Left and right knee jerks

If I'm playing devil's advocate, it's because the liberal arguments put forward for raising the minimum wage have not been pro-labor. I'm thinking of these two: it will stimulate the economy (Stiglitz and Reich among others) and it will disburden the taxpayer who is subsidizing the welfare safety net for minimum wage earners (even Occupy's Cathy O'Neil seems to buy this argument). There's even the argument that Wal-mart and McDonalds would benefit by a raise because their employees would spend more money there (the Henry Ford business model). The only pro-labor argument points to the fact that a family can't survive on minimum wage. But the raise that Obama has proposed is not enough of a raise to solve the problem for minimum wage-earning families. 

It seems clear then that Obama's proposal is intended not to improve the welfare of low-income wage earners -- especially those with multiple jobs who will lose their medicaid or food stamps -- but to provide a mild stimulus to the economy without increasing unemployment (small increases in minimum wages have been shown not to increase unemployment, as studied by Card & Kreuger -- I've posted their work before here and here -- and more recently, Dube, Lester & Reich) and without increasing federal spending or taxes. In other words, Obama has found a expedient means to appear progressive without alienating conservatives -- and without actually being progressive. An expansion of the welfare net would be truly progressive, especially if it were met with a commitment to free public housing (Occupy has been working on this by occupying foreclosed properties) and free higher education.

This nation is incredibly wealthy despite its long relative decline, its dependency on dollar devaluation and debt financing. It's instructive to me that the current recession was not caused by a business cycle but by deregulation and overspeculation. It wasn't caused by higher taxes (they had been lowered, in fact) or spending (the economy was growing through two hugely expensive wars). That suggests to me that the economy can withstand all sorts of Keynsian measures including both higher taxes and more government spending. 

Transformation requires a shift from playing the political-economic game to demanding change, and that requires a shift in our discourse. In a world of knee-jerk conservatism, knee-jerk libertarianism, knee-jerk liberalism and knee-jerk leftism, that's not likely outside obscure blogs that don't matter. 

The confusion

To assume that any policy is by definition pro- or anti-labor is a mistake of knee-jerk liberalism. A policy isn't pro-labor if it throws laborers out of mediciad and food stamps. Wal-mart shows a structural contradiction in our current capitalist economy, driving both wages and prices down. Raising the minimum wage does nothing to resolve that structural contradiction. Expanding food stamps and medicaid, and similar welfare state policies, do.

To be plain, I'm pointing out that labor activism has two directions that are in important respects incompatible: socio-economic transformation (including revolution) and socio-economic entry. Union activism succeeded in bringing labor into the middle class, a material improvement, but not a transformation. It's an expansion of conformity of the individual as commodity and consumer-of-commodities. The New Deal social welfare state was transformative, protecting people as they are, leaning the nation towards a socialized society.

The social safety net seems to me the visionary direction. Why shouldn't food and health care be as much a right as public education, public libraries and public parks? Why not public housing as well? It's not just libertarians who object to the social safety net. Liberals also don't seem to get that expanding the net is liberatory. Maybe they're afraid of it. Liberals seem much happier supporting a unionism that shepherds its people into middle-class consumerism than allow them any measure of real freedom beyond their own horizon. 

I'm much more sympathetic to liberatory transformation. But even if I weren't, in an economy that is increasingly stacked against the 99%, requiring ever more debt, I'd be wary of the entry game. And I think labor ought to take a stand on it in favor of expanding the social safety net. Since Reagan-Thatcher everyone seems afraid of the social safety net. It's the new McCarthyism. 

Labor activism is confused

Wal-mart employees are the largest food stamp and Medicaid recipients in many states, at taxpayer cost. So labor is agitating for a raise in the minimum wage, claiming that it would not only improve the lives of low income earners, but also increase the liquidity of the economy. The latter argument is debatable, the former is just false. 

Medicaid and food stamps are great. They directly, without any economic mediation, give people who need real food and health care exactly those needs. Raising the minimum wage, on the other hand, plays into the economic equilibrium — and what economist really knows how that will play for sure? — without providing those people’s actual needs. Food stamps are much less of a relativized abstraction than cash, which is entirely abstract and relative. 

Food stamps and Medicaid paid for by higher-income taxpayers are much better and more progressive social and economic policies than either raising the minimum wage or guaranteed income.

Some small businesses with narrow profit margins will have to pay for a raise in minimum wage (that’s regressive) and both raising the minimum wage and guaranteed income play into a market equilibrium than can backfire through inflation. Why flee food stamps and Medicaid, two of the best welfare-state models we have, for the sake of subserving a wage economy without guaranteed food and health, where you’d have to buy health insurance and where the wage-earner buys discount junk food with cash at a Duane Reade rather than at a supermarket where fresh produce are at least available and encouraged by the stamps?

I can see only two advantages to raising the minimum wage: once implemented, it is not likely to be revoked or curtailed, as food stamps have been; there's a chance that it might increase the overall liquidity of the economy. But to force labor to buy its own food and health care seems a really regressive and upside down way to improve the lives of low income workers. The underlying issue of dignity notwithstanding, labor ought to be demanding increases in food stamps and medicaid, not begging to abandon them. I wonder whether Wal-mart might actually help labor in agitating for increases in social programs. That would be much more effective than just a day of labor protest.  

Wal-mart has two sides to its business model: low wages and low prices. Only small businesses object to the latter. A raise in the minimum wage might solve the price problem for those small businesses, but at the expense of the wage problem for them. So it's a wash for them. On the other hand, if government subsidizes the wages with increased food stamps and medicaid, the small businesses won't be helped, but a much larger sector of the population will be helped not only with food and health, but also with low prices. That's persuasive to me. Let the small businesses cater to the upscale. Let government subsidize labor and low prices.