anyone who hasn’t had a job for more than a year is not considered “unemployed” in the American statistics. Anyone without a job and not in school or training is considered unemployed in Sweden.

The Swedish trick is to guide the economy toward employment, with incentives for job-creating investment, a robust public sector and commitment to education, skills-training and domestic consumption. All of this was achieved with relatively high wages and a strong social safety-net for workers finding themselves between jobs. While Sweden does not impose state-mandated minimum wages, their unions, which represent about 80% of the workforce, negotiate salaries and compensation across industries, generally at the national level. This is a more democratic and effective method for insuring decent wages and working conditions, but it is not replicable in the United States any time soon. Our strategy, given low unionization rates, has to include such mandates- including living wage ordinances for city and county contract workers.

I began this post with the quote from Galbraith because of his consistent opposition to wooly-headed economic thought. Galbraith was always quick to point out that it seemed a nifty convenience that the economic “truths” proclaimed by the rich so often justified their enrichment. We should use the same skepticism in assessing the claims by local employers, their friends and politicians who benefit from their largesse.

More on wages and the economy.