Minimum Wage: Employed Against Employees

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It is interesting to consider minimum wage in relation to how it applies to price controls. Usually, the first idea that comes to mind when the subject of price controls are brought up is the concept of the government fixing prices so that price gouging does not occur during times of shortage. Minimum wage serves the same purpose, but instead of protecting consumers from sellers, they act as a protection of future consumers (i.e., workers) from those provide who the capital that they would use to exchange within their future consumption—the government fixes the price of a bare minimum wage so that companies will not price gouge their employees by shorting them on the worth of their pay. However, current minimum wage rates are far below the poverty line. This “price gouging by low wage rates” is common in the service industry. Many of today’s companies who are making excellent profits still insist on paying less than a living wage to a majority of their workers, particularly illegal immigrants.

Robert Reich, chancellor’s professor of public policy at UC Berkeley, explains in his article “Fiscal Cliff Would Hurt Low-Wage Workers the Most” that current economic policy, issues are threatening to have massive negative effects on the already overburdened low-wage workers of America. Many of them are already only working part-time, without benefits, at a rate far below a living wage; and with the looming end-of-year combination of tax increases and social services cuts, many low wage workers feel that they will be the ones feeling the brunt of the pain from these austere measures. 

Reich explains that “jobs are slowly returning to America, but most of them pay lousy wages and low if non-existent benefits…More than 46 million Americans now live below the poverty line. Many of them have jobs. The problem is these jobs just don’t pay enough to lift their families out of poverty” (1). This “job growth” among the lowest-paid jobs explains why the median wage keeps getting lower despite more available jobs being filled. 

Low wage workers have begun organizing—in the last week and a half, fast food workers in New York and Walmart employees across the nation are striking and walking out in protest. Reich suggests that the reason for this is that the workers have become encouraged by the economic recovery and election results. He also notes that these actions are more likely to pay off for the workers because their jobs are not jobs that are in danger of being mechanized or of being shipped overseas (Reich 2).

But these worker demands are really not that difficult to deal with. Many of the companies whose workers are dissatisfied have been posting record profits. Of course, companies would have to cut any concessions given to workers directly from those profits due to the fact that they have to remain competitive in their respective markets. But considering that executive employees are regularly given multi-million dollar bonuses, and considering that the Walton family (which owns the majority of Walmart stock) has more wealth than the bottom 40% of all U.S. families combined, it doesn’t seem like such a difficult endeavor to give the low-wage workers of these companies a bit of a bump financially by increasing wages or with benefits or both (Reich 4).

It appears that these companies exist as a general type of oligopoly. Of course, this is a misuse of the word as there is not anyone market or industry associated with all of these different companies; but what is associated with them is a willingness to suppress their workforces through low wages and health coverage law loopholes (hence all the part-time workers). Just as the minimum wage is a fun-house mirror version of price-fixing (it’s the reverse but accomplishes the same thing—or tries to, anyway), these companies together act as a funhouse mirror version of an oligopoly, and the “consumers” negatively affected by this oligopoly are the low-wage workers. Instead of considering a seller/consumer paradigm, a worker/employer paradigm fits more appropriately.

Reich notes that unions form when there is low unemployment because the workers are not fearful of being replaced by eager applicants. It is for this reason that Reich suggests that the number one national priority should be job growth, not deficit reduction. With a larger majority of workers gainfully employed, they will more easily be able to unionize and therefore improve conditions for themselves, which will lower the costs of social services such as unemployment, welfare, and healthcare—thus effectively reducing the deficit almost automatically. But Reich laments that neither party in congress is talking about these issues. Low-wage workers are invisible to Capitol Hill. He notes that this is one of the major issues that is going to have to be addressed if the nation's inequality is to be reversed (Reich 5).

Work Cited

Reich, Robert. “Fiscal Cliff Would Hurt Low-Wage Workers the Most.” Christian Science 

Monitor. 1 December 2012.