Raise The Minimum Wage: A Conservative Policy

In 2018, a study by the Urban Institute found a plurality of Americans struggled affording basic needs. Nearly 40% of Americans have trouble keeping necessities such as housing, food, utilities like gas and heat, and healthcare. This is a sign people do not have enough money. It makes sense they don’t. In fact, there are very few points in the last 80 years where the minimum wage today would be worth less than it is now, and usually it was worth more.

Read the original at Dissenting Academic’s blog

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If conservatives want to restore social order and tradition, they need a populace with social stability. This goal requires the citizens are happy with their lives and feel life has a meaning. There is a problem undermining this goal. People aren’t going to feel like their lives are meaningful or worth anything when they aren’t treated that way. The old rule goes, “Treat others as you want to be treated.” But, if the minimum wage had been increasing at the same rate as productivity, it would be over $21. This devalues the labor of the working class and makes social stability a laughing matter.

Let’s imagine there is a worker making the federal minimum wage and living in the cheapest city in the United States – McAllen, Texas. In this city, the median monthly rent for a one bedroom apartment is generally between $600 and $990. We could assume a median rent of $795 then, but it’s worth noting low income people are probably going to opt for cheaper options. So, for the sake of this hypothetical, let’s assume a rent of $700. The worker in this home also has to purchase groceries. The cost of living in this city is 24% below the national average so we can estimate they’re spending about $190 on groceries per month. When adjusting for the price of living difference, utilities will bring this worker down another $355. Gasoline should cost between $60-100 per month for one person. This person probably needs car insurance so we can estimate another $118 on average. The average cost of health insurance for one person is about $440 per month. These are the very bare necessities and don’t even begin to assess the full scale of average expenses for someone (for an example, I didn’t go into homeowners insurance).

The federal minimum wage as of the beginning of 2019 is $7.25 an hour. If we say the worker in this example is working 40 hours a week, they’ll be making $1,160 a month before taxes (if they pay them). The combined cost of these bare minimum expenses comes out to $1,880. This, though is a massive under exaggeration of the problem for millions of Americans. Because most of America is living in much more expensive or even slightly more expensive cities than this one. Most of America isn’t living on their own their whole life. Most American children have an increasing likelihood of their mom being single. What do we do for these people?

“Get another job. It’s all your fault! Personal responsibility and liberty!” These mean nothing. Maybe they made some mistakes; maybe they didn’t. Does it mean they should suffer and live in perpetual debt? Sometimes, sure, but a lot of the time, no. The problem at hand needs to be addressed and the best method to address these problems is through a minimum wage increase.

Conservatism is about social stability and restoring the traditional order to society. This is not being addressed through leaving 40% of America struggling to afford the bare necessities. So, after assessing the problem in whole, the positive effects of raising the minimum wage must be fully brought to light and the negative effects claimed by libertarians and “conservatives” must be criticized. Raising the minimum wage is a conservative policy and the effects of it are what the nation might just need.

[Read the original article on my blog: here. Or don’t – this is the same article.]

Laissez Faire!

The phrase “laissez faire” is a French word meaning “let do” or “let go” and is used to describe unregulated, unsubsidized markets. It was originated for this usage in France when the mercantilist minister asked a group of business owners how the state could help different markets. M. Le Gendre, the “leader” of this group put bluntly “Laissez-noure faire”. This influenced a large wave of economic policy for the next couple centuries.

In response to the idea of raising the minimum wage (as well as simply having the minimum wage), many libertarians are going to argue that it “wouldn’t be very laissez-faire”. This is followed by an half-brained comment that this is “basic economics, bro.” If we are to talk about “basic economics” then how about the fact that laissez-faire hasn’t been taken seriously by economists for a century? But, I digress.

A minimum wage would generally raise the wages of the working class (more on this below). By doing so, you are essentially stimulating the economy to a large degree. Because poor and middle class people spend a significantly larger portion of their money than upper class people, the result of a minimum wage increase is an increase in spending into the economy. A study by the Congressional Budget Office finds “Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $2 billion.” This plays effective in a lot of other areas discussed later. The reason it’s important to mention this now is because it reduces the need for centralized stimulus. No more recession spending done through tax dollars.

