$15 AN HOUR – THE DISCUSSION CONTINUES
Artie: “I’m somewhat shocked by your reader’s suggestion that we let ‘the market’ determine wages. We sort of had that earlier in our history with the slaughterhouses, the coal mines, the migrant farmers, etc., and it took the blood and violence and the unions to somewhat level the playing field and get people a liveable wage. [And weekends! We got weekends! — A.T.] Now that the unions are being decimated, we’re heading back to the good old days. . . . Another interesting aspect of this argument is that there are other markets in play: I would contend that Wall Street is forcing a hard heartedness on corporations that perhaps exceeds what they would manifest were they privately run. Executives are expected to seek financial growth consistent with market ‘expectations,’ both as a condition of their continuing employment and as a determinant of their compensation. This kind of pressure, especially in the midst of an economic downturn, but even well before, has forced downsizing as well as cuts in compensation and in benefits, most notably health care insurance and pensions. As my former CEO, Verizon’s Ivan Seidenberg used to say, ‘We’re driving costs out of the business.’ He made it sound so benign.”
Patrick Johnson: “I still strongly disagree with you on this. I trust you don’t believe the government should set a minimum price for a copper pipe or a share of IBM stock so why is it a good idea to set a price for labor? If government setting the prices of things was the path to prosperity wouldn’t Mao’s China and the Soviet Union been powerhouse economies? I respect anyone who works. However, sadly I don’t believe that all work adds enough value to pay everyone who works at a level to support a high consumption lifestyle. And if it doesn’t add sufficient value, how can an employer pay a higher wage level and stay in business? I want work to be valued and compensated but I only think market prices work.”
☞ Well, in the chasm between Patrick (my esteemed performance-tracker, by the way, in case you forgot his great contribution to this page) and Artie (who said most of what I would have said just now in response to Patrick) lies a very important difference of views.
As a centrist type, I am all about rejecting the extremes (as I’m sure Patrick and Artie would, too) — communism at one end, Darwinian capitalism at the other — and finding a good balance in between. That’s why it’s frustrating yet oddly validating when President Obama is simultaneously lambasted as a Marxist from the right and “Republican lite” from the left.
People are not copper. Copper doesn’t suffer if it’s sold cheap; copper’s children don’t lack for the investments in their future that ultimately benefit us all (by increasing the odds they will grow up to be productive citizens and good neighbors); and we have no special interest in seeing copper triumph. If copper can be replaced by a more cost-efficient material (especially when you price into your cost calculations the “externalities” our free markets rarely do), that’s totally fine.
We don’t want the government setting prices for everything. But we do want a strong middle class, because, as Nick Hanauer so eloquently reminds us in that short video everyone in America needs to watch, it is the middle class — not the rich — who are the job creators. And most of us want a society in which, if you work hard and play by the rules, you can have the basics you need for a decent life. Which these days includes things like an Internet connection that no one would have dreamed of a century ago.
A decent life shouldn’t be handed to you; but working at a fast food restaurant isn’t a walk on the beach. (I know: I’ve just taken a walk on the beach — like five minutes ago — and greatly prefer that to tending the boiling oil at McDonald’s, which I would pay a lot more than $7.25 not to have to do.)
Those of us who patronize those restaurants are doing so voluntarily, which means we value the work of the people employed there. Do we want our employees — in a sense, for the few minutes we’re getting our oriental chicken salad, they are working for us — to be paid even less than the current $7.25 minimum wage so our bill might be a few pennies cheaper, or our dividends, as McDonald’s shareholders, a few pennies more?
That’s what Republicans — who mostly oppose the minimum wage altogether, let alone raising it — would like to see. Which means that in a bad economy, with people desperate for work, keeping the government out of this would allow wages to fall from $7.25 to perhaps $6 or $5 or $4 . . . and that would also likely put downward pressure on wages of those currently earning modestly above minimum wage.
Which would likely hurt the economy (less buying power), leading to larger deficits and less job creation. There was no minimum wage in 1929, which may be one of the reasons the middle-class-decimating Depression was as bad as it was.
When you think about it, if you’re okay with “collective bargaining” — as even some Republicans are (a third of union members voted for Romney) — isn’t the minimum wage . . . sort of, vaguely . . . the ultimate collective bargain? We the people, through our elected representatives, decide that — for a variety of reasons, both moral and self-interested — it would be a good thing to set a floor on wages.
If you buy that, then the question simply becomes: how high should that floor be? As we’ve been discussing these past couple of weeks (here and here), $15 — though higher than I first thought practical — might actually make a great deal of sense.
Quote of the Day
That I'm their competition.~Famed hedge fund manager Michael Steinhardt, when asked the most important thing an investor could learn from him.
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