Tuesday, June 17, 2008

Happy Anniversary. Now Back to Work.
You probably missed it, but this is a week of mild celebration for Americans who work the crappiest jobs: the federal minimum wage was signed into law on June 16, 1933. New York Times "editorial observer" Adam Cohen tells the story and explains the significance:

When progressives set out to establish a national minimum wage, they faced stiff opposition. Industry insisted that government should not interfere with its relations with its employees. Organized labor was also opposed. (“If you give them something for nothing,” one labor leader objected, “they won’t join the union.”) The pro-business Supreme Court presented the biggest obstacle, ruling that minimum wages were unconstitutional.

The Depression provided an opening. Progressives injected minimum-wage and maximum-hours provisions into the NIRA. These provisions were technically voluntary, but if companies wanted the government to approve the minimum prices and production limits they desperately wanted, they had to agree to minimum wages. Most industries adopted a minimum hourly wage of at least 40 cents.

The Supreme Court declared the NIRA unconstitutional, but the idea of a federal minimum wage had taken hold. In 1938, Congress passed the Fair Labor Standards Act — which a more progressive Supreme Court upheld — creating a mandatory federal minimum wage.

The new law was enormously effective: within a year, it brought millions of low-paid workers up to a wage of 30 cents an hour. It also had major weaknesses, notably that it was not indexed to inflation. Congress has to raise it, which leaves low-income workers at the mercy of politics.

I first took a serious look at the minimum wage four years ago, in the context of a report on working poor families in New York state. During the research, we engaged the Pataki administration's welfare office; the commissioner and his top advisers there were clearly conservatives and opposed a higher minimum wage, which we were considering including as a recommendation, but they were fair-minded people who weren't afraid of the argument and didn't hold against us the fact that we did ultimately urge the state legislature to raise the wage. (They did, that winter; much as I would love to assert that our advocacy had something to do with it, the timing--our report came out in November, the vote took place very soon after--puts that into doubt.)

The federal minimum wage increase passed by Congress last year, to $7.25 per hour, was higher than the $7.15 state wage, and thus superseded New York's change. The problem, as Cohen notes, is that the wage is not indexed to inflation--so every move to raise it requires a new act of political will. Perhaps not surprisingly, the real value of the minimum wage has fallen sharply since the late 1960s, which of course is when the conservative political ascendancy at the national level really took hold. From 1981 to 1990, and again from 1997 until last year, the federal minimum didn't go up at all.

Arguments against the minimum wage center on its supposedly harmful impacts to business, particularly smaller employers. Perhaps surprisingly, I haven't heard even right wing pundits declare that the higher minimum wage is the reason for the current economic downturn. (Granted, this position makes no sense; but that rarely seems to stop them.) Arguments for a higher wage generally engage both a moral case and a utility argument, that providing low-income earners with greater spending power exerts a stimulus effect since they tend to spend every added dollar on needed goods. This piece from CNNmoney.com briefly covers both sides, in the context of the debate early last year when the increase was being considered in Congress.

A brief search revealed no analysis of how the most recent federal increase has impacted the economy. But this report by the Fiscal Policy Institute, a labor-affiliated research shop based in Lower Manhattan, found that in New York, employment in the industries most affected by the increase--retail and food service--grew at a faster pace than overall job growth in the state from 2005 to 2007, during which time the minimum wage rose each year.

The politics of the minimum wage touch upon the big sea change in American political culture I referenced above: the shift in default public mindset from assuming that government intervention in the economy was certainly well-intentioned and probably justified (a majority view from 1933 to sometime in the late 1970s) to suspicion of any interference in markets, no matter how justified by outcomes. This is probably something I'll be writing more about on this site in the months ahead, so be warned... though I'm also noodling something about horror movies, if you're into that.


Chris said...

i found this engrossing. does that make me sick?

Anonymous said...

I read "Nickled and Dimed" a year or two back and came away with the sense that we shouldn't have a country where people work hard all week long but don't have enough money to live on. There is some evidence that minimum wage does impact employment levels, and I think that we need to deal with that reality, not try to gloss it over. But that doesn't change the underlying reality.

I wonder if getting low-wage earners to vote more consistently would be, perhaps, one of the highest-leverage options for change.


David said...

Absolutely. But that's the trick, as antipoverty organizers have been finding out for the last fifty years or so. (Chris, are you guys legally allowed to do registration drives or anything like that?)

Chris said...

i'm allowed to do nothing political other than vote and give money. that's it.

it sort of blows and is sort of freeing, but it does take a lot of people out of the political process (other than to vote).