This increase also means the decrease in size of the welfare state. With the increase of wages, hundreds of thousands of people would be moved above the poverty line and millions would feel a substantial wage increase, allowing them more flexibility in spending, or to at least start affording basic needs.

So, the minimum wage, while is a regulation of it’s own, reduces the need for much bigger government intervention into the economy. This dogmatism of the free market is distracting libertarians from discussing policies that affect average people and disallowing them from saying, “You know what, this is kind of messed up how this happens to people. Maybe government could do something good here.”

A Raise For Him & Him & Her

A study done by the non-partisan Congressional Budget Office finds raising the minimum wage to $10.10 an hour would cause between very few jobs and 1,000,000 jobs to be lost – with a central estimate of 500,000. Many on the right show this as evidence that the “minimum wage is what puts people in poverty.” 1,000,000 jobs lost? The biggest disaster we can imagine, right? Well, not so much.

What many on the right ignore when reading over this study (if they even fully read it over) is that it is looking at a very large group of people. They state in the study this decrease in jobs would result in an increase of wages for around 16.5 million people. So if we take the central estimate of 500,000, this is a sizable effect for sure, but pales in comparison to the benefits.

In addition, the study was not able to take into account the amount of money that would now be put back into the economy. This means more money is being put into hiring, and so some would receive new jobs or not be unemployed at all. The demand for more products and services rises when the purchasing power increases. So, this 500,000 is an overstatement as is.

The study might even be right when it says there could be very little unemployment. A product is said to be demand inelastic when the demand for it doesn’t change despite changes in price or purchasing power. Some argue that demand inelasticity is strong within low wage fields and because of this, the minimum wage increase wouldn’t cost any jobs. Any inflation or extra costs to business owners would be made up for because a) people are going to continue buying their product whether or not price inflates and b) purchasing power increases for the lower class, meaning they may get more investment and therefore more profits. A study conducted by David Cooper and Douglas Hall actually found more people are employed with the minimum wage and the actual GDP of the nation increases highly.

Pew Research Center was able to compile an organization of what jobs minimum wage workers are largely doing. What they find is minimum wage workers are largely employed in food related industries such as restaurants and grocery stores, as well as in department and discount stores, construction work, and schools. These are all jobs one could look at and say, “Yeah, a couple dollars of inflation isn’t really going to change the sales of the business.

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A paper by David Card and Alan Krugman surveyed 410 different fast food restaurants in two different states – one with a raise in the minimum wage and one without. Interestingly, they found no evidence of a significant increase in unemployment.

One could very fairly make the argument that while unemployment doesn’t increase and wages at the start are lifted, companies have to find some way to compensate. To do this, they argue, the companies lower the amount of hours these minimum wage workers are working and they could even start making less. For one, this still lacks evidence as far as my knowledge goes. I have yet to find a single economic study on the matter.

Furthermore, for the amount of work to be less, the stores would have to be open for less time. For a hypothetical, let’s say there is a store that is open three days a week for 8 hours each day. There are three employees hired at this store and they each work one of these 8 hour days on their own. The minimum wage increases. If the store manager were to keep all three employees and keep his store open the same amount of hours total, he would have to spread their work over the week. If he does this, they’re still working the same amount of hours, but over three days. To make things simpler though, the Card and Krugman study from before looks at the amount of hours the store was open and sees no difference before and after the minimum wage raise.

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So, for now, the argument for the minimum wage is pretty strong. The unemployment rate may go up, but there is evidence it wouldn’t. If it did, the amount of people getting raises and investing into the economy is still far greater. People seem to work the same amount of hours and what this all boils down to is: people do get raises and make more money when the minimum wage is raised.

The Limp Balloon

A topic brushed lightly in the last section is inflation. Many libertarians will argue the amount of inflation will cause the minimum wage to be useless. After all, if businesses have to invest more into labor, they have to make up for it in some way. This is based largely on the “basic economics” fallacy and lacks empirical evidence. There are better reasons we should dismiss this argument though.

