The War over Wages

Anyone who’s ever held a minimum wage job (which is a lot of people) knows that it’s impossible to support a family solely on $7.25 per hour. With an average monthly rent of somewhere around $700, you would have to devote nearly one hundred hours of work each month solely to keeping a roof over your head. Given that a number of these jobs are often available only part-time, the financial plausibility of it becomes ever more remote. In an economy that makes it so hard for individuals at the lower end of the economic scale to meet their basic needs, any argument like “take personal responsibility for your financial situation” or “pull yourself up by your bootstraps” rings woefully hollow.

Of course, it wasn’t always this way. The United States has not always had a minimum wage, so it’s important not to take it for granted. Furthermore, the minimum wage has not always been as high as $7.25 an hour (the amount that Congress only slated it to become in 2007). I trust that this fact is obvious enough to be self-evident, but what might be surprising is that the first minimum wage was a mere $0.25 per hour. Compared to today’s minimum wage, this seems laughably—perhaps even impossibly—low.

Except for one thing: it’s not. We don’t have to go back very far to see a similar rate. In today’s money, 25 cents in 1938 would have been equal to almost $4 an hour—not so drastically far away from what the minimum wage was before being raised in 2007.

* * *

Looking at the chart, you can see the historical data of minimum wage’s effective value. Even today’s recently increased rate is relatively unimpressive:

President Franklin Roosevelt made [the minimum wage] law in 1938, that any hourly worker had to be paid at least 25 cents an hour. It was revolutionary, and very few countries had anything like it. … Fast-forward to today. The minimum wage is currently $7.25. But in 1968, you’d make the equivalent of $10 an hour in today’s money.

Since then, the value of minimum wage has clearly dropped substantially. Ten dollars an hour isn’t enough make you rich, but there can be no question that it would give you a far better shot at financial stability than what we have now. For a full-time employee, that’s a difference of over $5,500 per year (and if you don’t think that’s significant, I’ll invite you to begin sending me that much money every year).

Take a moment to store this figure in the back of your mind: since 1938, the value of minimum wage has risen by around 85% (from almost $4 to $7.25).

The US GDP in 1938 was $7,637. In 2011, it was $42,671.

US GDP – Historical

Now let’s look at the overall national economy. In terms of today’s dollar (that is, adjusting for inflation), the US GDP per capita in 1938 was $7,637.21. If we compare this to the federal minimum wage, we might expect this figure to be something like $14,128.84—85% more than the 1938 figure. Is this what we see?

No. Not even close.Today’s adjusted GDP per capita is a whopping $48,372. That’s over six times higher. Since the time of minimum wage’s implementation, the country has seen a massive increase in economic productivity. The federal minimum wage, however, is nowhere near so valuable.

Since 1938, GDP has risen by 630%. Minimum wage has risen by only 85%.

Since 1968, GDP has risen by 230%. Minimum wage has fallen by 30%.

Can there possibly be any excuse for this?

The disparity does not stop there. For the past 40 years, the earning power of the bottom 80% (that’s the vast majority) of US households has been relatively stagnant (granted, with a very slightly positive trend) while the top 20% of earners show a substantial overall increase in income. Simply put, individuals at the bottom earn less while those at the top earn more—lots more.

US Incomes by Quintile – Historical

Those top earners are offered as examples of people who have “pulled themselves up by their bootstraps” while those on the bottom are condemned for allegedly bearing deep moral faults—they are blamed for their poverty.

The so-called “culture war” is real, but it isn’t being fought over whether shop clerks should say “Merry Christmas” or “Happy Holidays” to customers; this is a distraction. No, the war is being fought over money by corporate lobbyists who represent the wealthiest households against the interests of everyone else. It’s being fought by members of Congress who rely on their corporate donors to fund their political campaigns. It’s being fought by people like Grover Norquist, who has successfully sold the Republican party en masse on the idea that raising taxes even a little bit is completely unacceptable—to him and his anti-revenue brigade, the richest Americans (who have seen the most significant increases in income) should actually be made to contribute less to the running of the country.

How this constitutes that richest quintile’s “pulling themselves up by their bootstraps” is anyone’s guess. On the contrary, the rest of the country is doing all the pulling.

Who’s supposed to pick up the tab for their decreased tax burden? Well, no one, actually. The Republican message is that government should “cut spending,” which effectively means the reduction or cessation of services. Which agencies should be eliminated to compensate for the rest of the country giving the richest group an even bigger increase in spending power? The USDA, which works to ensure safe and effective farming practices? The Department of Education, which works to make quality education available to all Americans? The Department of Energy, which works to keep the lights on in American homes? How about the FDA, which works to make sure that foods and medicines don’t kill people? Perhaps the USDOT—after all, we don’t really need drivable roads between states, right?

