Minimum Wage, Wage Suppression, Welfare State, etc

I’ll keep this post simple. I mostly just want to offer some views on the wage issue that most people don’t come across. You won’t hear most of this in the MSM. You won’t likely even see it in social media, unless you have some very well informed friends. But first let me summarize the issue while offering some straightforward analysis.

The specific issue at hand is the minimum wage and whether to raise it. Everyone is talking about it. But the discussions I come across most often lack much depth and breadth. I see two related issues: wage suppression and welfare state.

Wage suppression is my main focus. It relates to decades (or even generations) of Fed hard money policy, union-busting, and off-shoring.

The Fed hard money policy is something I came across in William Greider’s Come Home, America. You can find the relevant passage at the bottom of the page.

Union-busting is something I was already well aware of. And off-shoring as well. These two are closely related.

It is easier to bust unions with threats of off-shoring. If labor tries to strike, the scabs will be in far off foreign countries. This is very sneaky and basically immoral in all ways. It undermines both democracy and free markets for there is no such thing as anti-democratic free markets. Corporations often off-shore to countries that lack not only democracy but also lack human rights, workers protections, and safety/environmental regulations. In these foreign countries, corporations are sometimes free to bribe officials and use private goons, police or the state military to bust up unions the old fashioned way.

It isn’t just foreign governments that corporations can bribe, threaten, control and otherwise influence. Off-shoring is possible because our own corporatist (corporate-owned-and-operated) government allows and encourages it with free trade agreements. These free trade agreements are shaped by big biz and so unsurprisingly are business friendly and labor unfriendly. Such trade is only ‘free’ for big biz. In these free trade agreements, there are rarely if any demands for participating countries to have democracy, human rights, workers protections, or safety-environmental regulations.

The second issue is where it gets most interesting.

Conservatives, libertarians and even many mainstream Democrats complain about what they deem an out-of-control welfare state. But this welfare state ultimately functions in two ways. Because minimum wage workers aren’t making a living wage, they end up on welfare which means the welfare state is a massive apparatus to use taxpayer money to subsidize big biz. And so without welfare the average American would be even more desperate.

What does desperation breed? Populist reform or even revolution. The ruling elite will never willingly end the welfare state because, along with mass incarceration, it is a social control policy. If minimum wage and all welfare was instantly ended, there would be revolution over night.

The minimum wage and welfare combo is the only thing making wage suppression and social oppression tolerable. As long as people are getting by, even if only barely, they won’t fight for their rights as citizens. It is the old bread and circus routine with big biz media serving the circus part of the equation.

There are a number of options here:

  1. We can raise the minimum wage while continuing wage suppression and while not increasing welfare.
  2. We can strengthen and broaden welfare while continuing wage suppression and while not raising the minimum wage.
  3. We can more moderate raise the minimum wage and increase welfare while continuing wage suppression.
  4. We can end wage suppression and solve the problem at its root.
  5. Or we can do none of the above and wait for the populist revolts to begin.

There are no other options. Excluding a return to such things as feudalism, indentured servitude, debt bondage, slavery, etc. Although there are other ideas that could work, such as a basic income, related to Paine’s citizen dividend. So, at least within the present system, there are no other options.

* * *

Here are a few links to helpful articles and a couple of discussions:

An Idea Conservatives Should Love
By E.J. Dionne, Jr.
Feb 17, 2014

The Skills Gap Argument as Cover for Wage Suppression
January 23, 2013

Suppressing wages and increasing corporate profits:
The tough math behind the current economic recovery.
By mybudget360

Suppressing wages
By davald
The Observer
December 10, 2012

The China trade toll
Widespread wage suppression, 2 million jobs lost in the U.S.
By Robert E. Scott
Economic Policy Institute
July 30, 2008

Its impact on workers in all three nations
By Robert E. Scott
Economic Policy Institute
April 2001

By Mary Bottari and Rebekah Wilce
from PRWatch
July 23, 2013

The Force Behind Bills To Lower Wages and Suppress Workers’ Rights? You Guessed It: ALEC
By Mary Bottari and Rebekah Wilce
July 30, 2013

Union Busting adds to corrupt bureaucracy and incites crime
By zacherydtaylor
September 26, 2013

On Becoming a Nietzschean Society
By Greg Horsman
About Questioning and Skepticism
November 1, 2013

What is ‘wage suppression’ and is it real?
Discussion on

Why should taxpayers subsidize low wage workers? (fast food, minimum wage, salaries)
City-Data forum

And below is the aforementioned passage from William Greider’s Come Home, America.

* * *

Kindle Locations 557-562

It was mainly the Federal Reserve-sheltered from public scrutiny and protected from political accountability-that engineered America’s great shift in fortunes. The Fed “hardened” the value of money and wealth with its successful campaign to suppress price inflation. Then it proceeded to encourage or passively allow the scandalous financial behavior that followed-wealth being concentrated in the financial sector, the growing inequalities among Americans, deregulation and the creation of dominating megabanks, and recurrent frauds and financial bubbles followed repeatedly by government bailouts of banks and financial firms.

The Federal Reserve’s policy essentially tilted the normal economic balance hard in one direction, then held it there for a generation. It favored wealth over wage income, creditors over debtors, capital over labor, financial investors over producers.

Kindle Locations 601-602

“Hardening” the value of money may modestly benefit average consumers, but the true winners are people with vast accumulations of financial wealth. As the Federal Reserve drove the inflation rate lower and lower, eventually getting it close to zero, disinflation was a great gift to the wealthy, one that kept on giving.

Kindle Locations 621-635

The “hard money” policy was sustained in a way that might have shocked many Americans if they had known about it. The Federal Reserve suppressed inflation by targeting the wages of working people. It prevented their incomes from rising even though, in a healthy economy, wages would normally rise consistently. Nobody in authority ever acknowledged this strategy in a straightforward way, but the reality was well understood by economists and financial investors. By holding back the natural energies of the economic recovery, this monetary policy kept labor markets slack and the unemployment rate higher as a result, at around 6 percent. That made it very difficult for industrial workers, union and nonunion, to demand higher wages. If the economy had been allowed to grow faster, more jobs would have been created, unemployment would have fallen, and workers would have gained bargaining power.

But the conservative Federal Reserve regarded rising wages as an inflationary threat and worked deliberately to prevent it. Throughout the 1980s and most of the 1990s, the Fed protected its victory over inflation by keeping its foot on the brake and tapping it occasionally to make sure the economy did not get too healthy. That is, the federal government-represented by the central bank-ensured that the broad ranks of working people would not share in the “good times.”

Paul Volcker used to carry in his pocket a card setting out the latest wage settlements in contracts negotiated by unions. When politicians urged him to let up and lower interest rates, the Fed chairman would cite recent wage agreements as evidence that he must hold tight. Monetary economists devised a theory to justify the antiwage policy. They claimed inflation would return if the Fed let the economy progress to below a so-called natural rate of unemployment. The theory was bogus; it was subsequently disproved by real-world experience when unemployment fell to 4 percent in the late 1990s, yet no inflation appeared.

The Federal Reserve, in other words, has played a central role in suppressing wages during the last three decades, a policy that was powerfully reinforced by globalization and the migration of US jobs to low-wage economies. Was this in the public interest? The question was not discussed in polite circles. The presumption among the governing elites, including the most influential newspapers, is that everyone shares a common interest in subduing inflation and therefore wage suppression is required. Wall Street celebrated the central bank’s success in restraining economic growth by dubbing it the “Goldilocks economy”-not too hot, not too cold, but just right. It may have seemed just right to financial investors. For working people, it was way too cold.

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