Sunday, December 08, 2013

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.

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