For starters, just because there is inflation doesn’t mean the increase in wages is cancelled out. Let’s say the minimum wage is raised from $7.25 to $10.25. This is a $3 dollar raise. If all items produced within that wage group only go up $1-2, then there is a raise. This is a very basic example and for all we know prices could go up more than this – looking at the bare numbers.

The Bureau of Labor Statistics finds $100 in 2000 would be worth $145.82 in 2018. This is 45.82% higher and comes out to an average inflation rate of 2.12% per year. The last minimum wage increase in this time period was July, 2009, when it was raised from $5.15 to $7.25 an hour. The average rate of inflation after this minimum wage increase was 1.76% so less than the average overall. If you look at each month’s inflation rate during 2009, you see the months with the lowest inflation rate are during and after the summer. But, this is a trend that was already happening and likely not the best evidence.

The minimum wage first became law in 1938 and was worth $0.25. Between 1938 and 1939, prices lower over 1.42% and of course inflation went down at the same rate. Between 1938 and 1940, the average prices of goods went down 0.71% per year with an inflation rate of -0.36%. Similar to before, it’s worth noting this is at the end of the Great Depression so it’s hard to measure the effect of only the minimum wage considering all other confounding factors. In the same breath, this is a raise from no minimum wage to an equivalent of over $4, and despite this huge boost, the economy obviously still did its recovery right after.

In terms of long time spans, it’s harder to measure the effects of the minimum wage on inflation. Despite the minimum wage generally being raised over time, the value of the minimum wage changes at different rates and fluctuates up and down. In 1980, the minimum wage was raised from $2.90 to $3.10 an hour. Prior to this raise the inflation rate rose by 2% (1979-1980) and afterwards, there was a deflation rate of 3% (1980-1981). This trend is better documented in a short article by Morgan Visser, which shows the inflation rate has generally decreased with increases in the minimum wage.

Even Investopedia states,

“In theory, raising minimum wage forces businesses to raise prices, which spurs inflation. But since wages are only part of the product costs that consumers pay, it’s not that simple. In 2014, fast-food workers in the U.S. wanted a minimum wage of $15 an hour, or almost double what they were currently earning. At that rate, a burger flipper at McDonald’s would have earned $30,000 a year. An excessively high minimum wage will obviously place inflationary pressure on the economy. But increasing it to keep pace with inflation will have only a minimal effect.”

The idea raising the minimum wage is going to increase the inflation rate like a balloon is a farce. Unless you mean a very limp balloon.

“Basic Economics, Bro!”

In 2014, over 600 economists, including multiple Nobel Prize winners, signed a petition to raise the minimum wage to $10.10 per hour. Another petition was signed by a large group of PhD level economists arguing to raise the minimum wage to $15 an hour by 2024. A poll of economists from 2013 found a majority of economists believe the benefits of the minimum wage largely outweigh the costs. These are all people who understand basic economics pretty well. Yet Libertarians go off on these tangents about how the minimum wage being a failure is still basic economics.

The “basic economics” fallacy is an appeal to authority without an existent authority. While support from economists on the minimum wage does have a history of being low, this support has always existed and has been increasing. Even if there was not a large amount of support from economists, this wouldn’t mean anything. At one point 99% of people thought the Earth was the center of the solar system. The evidence for this was basic science at the time. Phrenology was a pseudoscience based on determining someone’s life outcomes by differences in brain shape and size. It was then used to justify slavery. Despite it being false, it was considered a legitimate science at the time.

One major problem with older economists views on the minimum wage is the methodology used to come to said views. In addition, it would be unethical for scientists to conduct experimental studies on the matter in case it hurt the economy. Studies before the 1990’s would use time series and simulation methodologies (which are flawed for studying the minimum wage), but after that point, economists started using better methods and along with that, their views started changing.

An Economic Policy Institute study from 2007 found 68% of economists found an increase in the minimum wage would result in an increase in hiring. A 2006 poll found 38% of economists wanted an increase in the minimum wage, 14% of economists wanted to keep the minimum wage the same, and 47% supported eliminating the minimum wage. A 1996 poll found support for the minimum wage was nearly 50/50 split among labor economists.

