Writing in
the midst of war and in the aftermath of the greatest economic crisis
of the Twentieth Century, the historian Karl Polanyi commented
provocatively that capitalism’s most enduring consequence was to turn
land and labor into commodities. Preindustrial societies had relied on
markets for specific, limited purposes. Western Europe and the United
States were becoming full-fledged “market societies.” They surrendered
the major contours of social life to the imperatives of supply and
demand. Just how complete that surrender has become was inadvertently
demonstrated when my home state of Maine recently increased its hourly
minimum wage from $5.75 to $6.25. Dick Grotton, head of the Maine
Restaurant Association, commented that “labor is a commodity” and that,
as with all commodities, markets alone should set its price. With
conservatives ascendant in Washington, many states must confront the
issue of whether labor is more than just a commodity and if so how
state governments can serve workers’ needs. Fortunately,
Polanyi’s lament was premature. The Depression itself and the Cold War
checked for a time the seemingly providential march of unfettered
capitalism. To limit the appeal of an authoritarian left, Western
democracies pursued ameliorative strategies to tame markets. They
enacted various forms of progressive taxation of income and
inheritances, labor union protections, old age pensions, unemployment
compensation, vocational and higher education programs, and minimum
wage standards. No
western democracy achieved the final marriage of equity and efficiency.
In the US, divisions over race and gender, an overweening faith in
markets, and a constitutional structure that worked against broad
social policy left the US welfare state weaker than its European
counterparts. Nonetheless, by the fifties even the US had enacted broad
social democratic programs that most Republicans dared not challenge.
Remarkable gains were made not only in income but also in the quality
of life. Free time and wage rates rose together. Economic growth in the
1945-1970 era outpaced the rates of the more staunchly market oriented
eras that preceded and succeeded it. Locked
into their new common sense market logic, conservatives paradoxically
disregard not only US history but a plethora of empirical and
cross-cultural evidence as well. Though some studies suggest job losses
from minimum wage gains, other equally credible work argues that both
net job levels can be retained even as low- wage workers increase their
pay. When we remember that the minimum wage in 1968 was $8,50 in
today’s dollars with unemployment near all time lows, it seems hard to
argue that a wage floor necessarily destroys jobs. There
are good reasons—not merely moral but economic—to suggest that labor is
more than just a commodity. Hiring a worker is not like buying a nail.
Pay is not merely compensation to an input. It signals at attitude that
itself can be easily replicated. Wages upon which one cannot even
subsist bespeak a lack of respect all too easily matched by an absence
of enthusiasm, initiative, and commitment. Just
as importantly, workers’ incomes are not merely a cost to the business
but a source of future consumption. Minimum wage increases can
sometimes drive up costs, but any wage increase also can occasion
greater demand for products from workers with more money to spend. Free
market devotees respond with a familiar line: Profit oriented
businesses will naturally increase wages if this course yields
compensatory gains in worker productivity. Yet business today is
inordinately fixated on short-term results. Markets are often as good
at spreading rumors and fads as widely tested norms and practices. The
benefits from adequate workplace compensation are realized over years.
The costs are upfront. Laws that encourage a longer time horizon and
limit the forms that competition can take, like child labor laws, help
ensure the future of markets. A
more generous Federal minimum would enhance state efforts, but in
states like Maine, where many minimum wage businesses are service
sector and can’t easily flee, state initiatives can work well.
Nonetheless, conservatives are right about one thing: Poverty cannot be
eliminated simply by large yearly boosts in the minimum wage. Any
increase in the minimum wage will destroy some jobs even as it creates
others. Gradual increases in the minimum wage can yield dramatic
reductions in poverty when accompanied by complementary policies to
encourage ongoing worker training and broader forms of worker
involvement in workplace decisions. Tax policies, like the earned
income tax credit, must also be improved and better publicized to
supplement the incomes of the least well off. The best blend of such
policies would need continual adjustments. Sustainable
capitalist economies are works in progress. Our health, and
paradoxically the health of our markets, requires a reexamination of
the articles of faith so many market defenders unreflectively embrace. John Buell (jbuell@acadia.net)
is a columnist for the Bangor Daily News (Maine) and author of
Democracy by Other Means: The Politics of Work, Leisure, and
Environment.
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