Government agencies provide services, and Republican politicians* apparently often forget this. These people cannot possibly be conceived of as agents of responsible governance.

Alas, the message we are meant to receive is that this decrease in wages from the 1960s is actually a good thing because it leaves the richest individuals (oh sorry, the “job creators”) with more money. If you are struggling to make ends meet, stop buying luxuries. Pick up another job. Get a roommate. Stop having children. Work harder. But don’t expect any help from anyone else, least of all the government.

The mind recoils at the sheer idiocy of it.

 
* Sure, Democrats sometimes do this too, but let's not pretend that both parties do so at equal rates.
  Both parties have their faults and their strong points, but the national Republican party exhibits
  a distressing disregard for the public well-being. At least the Democrats pay lip service to it.
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4 responses to “The War over Wages

  1. “Government agencies provide services”
    Government agencies provide poor services. “The Department of Education, which works to make quality education available to all Americans?” Seems to me they’re doing a piss poor job of it. Math and science I learned in Russia in 5th grade was only taught to me here in the 8th. Dumb motherfucking ‘science’ teacher in middle school didnt even know what a mitochondria is.

    I would be willing to trust the FDA and USDA if they werent in bed with companies like Monsanto. Ideally, yes those agencies are there to protect us, however instead they are vehicles for corporations to screw us over more. Just because someone has good intentions, doesnt mean their actions are constructive. See Food Inc. Dont get me wrong, I do understand that the super-rich are fucking us over, they always have, I just dont think that trust in more government is the solution.

    “If you are struggling to make ends meet, stop buying luxuries.” How is that an idiotic notion? Makes perfect sense to me, if you’re on food stamps then you why the fuck do you spend your money on bling and smartphones? I stood in the food stamp line, and let me tell you, half of those people dont belong there. Social safety net SHOULD exist, but to aid people like me temporarily who are working their way up(or those who are not able to work their way up for physical reasons), not to serve those who are too lazy to work and would rather leech off the system, and make it harder for those that truly need it

    “At least the Democrats pay lip service to it.” So as long as you talk nice, its all cool? I personally think the party system, as it is, is just a way of divide and conquer. I hold some conservative views and some liberal, why should I be discounted by the right just because I oppose the war and support the right of gay people to marry and discounted by the left because I think people should have not be entitled to benefits but must earn them if they are physically able to.

  2. “Government agencies provide poor services.”
    Confirmation bias. You only notice the services that are bad because you expect to see bad services. You take for granted the ones that work well. In any event, services can be improved, and I’d argue that that’s the proper course of action, not to remove them entirely.

    Government solutions may not be the best solutions, but I think they’re the only solutions. No society can function on the discretionary altruism of a wealthy minority. When services enhancing the public good can be withdrawn for any or no reason, society cannot function. Government is necessary to provide stability.

    “How is that an idiotic notion?”
    It’s idiotic because it presumes that the poor are buying luxuries in the first place. Again, I’m going to cite confirmation bias here. For every person who abuses government services, there are several who do not. As the Florida drug screening fiasco has taught us, policing these systems for abuses can cost more than the abuses themselves. (I’ll definitely be one of the first people in the “this shit needs to be improved” line, but that’s not really my point here. My point is that it is simply wrong to assume that poor people are poor because they are spending their money on expensive luxuries.)

    “So as long as you talk nice, its all cool?”
    I don’t know about that. I’d say that incremental improvements are better than none at all, regardless of whether sweeping improvements would be better, faster. That’s kind of my interpretation of the modern Democratic party–slow as molasses, but at least oozing in the right direction.

    “I think people should have not be entitled to benefits but must earn them if they are physically able to.”
    Do you view paying taxes as “earning?” This is my explanation for government services–people earn them through tax dollars.

    I’ll actually go a step further. I value social cohesion over minor financial gains. If a given percentage of the population is guaranteed not to work (either through an active refusal to do so or through an inability to do so, like because of high unemployment rates), it may be more beneficial for everyone else if the government allows them to “game” the system. Why? Well, it costs a lot of money to keep people in jail, and even this consideration overlooks the human trauma element of violent and property crimes. If the denial of services to freeloaders has a higher cost than the freeloading, we’re collectively better served by overlooking the freeloading. Is this fair? Our moral impulse (yes, mine too) is to scream out “No, of course this isn’t fucking fair. I work hard for my money, so they should have to too!” but this answer is shortsighted for the reasons I hope I’ve made clear in this paragraph.

  3. “Confirmation bias. You only notice the services that are bad because you expect to see bad services.” And I can argue that you notice the good services because you expect to see good services and ignore the ones that work poorly. Semantics.