So overall, it’s true economists have not historically had the best views of the minimum wage. But the data has been rather mixed and support has been increasing as methodology has gotten better. Now that we have made clear the general economic impact, I hope to explain the social value of raising the minimum wage and how this really is a conservative policy.

Don’t Do Drugs, Adults!

The War on Drugs has been said to have failed for its hefty cost and lack of effectiveness in reducing drug use. Conservatives have been on the forefront of the movement against drug use in America. It is a sign of social hedonism and shows suffering within the working class. What should be obvious is with raising the minimum wage, we may find it lowers drug use.

Business Insider has conducted an analysis looking over how the bottom 20% spends their money and how the top 20% spends their money. The top 20% spends an average of $1,161 on alcoholic beverages while the bottom 20% spent $195 on alcoholic beverages. In terms of tobacco products and smoking supplies, the top 20% spent an average of $332 and the bottom 20% spent an average of $308. When adjusted for income and put into percentages of income spent, the top 20% spend  27% more than the bottom 20% on alcohol and over 400% less on tobacco products and smoking supplies.

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But, what’s important here is the amount of money they gained. The bottom 20% makes an average income of $22.6K while the top 20% makes an average income of $111.9K. This is nearly 4 times more money, but only 1.27 times as much drinking.  So, the amount of alcohol consumed is less than a projected amount given a raise in income. This could likely be a result of spending more on more expensive wine. It’s also worth noting, wealthy people are going to be more responsible with their drinking. Those in poverty are often going to bars, drinking beer and liquor, and making poor decisions afterwards.

As we can tell, the usage of tobacco products and smoking supplies goes down immensely. “Smoking supplies” are often pipes and bongs, which are probably not being used for tobacco a lot of the time they’re bought. We might expect marijuana consumption to go down as well. But the effect would obviously not be as big as the analysis seen above, because the minimum wage going up $3 an hour isn’t going to put everyone in the top 20%.

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I ran a regression analysis comparing poverty rates by state and gallons of alcohol consumed. While not an incredibly strong correlation, it did exist. The coefficient of determination (r^2) was 0.110. The only thing preventing this from being a strong correlation is the large amount of states with high poverty rates with low amounts of alcohol consumed.

My analysis doesn’t take into account irresponsible drinking, so what would be best for this argument is to look at studies addressing specifically alcoholism and its relation to poverty. A popular study from 2002 found when poverty increases, so does alcohol consumption as well as the amount of alcohol related problems. Recent unemployment would actually lower alcohol consumption but long term unemployment raises it.

The CDC finds people making less than $20,000 a year abuse heroin at over three times the rate of people who make more than $50,000 a year. The National Survey on Drug Use and Health reveals people that are unemployed are about twice as likely as the employed to abuse illicit drugs. A Scottish paper entitled, “Drugs and Poverty: A literature review” argues poverty has a very strong correlation with later likelihood to abuse drugs. It states,

“Deprivation does not directly cause addiction, instead it increases the propensity to misuse – it weakens what are sometimes called the protective factors and it strengthens the risk factors.”

In addition, an article by Maia Szalavitz argues that drug addictions are harder to fight off when the person is poor. So whether or not first-time drug abuse is increased or decreased by poverty, addiction would be stunted, which is much more of the problem than people experimenting or using drugs moderately.

So, it seems bringing more people out of poverty would likely have some effect on drugs. The size of this effect is debatable though. The main point here is it is better than nothing. If the War on Drugs is as unsuccessful as it is made out to be, maybe the problem is simply our tactic towards it. Maybe the problem is people being in suffering conditions that cause them to abuse illicit drugs in the first place. There is much more to the equation than made out to be and so we should try and see what we can do.

They Take The Jobs Americans Will Do

Since 2016, I’ve been very against immigration into the United States. The effects of low skill workers on the working class and on social cohesion, voting patterns, and crime has been devastating. The Republican Party has failed to address these issues to a large degree. They don’t even fight back against legal immigration, let alone illegal immigration. Meanwhile, they’ve been losing votes and racing the economy to the bottom.

