Thoughts on the Minimum Wage

The $15 minimum wage is an issue that I feel deserves a quick jot down in the blog to save my two cents for future posterity. It’s a divisive issue and like a lot of things, I feel though a lot of people are looking at the situation incorrectly.

The Market and Wages

I think we all know the basic idea that free marketplaces (which our market is in part) self-regulate wages. The idea of self-regulating systems is very powerful because from a philosophical standpoint. We know from common sense that there are some things centralized government can do better if viewed from an omnipresent, omnibenevolent perspective (if being authoritarian is compatible with benevolence, of course) but when something can operate without a central authority that tends to work best in pragmatic reality. It also tends to allow people to act with more personal freedom.

While I believe free markets should be open and largely unregulated I also believe a free marketplace (and in turn a free society) is a concept that needs to mature with a society that fits it. We’re not quite where we should be there when it comes to how we handle wages. We rely on the market to regulate wages yet wages are a very stagnant component in our society.

I call our society a debt-based society because a lot of spending on both the government level and the individual level is less based on actual holdings and more on leveraged debt. We have a fairly stable instance of this type of economy now but it is not so stable that it is impervious to inflation. Annually we have 1.5-3% inflation which affects everything overall.

Most people work jobs that will get wage increases over time but it often is not consistently outpacing the rate of inflation, keeping wages depressed to the cost of living. Then as time passes we see a job market that grows around that reality. It doesn’t help any that often businesses use people changing professions as a means to further keep wages around a baseline by often resetting new hires. This doesn’t affect people in the upper tiers of our society as much as it does those at the bottom, but it is clear that those at the bottom need the negotiating strength more overall.

I want to be clear on my bias here. I’ve seen and worked in the lower spectrum of the job market my whole life, only now being meagerly in the middle class due to being married and both of us working full time. I do not feel that a middle-class lifestyle should require two working full-time adults when both are in professional trades as it leaves little time (and energy) for actually fixing life problems that arise. I also think the stagnation of wages (the fact that wages don’t adjust and adapt to growing inflation) across the board is an obvious reality. Now that I have stated my bias, let’s take a look at where I stand.

Classless Wage

The minimum wage is generally seen as a solution to depressed wages by creating a baseline level where the working class begins. When I started in the job market, my minimum wage was $5.15. The federal minimum wage only ever went up to $7.25 and it hasn’t been updated in over a decade.

Usually those in favor of conservative economics view wages like a game of supremacy ala Objectivist philosophy. The strong and smart will thrive, the weak will flounder. I feel this misses the point of free-market economics. I take my view of economics from Adam Smith in the sense that I view it as an ethical philosophy of values and most people do offer enough value to the overall marketplace to justify wages that satisfy basic poverty needs.

While nothing in free-market economics says “basic poverty needs” should be satisfied, it seems obvious to me that a functioning free market would do so. Think about it – the value of society’s goods is not the accumulated wealth everyone has. All our products and labor improve in value when traded to the right people, increasing the net value of the entire society. At least that is the idea and that idea doesn’t flesh itself out when some part of our society is always beneath poverty-level income.

Just to quickly state my thoughts on the idea of class, I view it as a false dichotomy with real outcomes. That is, class-structured viewpoints have relevancy to the world but they are built upon the false dichotomy of the self-described classes. Many critics of capitalism state that capitalism is a necessarily class-based system by definition and that it requires an underclass. I don’t see anything overt in the philosophies of Smith and other free-market philosophers which states that the underclass is a necessary component to the structure, although a non-equal set of classes necessarily exists in any society that has delineation of any kind. So the class ideas have merit as individual points to argument but as an overall worldview, it is a false dichotomy (that being the idea of class-based society versus “equal” and “classless” society) and I consider it a bad point of contention to argue with a capitalist system.

So I understand most people who just read that think I’m talking nonsense, so let’s just wrap it up.

A Livable Wage

Any society that wants to fundamentally operate needs to provide a baseline by some means, either self-driven or government instituted. I think most people agree with that idea even if some don’t like the implication of it. Right now the current institution of our free market (which is a heavily regulated, heavily government-controlled one, but still free in comparison to many others) our wages are stagnant.

There are several solutions to fix this. The crudest is the obvious, a simple minimum wage increase. As human beings, we have a lot of conditions that cause us to not be able to freely shop our labor and productivity to the highest bidder and these life circumstances cause us to not match the freely competitive nature most who are free-market supports believe should be the pure driving mechanism. The minimum wage does fix that by prescribing a baseline wage. If that is the only solution at play, I’d just say raise it and be done with it.

It however isn’t the only solution at play and I think we should explore other solutions to see what impact they have. Anything more complex than a mere rote and simplistic minimum wage increase. For instance, perhaps applying minimum wage increase requirements to only the largest and most successful businesses. The multi-billion and multi-national corporations. This creates an undermarket for below-poverty wages to absorb the perceivable unemployment shift that some argue comes with the minimum wage change while also at the same time ensuring our most successful businesses are providing above-poverty working wages.

Another option I think is a revamp/overhaul of corporate tax breaks. Right now tax breaks are geared towards charity (which often becomes a second wallet for the business rather than providing actual charitable work) and expense writeoff benefits and often let companies totally reduce all taxable income to zero.

I would like to see these tax breaks restructured towards reducing the tax burden for keeping wage growth trending positively against the inflation rates. If you want to write off all taxable income for your business, follow standards to keep wages above poverty and trending above inflation so your worker base is never shifting down the living standards spectrum. If you don’t want that well, pay your full taxes because you are employing a bunch of people who at the end of the day will eventually need some assistance (usually government-supplied) to make ends meet because you’re not paying them enough.

I also believe there could still be a below minimum wage labor market however it should just be strictly regulated to prevent it from being feasible to operate on it for mainline business. There would have to be strict restrictions on how many hours these workers could operate before being required to be a minimum wage worker and limits to what percentage of a workforce is allowed to be in this type of underpaid work. I think of the idea as a microwork market.

Why do such a thing when it seems exploitative you ask? Well even if you didn’t ask, I’ll just put it like this. It creates opportunities for people to participate in the job market on fairly simple terms and for that, they get a wage that is below minimum wage but it provides some degree of opportunity. It builds relationships and if regulated heavily enough, would not be terribly exploitative because companies legally couldn’t build an entire workforce in this labor class. Maybe we could pair this idea with the abolishment of unpaid intern work. Instead, we would let some classes of intern work fall under “microwork” and be permitted to be below the minimum wage. Maybe we could even define a second floor for “microwork” minimum wages to ensure it doesn’t get out of hand. Maybe a minimum wage operates at $15/hr could also have a microwork wage set to $10/hr with these stated restrictions, to give a broader range of work options.

Anyways I would structure changes to any of this around the tax write-off restructure I mentioned earlier. I’d also think it’d do the job market well to have other labor-related ideas part of such a restructuring – like revising full-time work schedules to 32 hour work weeks so full-time workers have more opportunities time-wise to advance in school, manage families, improve their lives and plan to advance their careers or even start their own businesses (which all are activities greatly beneficial to the overall marketplace, I think in many industries it would be a very positive change).

If ideas like these could be tried and tested throughout the country we’d create a marketplace of ideas that would give us a better chance to see if things outside a mere baseline increase to the minimum wage could impact the actual marketplace positively.

If the minimum wage were to increase to be a more livable wage yes, it would address a problem. However, there is a great opportunity in exploring alternate means to solve a problem and try different solutions in tandem. It often creates a stronger, more permanent solution that would otherwise just be overlooked. I think everyone should take a moment to think of things on issues like this, rather than just be partisan ideologues.