    If you have to use force or coericion to take from someone else, then you are always ignoring the evil. You could try to improve services as an incremental move, but not as the end all solution. Most of societies greatest achievements came not from govt. but from the private sector:Iphones, airplanes, refrigeration, air conditioning,all of those solutions came from the desire to make money, not from the altruistic desire to help people.
    No one is arguing to withdrawl services from the public good, if we just cut our “defense” spending by half we would be able to afford all entitlement system, but wtf is public good anyway? Is it good for my dad who pays more taxes, or good for me, I get most of my taxes back in a refund.

    “Government is necessary to provide stability.” I’m sure that was Rome’s arguement as well.
    I’m not against government, there are things that it should do, like enforce contracts, to provide national security. If you want a controlled economy in an attempt to reach some utopia where everyone is treated equally and fairly then you need minimum wage, but I think that the wage labor system is a very authoritarian system top down control, chain of command except the oppressor and controller is the be the US government instead of the corporate tyranny. If you want to help the poor by raising the minimum wage, then why not raise it to $100 per hour? Only markets set wages, govt cant set wages. If you gave every Mcdonalds worker 100 dollar an hour
    then the 99 cent value menu would be the 99 dollar value menu.

    “It’s idiotic because it presumes that the poor are buying luxuries in the first place”
    But…. they are! Like I said, a good half of the people in the food stamp line had nice clothes and smartphones, and would hide their bling when it was their turn at the window. The guy who lives above me lives off welfare and his GF, yet he owns a much better car than I do, a nice TV and a cable package. I’m not saying that’s the only reason they are poor, many people are born into poverty, but if you’re making poor spending choices, wtf should you get the same treatment as someone like me, who understands that I dont need to spend $60 on a new video game, because I’d rather spend that money on good for for my kid. My mother(and arguably I) grew up in extreme poverty, but she worked hard, studied hard and as a result knew enough English so that when her boss asked her be the tour guide for a bunch of Americans visiting my hometown in Siberia, she was able to make conversation with my stepfather. Clarence Thomas was born in the ghetto as well. Does he qualify as the “Those top earners are offered as examples of people who have “pulled themselves up by their bootstraps””? I’m not saying that ALL poor people are poor because it’s their fault, but from what I’ve seen, many are. Hell, I dont have to go far for an example, my Mom and Dad spoiled the shit out of me by giving me money without any accountability for what I spent it on, and I grew up a waistoid slacker who felt entitled to his parents’ money. It’s thanks to my ever-practical stepfather(the TRUE American) who actually try to raise me, that I had enough sense to realize what I’ve become and decided to work myself out of that slump.

    “Do you view paying taxes as “earning?””

    No, I view working hard and trying to better oneself as earning.

    “This is my explanation for government services–people earn them through tax dollars.”
    First of all, being at barely above poverty level(which is a joke to me: two cars, two laptops, two smartphones, gaming desktop, cable TV, organic food, etc. etc. in Russia I’d be the 1%) I get most of my taxes back, so I’m not really at a minus like my stepfather is.
    Second of all, as an example 90% of Medicaid recipients in Nebraska dont even file their taxes. They have smartphones and cable TV, yet can’t pay $2 co-pay for doctor visits.

    “If the denial of services to freeloaders has a higher cost than the freeloading, we’re collectively better served by overlooking the freeloading.” This is a similar arguement that some corps use to just drop people’s coverage and pay the penalty…. If by the current system it’s cheaper to just do the wrong thing, fuck it.

    http://finance.yahoo.com/news/government-overpaid-14-billion-unemployment-085800667.html
    http://cnsnews.com/news/article/study-more-half-trillion-dollars-spent-welfare-poverty-levels-unaffected

    Give a man a fish and he will eat for a day. Teach a man to fish and he will need to get a fishing license, abide by catch limits, license his watercraft and wear a floatation device, prepare his fish in accordance with Department of Health guidelines, dispose of the guts in accordance with EPA mandates, etc. Easier to just take the fish.

    http://www.fff.org/blog/jghblog2008-06-23.asp

  4. “And I can argue that you notice the good services because you expect to see good services and ignore the ones that work poorly.”
    Perhaps, but I’m not arguing that government services are inherently good. You seemed to be advocating a position that government services are inherently bad. Citing a few examples of low-hanging fruit (poor teachers/curricula, lapses in oversight, etc.) does not demonstrate that society’s government cannot solve society’s problems. You’re welcome to regard your individual teachers (or individual schools, or individual curricula) as crappy, but compare them to one alternative: a complete lack of state-sponsored education. Undereducated teachers are a problem, but no teachers would be a bigger problem. My contention is that when “the super-rich are fucking us over,” the answer is not less regulation of the super-rich but more. Government is the only way to effectively achieve this regulation.

    “If you have to use force or coericion to take from someone else, then you are always ignoring the evil.”
    I find the use of the word “evil” here entirely inappropriate. Governments use coercion to extract tax money from citizens, but this alone is not an “evil” act.