What could be the rationale for their weakness on immigration? Well, put simply, they take the jobs Americans “won’t” and for low wages. Despite this being the economic defense for slavery in the 1800’s, this is our key argument to keep immigration around – because Americans supposedly won’t do dirty jobs.

One must ask why Americans won’t do these jobs. It wouldn’t be too far fetched to believe it’s because their work is devalued – they lack the wages to think these jobs are worth it. The argument becomes incredibly conservative once this point comes up. After all, if Americans start taking the jobs now put at a higher value, illegal immigrants (and many legal immigrants) have no reason to come to the country.

The problem goes a lot further than the minimum wage, though. Because the truth is Americans already will do these jobs. The Center for Immigration Studies conducted an analysis and found only 6 of the 474 job categories in the Census were made up of majorities of legal immigrants and an astounding zero were made up illegal immigrants. Why haven’t the Americans taken them first?

There are two answers to this question: either the immigrants get to them first, starting this whole cycle, or the minimum wage is not high enough so they won’t as of now. Either way, Republicans are screwing people over at the loss of their own party. If we want to protect our country, if we want to be an America First land, if we want to care about our working class and restore conservatism in the West, we need the minimum wage.

The Most Productive Succeed

One of the most important things for the economy to grow is productivity and innovation. With a large amount of research, it appears raising the minimum wage would certainly increase productivity. It’s long past due as well. As we found out earlier, if the minimum wage were increased over time to stay in line with productivity, it would be over $21 – three times what it is now.

In terms of personal motivation, higher pay seems to be very strongly related with higher levels of productivity and commitment. Effort levels of work are raised and necessity for worker supervision is decreased. An experimental study in the US finds when the minimum wage specifically is raised, minimum wages improve worker outcomes and productivity.  A very recent study from 2018 finds when the minimum wage is increased, worker productivity went up by 2.4%. None of this should come as a surprise. After all, even motivation is raised, signifying maybe the feeling of worth of labor is going up when the worker is paid more.

Even at the macro level, we actually see more competition within firms to provide products consumers want. Some may say this can create monopolies as an argument. The problem though is that monopolies aren’t inherently a bad thing. If a company is producing a product at a fair value and is satisfying the consumer’s general needs best, then of course they will have a monopoly. It’s become a dirty word to appreciate this, but the truth is this simply means this company is hiring a large amount of people to expand, looks good in the people’s eyes, and serves the general interest of the public. If it goes rogue, it wouldn’t be hard to convince a group of investors to help start a competing business, pushing this one out of the market immediately.

Surveys of employers have found companies realize they need to make their employees more productive since they have to pay them more and so update technology and invest more in training. In the long run, we may see more innovation come from this productivity as well as increased demand for technology. This brings us to an interesting point that I’ve theorized.

Before agriculture, innovation was a rarity and so we do not have much record from that section of human history, nor the accomplishments made during it. A large amount of time was invested into hunting prey and finding other sources for food. But around 8000 BC, humans realized they could collect seeds from plants and replant them. After some development, they learned they could harvest the material from these plants and sustain themselves. Less time was necessary to hunt and more importantly, people at the time knew they had a consistent amount of food. They were economically secure in that sense.

Because of the consistent collection of food, population was able to naturally grow. Both of these aspects allowed for new ideas and innovation to be spread within the population. In Guns, Germs, and Steel, Jared Diamond states, “A larger area or population means more potential inventors, more competing societies, more innovations available to adopt – and more pressure to adopt and retain innovations, because societies failing to do well will be eliminated by competing societies.” Historian consensus tends to agree with this position that agriculture sparked the biggest rise of innovation over time.

As we have found, if a $10.10 minimum wage is put in place, it would raise (at least) 16.5 million people to a higher wage level. More stimulus would be put into the economy and wages in general would rise, relieving the stress of millions on paying their bills and giving them more money for personal purposes. Having more money allows more people to have children (and seen in European history when people become happier, they have more children) so we might expect fertility rates to rise as well. To add on, more people would be paying taxes and, in this event, receive tax returns. From my personal experience, poor people often spend their tax returns on projects they’ve been planning for a while.

