Will a $15 minimum wage create jobs in Seattle?

by Jehu

According to this article, “Thinking Bigger in Local Minimum Wage Campaigns: The Fight for $15 in Seattle”, raising the minimum wage to $15 would reduce poverty in Seattle from 13.6% to 9.4%. The increase, we are told, would affect more workers than any NLRB action in US history. The increase will have positive effect on the entire economy because “more people with more money means more customers for more businesses.” It is based, David Rolf asserts, on a “commonsense ‘middle out’ argument about how economics works”.

large_advanced_burger_flipperOf course, if this is actually “how economics works”, how did we get to a situation where poverty has been increasing for most of the last 40 years? Suppose a higher minimum wage actually means fewer businesses, i.e., suppose it wipes out the fast food industry. If this turns out to be the outcome of an increase in the minimum wage, would Mr. David Rolf then suggest the minimum wage must be reduced? If raising the minimum wage results in the collapse of a host of marginally profitable businesses, would he change his tune?

The question I am raising about raising the minimum wages it this: How much is the effort being made by activists tied to the absurd notion that “what is good for the worker is good for business too”? And how is it that capitalists, who should know what is good for their firm, haven’t discovered this benefit of raising the minimum wage. This is the really hard thing to explain: capitalists, who have at their disposal all the intellectual wealth of the society, have yet to discover that increasing the wages of the working class is good for capitalism. Science has brought us understanding how things appeared within milliseconds of the birth of the universe, but hasn’t yet been able to explain how raising wages is good for capitalism.

Will raising the minimum wage create jobs?

Now, it is obvious that a worker can buy more necessities with $15 than she can with $8. But this isn’t the argument Rolf is making; instead he makes another argument: capitalist firms will increase with an increase in wages: “more income for more people will create more customers for more businesses.”

I have no idea why he makes this argument, since it is clearly bullshit. Rolf is essentially arguing that business formation is driven by rising wages, not rising profits. However, we know that if wages are being forcibly increased by political means, this has to have a negative impact on profits since both wages and profits are drawn from the same pot of business income. Since the capitalist’s profit would be falling due to the rise of wages, he will want to offset this loss by reducing his investment in variable capital, i.e., by shedding or laying off workers.

In the first pass on the problem, Rolf explains that the material living standards of the workers will increase due to higher wages, but he neglects to mention that wages then begin to fall. Firms will reduce their employment of labor power and substitute technology for living labor wherever possible. The workers with jobs see their wages rise at first, but due to slowing new employment, improved productivity, and rising competition for jobs, their wages will be undercut.

All of this should not be a surprise to David Rolf precisely because this is what has happened in all seventeen of the previous minimum wage increases since 1970. Despite multiple increases in the minimum wage over the past 40 years, the wages of the working class have not kept up with inflation; the poverty level has increased; while unemployment and under-employment has been a persistent feature of an overall economic stagnation.

David Rolf deliberately neglects this history in favor of a truncated analysis of the impact of an increase in the minimum wage. What we get from him is only the first pass on the problem: the immediate effect on the wages of the lowest paid workers. Each increase in the minimum wage is treated in isolation from the long term impact the increase in the minimum wage must have on the rate of profit.

Is this an argument for not increasing the minimum wage? Of course not.

Calculating the worth of people as commodities

On twitter I have read the outrage many folks expressed because some person said $15 is too much for a burger flipper. So, is it the argument of the people offended by this statement that $15 is enough for a burger flipper? The same method by which that person arrived at the conclusion $15 is too much for a burger flipper, other people seem to have arrived at the conclusion $15 is all a burger flipper is worth.

The person making this argument thinks the skill set required to flip burgers doesn’t deserve the compensation — i.e., the simplest form of labor power isn’t worth a minimum wage of $15. It is ridiculous to fight the case against an increase in the minimum wage with the argument that simple labor power is worth $15 — you just get down to the level of the fascists. Now you have to give evidence why the simplest form of labor power — the labor power on which more complex labor power is calculated — should be priced at $15. Which means you begin to think like a fucking fascist.

Thinking like a fucking fascist means you begin calculating people in terms of their worth as a fucking commodity. You have already lost the debate when you accept the idea that people are commodities and you don’t even realize it. Now, you are haggling over the worth of human beings as a fucking commodity, which makes you no different than the fascists.

There are only two different outcomes to increasing the minimum wage to $15: either capitalism can survive with people paying $15 for simple labor power or it can’t. Now, why the fuck should we care whether capitalism survives or not? We only care that people can live. Whether this is compatible with capitalism or not is of no fucking concern to us — let the fucking fascists worry about McDonald’s profits and whether it survives. We only care about people. The whole fucking economy can crash as far as we are concerned — Wall Street can drop to zero — but one thing is for fucking sure, if you want to buy labor power after the law passes in Seattle, you will have to pay $15 for it.  Their profits are not our fucking problem; our sole concern is the working class, not profits and we should not even let profits figure in the discussion. The working class can live without either profits or wages — only the capitalists need that shit.

The long-term collapse of the purchasing power of the minimum wage

Not only should the minimum wage be increased, $15 is not nearly enough to keep up with what inflation has done over the past 40 years. When considered from a base minimum in 1970, the minimum wage should be closer to $50 per hour. This is how much the minimum wage would be have to raised just to take us back to what a minimum wage worker made in 1970 — i.e., to the purchasing power of $1.45 per hour minimum wage in 1970.

At that minimum wage, no worker with a full time job would be anywhere near the poverty level, and the earning of single worker could easily support a family of four. It would, in other words, redistribute all the gains in productivity from the capitalists to the workers since 1970.

My argument, therefore, is not meant to imply that a $15 minimum wage is too high, or too low; rather I take issue with the underlying argument for any minimum wage as a panacea for what is actually a labor time problem. We have far too many people — some 30 million — looking for work for any minimum wage solution to fix this.

Raising the minimum wage of the lowest paid employed section of the working class is not going to fix this; but this is exactly the argument Rolf is making with his argument, “more people with more money means more customers for more businesses.” He is essentially asserting that raising the minimum wage will create new jobs — and this is complete bullshit.

Yes. Raise the minimum wage, but hours of labor still must be reduced

Raising the minimum wage is popular because it is low hanging fruit now that Obama has signed on to the idea. But Obama signed on to the idea precisely because it avoids reducing hours of labor which must undercut profits even more than raising wages. It is a sop to the lowest paid workers to buy their political support against doing something for 30 million unemployed workers.

However, since competition among workers is fiercest among those seeking the lowest paid, simplest sorts of jobs, raising their wages may appear to insulate them from the effects of this competition, but it actually doesn’t, since it only means increased competition between those who are better educated and those who are less educated, those who are older and those who are younger, etc. Jobs that were previously too low paying to support a family or pay for college or buy a house, will now appear sufficient for those purposes.

Even if the minimum wage is successfully increased, there will remain 30 million people looking for full time work and they will be drawn into competition with the least organized, lowest paid workers. No matter the outcome of the minimum wage fight, hours of labor still must be reduced.