    “Most of societies greatest achievements came not from govt. but from the private sector”
    This seems rather like comparing apples with solar prominences–I don’t see any sound connection. The purpose of government is not inherently to generate a profit or to invent new technologies. Would these inventions even have been possible without governmental regulations? I very much doubt it.

    “I think that the wage labor system is a very authoritarian system”
    I’m largely uninterested in this objection. My primary concern is with how effective a policy is at furthering the well-being of society. If there are no controls on private sector wages, there are no protections for the people against abuses. If companies are permitted to collaborate to drive wages down indefinitely, and I don’t see any reason why they would not do this (especially in an environment of high under- and unemployment), then the disparity between rich and non-rich will only grow. As you’ve just said, corporations exist with a profit motive, and every time that profit margin shrinks, if they can offset the “loss” by knocking another $0.10 off each employee’s pay, they’ll do so.

    Governments interact with markets. Therefore, governments play a role in wages. I’m not saying that role should or should not be large or small, but it’s clear that governments DO play a part in setting wages.

    “But…. they are!”
    So you presume to have an intimate understanding of every poor person based on your geographically limited perspective? I’m not saying “no poor people cheat the system” because that would be an even more idiotic claim. What I’m saying is that you lack the data sufficient to make this claim.

    “Does Clarence Thomas qualify as a top earner?”
    The top quintile is defined as people who make >= $157,176 per year, so yes, he qualifies as a top earner as Justices earn more than this. Did he pull himself up? Maybe he did, but if so, it still wasn’t by himself, no. As a child, he stayed with his grandparents who were relatively wealthy, and he also enjoyed the benefits of publicly funded schools. Even if I grant for the sake of argument that he pulled himself up, so what? This doesn’t extend beyond the man himself. It does not demonstrate that the “bootstraps” mentality has any bearing on the real world; all it demonstrates is that the United States has some degree of social mobility–this alone is not evidence for any objection you’ve raised.

    “I’m not saying that ALL poor people are poor because it’s their fault, but from what I’ve seen, many are.”
    Okay, great, I won’t argue with that. I’ve also seen many people who abuse the system. But “many” is not “most.” The US has a LOT of poor people, so you can find “many” on both sides.

    “No, I view working hard and trying to better oneself as earning.”
    That’s a very judgmental position. Why should the government be in the business of punishing people who choose not to better themselves? Withholding services because someone is content to work at McDonalds forever seems entirely unjustified to me. The notion of “hard work” does not really enter into my analysis of the situation here. Take this guy for example: http://thinkprogress.org/economy/2012/07/06/512293/duke-energy-ceo-one-da/ Do you think he worked hard as the CEO of that company? Absolutely fucking not, but he still got over $40 million for his “hard work.” Hard work does not correspond with income. Governments run on money, not on hard work, so money needs to be the primary calculation.

    “Second of all, as an example 90% of Medicaid recipients in Nebraska dont even file their taxes. They have smartphones and cable TV, yet can’t pay $2 co-pay for doctor visits.”
    I’m willing to believe the 90% not filing their taxes claim, but your claim that they all have smartphones and cable TV should be pretty obviously absurd. No doubt some of them do, but 90%? Let me get my wikipedia cap on and add [citation needed].

    “This is a similar arguement that some corps use to just drop people’s coverage and pay the penalty”
    It might be similar, but it’s certainly not the same. I’m arguing for the well-being of an entire society. Corporations do this against the well-being of their employees for the sake of their own profit margins. My argument is utilitarian–if we hurt ourselves more than we benefit from the absolute elimination of a behavior (think war on drugs), we should not seek to eliminate that behavior. That doesn’t mean we can’t take precautions to minimize it, but we should only do so when the cost of those precautions is equal to or less than the cost of the violations they’re meant to deter. If we pursue a witch-hunt, we hurt ourselves more than we hurt the witches.

    “Easier to just take the fish.”
    It might be easier for a society to let one man take one fish, but if this becomes habitual, we come to a tragedy of the commons situation, and everyone loses. In that case, it’s better to give a man one fish a week and a quarter loaf of bread every day. Or some other similar analogy.

    To the overpaying unemployment article: This seems a rather clear example of an area where government services need to be fixed. I see no reason to defend this, nor do I see what it has to do with any other point discussed here.

    To the poverty article: I don’t see what this is meant to prove. Money being spent has not reduced the percentage of people living in poverty. What would that percentage be if that money had not been spent?

    To the minimum wage article: I believe I addressed this point sufficiently in my discussion of the topic above. In the long run, is it more beneficial to have everyone living in poverty (except a plutocratic superminority) because they all have shitty-paying jobs, or is it better to have 10% unemployment while the 90% can support themselves? My conditional take on this question is that if the 90% can afford to also support the 10% unemployed, that’s the better option.

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