The productivity of areas tend to raise when the minimum wage is raised. As seen before, firms become more competitive and less productive firms are pushed out of the market. As we found from surveys, businesses invest in more technology to match up productivity with wages and so, we might expect more innovation to happen over time. In the book The 10,000 Year Explosion: How Civilization Accelerated Human Evolution Cochran and Harpending hypothesize the uprising of agriculture lead to the changing cognitive ability of humans. With more time to innovate and more nutrients to stimulate the mind, people would become smarter over time.

I think all of this information combined makes us come to a very obvious conclusion. Let’s return to the statistic presented at the beginning of this essay – 40% of people in America can not afford basic necessities. With the rising incomes of Americans far and wide, this issue is less prevalent, ergo peoples lives are more stable. In response to more stability, they have more children. In addition, as we learned from Germs, Guns, and Steel, when populations become larger, they have more competition and innovate more. When the minimum wage is higher, firms become more competitive and out compete each other as well as require new technology to maintain productivity. What we can infer from all of this information is that raising the minimum wage might not only raise innovation, but raise it to a degree that it kickstarts a new revolution of innovation

In Human Accomplishment by Charles Murray, Murray estimates innovation has been declining for around a hundred years. If the minimum wage would increase innovation to the degree of a new revolution, similar to that of the agricultural revolution, the world would largely change for the better. In fact, the change it would bring might be completely necessary for the world, given the declining social capital, declining innovation, and declining happiness over time. This is paramount to the case for the minimum wage.

A Sad Concession

There is one point I’ve understood to be the drawback of the minimum wage: the effect on small businesses. This is the point in the essay where I concede, yes, the minimum wage does have some drawbacks.

In return to the argument minimum wage hurts small businesses, I suggest two possibilities within our range of already presented data to make us feel more comfortable. For one, the productivity of laborers is largely increased. For small businesses that manufacture products and require new items to be produced at a high rate, their rate of productivity goes up with wages. In return for higher wages, they are able to get more done, and so the company prospers enough to pay these wages and even maybe make profit.

Another argument against the impact on small businesses is the investment back into the economy. As I’ve stated multiple times, the minimum wage raising allows more money to be invested into the economy. Working class people spend more of their money and get a raise at the same time, allowing other people to get these same raises. This either results is no net negative effect on small businesses or maybe a net positive effect.

I admit, many have told personal stories of small businesses being destroyed in their towns after a raise in the minimum wage. This is the sad truth of the matter. Hopefully, in the interest of benefiting everyone, we can work past this issue, and hope in the long run, the economy straps back to normal with small businesses entering the market again.

Curb Your Costs and Benefits

Many essay conclusions include a recap of what the reader has learned. For now, I simply wish to ask you a moral question.

Is freedom more important than prosperity, social cohesion, and a developed society?

Well, this begs the fundamental argument of what freedom even is. Is it freedom when you can’t afford to live due to issues out of your control? Is it freedom when your IQ was just too low to get a respectable college degree and you are required to work in a minimum wage position – one that doesn’t allow you to afford the cheapest city in the United States? I would think most would answer, “No” to both of these questions.

Criticisms are made saying, “The minimum wage hurts the economy more than it helps,” but who is the economy? The economy is an over-generalization of general factors affecting a particular system of production. But, the country doing well economically does not mean the people are doing well and the country feeling united. It does not mean anything special to actual people.

At the end of the day, the minimum wage does not harm the economy, whoever the economy is. In fact, the effects it does bring not only help the economy (whoever the economy is), but help the nation succeed and bring about social stability. An innovative revolution is brought about along with new wages, more feeling of value, and greater quality of life among the masses. The minimum wage is not a policy to dismiss because small businesses are hurt in the short run. The minimum wage is a policy conservatives need to be for because every aspect of life for the citizens of the United States is improved in the long run.

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