The Minimum Wage Debate is Too Narrow and Small

Recently I’ve found myself having variations of the same conversation on social media regarding the minimum wage.  Those to my political left have made statements such as “if your business would fail if you paid workers $15/hour you’re exploiting them.”  Those to my political right–some current or former business owners, some not–argue that minimum wage increases had a definite impact on their bottom line.

I have two problems with the first argument: (1) it oversimplifies and trivializes a very serious issue, (2) these days, the arguers tend to aim it at small business owners.  Worker exploitation is real, and conflating every employer who follows the law when it comes to pay and other facets of employment harms the cause of combatting serious harms.  The outgoing Trump administration has been trying to reduce the wages of H-2A workers.  Undocumented workers in sectors like agriculture, food, home-based healthcare, and others fare even worse.  In some cases, drug addiction treatment has turned thousands of people into little more than indentured servants, with complicity from judges and state regulators.  Until recently, large corporations like Wal-Mart and Amazon evaded accountability for low worker pay and mistreatment despite having significant percentages of workers on food stamps and Medicaid and a high rate of worker injuries.

Another variation of the first argument takes a starting point in the past (like the 1960s) then says the minimum wage should be whatever the rate of inflation would have grown it to be between then and today.  If you go back to when Dr. Martin Luther King, Jr. was alive (for example), the minimum wage today “should” be $22/hour.  You can pick any point in time and say what the minimum wage should be based on inflation, but that’s not the same as grappling honestly with how industries have changed and/or how the nature of work has changed in the half-century plus since the civil rights era.

One challenge with the second argument is that the examples cited are typically restaurants or food services–businesses that operate at low margins and have high fixed costs in addition to being labor-intensive.  Even in that sector, the impacts of a $15/hour minimum wage are not necessarily what you might expect.  But not every business is the restaurant business, and a single sector cannot govern the parameters of debate for an issue that impacts the entire economy and the broader society get a broadly beneficial result.

At this point in the discussion, someone usually brings up automation, followed by someone mentioning universal basic income (UBI).  What I have said in the past, and will continue to say, is that automation is coming regardless of what the federal government, states, and/or localities do with the minimum wage.  As someone who has written software for a living for over 20 years, the essence of my line of work is automating things.  Sometimes software augments what people do by taking over rote or repetitive aspects of their jobs and freeing them up to do more value-added work.  But if an entire job is rote or repetitive, software can and does eliminate jobs.  The combination of software and robots are what enable some manufacturers to produce so many goods without the large number of workers they would have needed in the past.

Talking about UBI enlarges the conversation, but even then may not fully take on the nature of the relationship between government, business, and people.  We do not talk nearly often enough about how long the United States got by with a much less-robust social safety net than other countries because of how much responsibility employers used to take on for their employees.  Nor do we talk about the amount of additional control that gives employers over their employees–or the cracks in the system that can result from unemployment.  The usual response from the political right whenever there is any discussion of separating health care from employment is to cry “socialism”.  But the falseness of such charges can be easily exposed.  Capitalism seems to be alive and well in South Korea, and they have a universal healthcare system–a significant portion of which is privately funded.  Germany is another country where capitalism, universal healthcare, and private insurers seem to be co-existing just fine.

The conversation we need to have, as companies and their shareholders get richer, share fewer of those gains with their workers, and otherwise delegate responsibilities they used to keep as part of the social contract, is how the relationship between government, business, and people should change to reflect the current reality.  The rationale always given for taxing capital gains at a lower rate than wages was investment.  But as we’ve seen both in the pandemic, and in the corporate response to the big tax cut in 2017, corporate execs mostly pocketed the gains for themselves or did stock buybacks to further inflate their per-share prices.  Far from sharing any of the gains with workers, some corporations laid off workers instead.  Given ample evidence that preferential tax treatment for capital gains does not result in more investment, the preference should end.  People of working age should not be solely dependent on an employer or Medicare for their healthcare.  A model where public and private insurance co-exist for those people and isn’t tied to employment is where we should be headed as a society.  

We need to think much harder than we have about what has to change both to account for the deficiencies in our social safety net (that corporations will not fill), and an economy on its way to eliminating entire fields that employ a lot of people today.  Bill Gates advocated in favor of a tax on robots year ago.  The challenges of funding UBI and whether or not it’s possible to do that and continue to maintain the social safety net as it currently exists need to be faced head-on.  Talking about the minimum wage alone–even as multiple states and localities increase it well beyond the federal minimum–is not enough.