Minimum wage and moral capitalism: Is America Scrooged?

Minimum wage is a bad idea that hurts the most vulnerable workers, but Walmart's every-day low wages are still nothing to be pleased about. Photo: AP

WASHINGTON, December 4, 2013 — Thanksgiving protests at 1400 Wal-Mart stores and other large retailers resulted in at least 114 arrests on Black Friday.  


SEE RELATED: Minimum wage hurts those it is intended to help


Retail workers have been protesting low wages, demanding an hourly wage of at least $15. “Fight for $15” protests have been held at McDonald’s and other fast-food restaurants since last spring, and demonstrations have been held in Los Angeles and New York, focusing attention on minimum wage versus “living wage.”

A food drive held last month by an Ohio Wal-Mart for its employees added to talk about the “living wage,” as did discussion by the District of Columbia Council to require new “box retailers” — specifically Wal-Mart — to pay workers above the federal minimum wage.

This problem goes well beyond fast-food chains and big box retailers. There are currently 1.5 million young people working as interns for Hollywood entertainers, U.S. senators, MSNBC, The New Republic, and a wide variety of businesses. Half of them are unpaid, including interns for such harsh critics of minimum wage retailers as Senator Elizabeth Warren of Massachusetts, Robert Reich’s Common Cause, and until this year, MSNBC’s Rachel Maddow.

Due to a hole in American labor law, people who would be classified as entry-level workers at Wal-Mart and paid minimum wage can be classified as interns and paid nothing. Many of these interns work full-time hours in cities like Washington, New York, and San Francisco, some of them relying on food stamps.


SEE RELATED: DC Council passes anti-Walmart “living wage”


The irony of this is lost on the publications that use interns and that run stories critical of Wal-Mart and McDonalds. Intern positions are justified as valuable experience for as-yet unskilled journalists, a place for them to learn the skills they need for the job. The same could be said of an entry-level job at Starbucks, and in some cases the work required — answering phones, greeting customers, moving boxes and serving drinks — is the experience awaiting the intern.

In fact, internships often do provide valuable learning and networking opportunities. However, because they are unpaid or often pay less than minimum wage, these opportunities can only be taken by the children of relatively affluent parents who are willing to support them for several months in a city like New York. Kids from less affluent backgrounds should get their experience somewhere other than MSNBC.

Firms hire people in the expectation of earning a profit from their labor. Raise the minimum wage to $15 an hour, and anyone whose labor is worth less than that to the firm — whose impact on the firm’s bottom line is less than $15 an hour — will be unemployed. What holds true for the Wal-Mart employee holds true for MSNBC interns.

Firms respond to minimum wage by hiring workers whose productivity is closest to minimum wage. The workers who bear the heaviest burden from the minimum wage are the ones who are marginal: the least skilled, the least reliable, the least educated, the ones with the least work experience. In other words, firms will avoid the most potentially costly workers and the least productive.


SEE RELATED: Wage Increases in the D.C. Metro Area


Made unattractive by the higher minimum wage, these workers — primarily young, poorly educated, poorly connected and black — will have few opportunities to upgrade their skills. Unless, of course, they are willing to work for free as interns.

This is no argument that firms should pay low wages. Profit is essential if a firm is going to stay in business, but there’s no economic law that says you should or must pay your workers the least that you can simply because you can. That is a choice made by managers, who are under no obligation to be better than Scrooge.

Capitalism does not require that we treat workers badly. We do that because we want to and we can. We’ve coupled capitalism with a culture of self interest to produced employers who believe that they earn a great deal because they deserve to, and that their minimum-wage employees earn minimum wage because they deserve to. Morality has been put in the service of the results, rather than being the basis on which the results are produced.

Given the power to treat workers as cheap and disposable, and without moral values to tell us that’s wrong, we do just that. America’s employers seem to have no empathy for their employees and no interest in their welfare. Wal-Mart required about 71 percent of its employees to work on Thanksgiving to cater to early shoppers, unconcerned that their employees would not celebrate this traditional family holiday with their families.

Firms like Wal-Mart have that right, but if capitalism is going to succeed as an instrument for maximizing social welfare, they should not exercise it. Chicago Whole Foods stores, faced with bad PR and employee anger at plans to keep its stores open on Thanksgiving, backed down from making work that day mandatory.

Minimum wages harm marginal workers, the least skilled, the most vulnerable people in our workforce. For that reason they are wrong. But treating workers as disposable and keeping their wages low as they become more skilled is likewise wrong. If workers can easily advertise their skills, find better jobs, and move to them, this doesn’t matter; Wal-Mart will create decent employees but never keep them.

But it does matter. We don’t live in that world. The stagnant low wages of American workers are not just an economic reality, but a failure of social and business morality. Capitalism can only work in the long run if capitalists remember that they are part of a society, and that society is not just there as a means for capitalists to get rich.

The economy is like an organism. In our economy, the person who is most committed to his own enrichment and works at this goal regardless of its effects on others around him is called successful. In natural sciences, he would be called a cancer.

If raising the minimum wage won’t make poor people better off, then we should ask what will, and if we’re a good society, we should set about doing it. Capitalism can only succeed if we retain a moral center and wish to be a good society. Otherwise, there is little that makes it worth preserving.

 

James Picht is the Senior Editor for Communities Politics and teaches economics and Russian at the Louisiana Scholars’ College in Natchitoches, La. After earning his doctorate in economics, he spent several years working in Moscow and the new independent states of the former Soviet Union for the U.S. government, the Asian Development Bank, and as a private contractor. He has been writing at the Communities since 2009.


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Jim Picht

James Picht is the Senior Editor for Communities Politics and teaches economics and Russian at the Louisiana Scholars' College in Natchitoches, La. After earning his doctorate in economics, he spent several years working in Moscow and the new independent states of the former Soviet Union for the U.S. government, the Asian Development Bank, and as a private contractor. He returned to Ukraine recently to teach principles of constitutional law and criminal procedure at several Ukrainian law schools for a USAID legal development project. He has been writing at the Communities since 2009.

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